Agilis Information Technologies International Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 786/DEL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91261 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 27-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JUDY JAMES STADING CO U NSEL
• Assessee Lawyers: DIPIKA AGARWAL
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 234B; 10B

Judgement Text

DELHI BENCH I : NEW DELHI BEFORE SHRI S V MEHROTRA ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 AGILIS INFORMATION TECHNOLOGIES INTERNATIONAL PVT LTD, E - 11, RAJOURI GARDEN,NEW DELHI PAN NO. AAECA2786J VS. ITO, WARD - 1(4), NEW DELHI (APPELLANT) (RESPONDENT) DATE OF HEARING 27. 04 .2015 DATE OF PRONOUNCEMENT 26. 06.2015 O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS APPEAL ARISES FROM AN ORDER DATED 23.12.2014 PASSED UNDER SECTION 143(3)/144C OF THE ACT (HEREIN AFTER THE ACT) IN PURSUANCE TO WHICH, DIRECTIONS OF DRP DATED 14.11.2014 UNDER SECTION 144C(5) OF THE ACT. APPELLANT BY: SH NEERAJ JAIN , ADV & MS DIPIKA AGARWAL , CA RESPONDENT BY : SH JUDY JAMES , STADING CO U NSEL . DR 2 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 2. IN THIS APPEAL, THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN CO MPLETING ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME - TAX ACT (THE ACT) AT AN INCOME OF RS. 1,26,29,730 AS AGAINST THE RETURNED INCOME OF RS. 15,520. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING AN ADJUSTMENT OF RS. 1,26,14,209 TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF SOFTWARE DEVELOPMENT SERVICES RENDERED TO THE ASSOCIATED ENTERPRISE ON THE BASIS OF ORDER PASSED BY THE TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA(3) OF THE ACT. 2.1 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT IN TERMS OF RULE 10B(1)(E) OF THE INCOME TAX RULES, WHILE APPLYING TRANSACTIONAL NET MARGIN METHOD (TNMM), NET PROFIT MARGIN (OPERATING PROFIT MARGIN) EARNED BY THE TESTED PARTY FROM TR ANSACTION UNDERTAKEN WITH ASSOCIATED ENTERPRISE ONLY IS OUGHT TO BE BENCHMARKED. 2.2 THAT THE DISPUTE RESOLUTION PANEL (DRP) ERRED ON FACTS AND IN LAW IN UPHOLDING THE TREATMENT GIVEN BY THE TPO TO CONSIDER FOREIGN EXCHANGE FLUCTUATION INCOME AS NON OPE RATING ITEM OF INCOME FOR THE APPELLANT AS WELL AS COMPARABLE, AND THEREBY RE - COMPUTING THE OPERATING PROFIT TO COST RATIO OF THE APPELLANT AT 6.54% AS AGAINST 7.91% CONSIDERED IN THE TRANSFER PRICING DOCUMENTATION. 2.3 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT EXCHANGE FLUCTUATION INCOME OR EXPENSE IS AN INTEGRAL PART OF THE SALES MADE OR EXPENSE INCURRED BY THE APPELLANT DURING THE COURSE OF ITS BUSINESS AND ACCORDINGLY SHALL BE CONSIDERED AS OPERATING INCOME/EXPENSE WHILE COMPU TING THE OPERATING INCOME OF THE APPELLANT AND COMPARABLE COMPANIES. 2.4 THAT THE DRP ERRED ON FACTS AND IN LAW IN UPHOLDING FILTERS OF (I) TURNOVER LESS THAN 5 CRORES AND (II) EXPORT SALES LESS THAN 75% OF TOTAL SALES APPLIED BY THE TPO, FOR THE PURPOSE OF THE BENCHMARKING ANALYSIS APPLYING TNMM. 2.5 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN REJECTING THE FOLLOWING COMPARABLE COMPANIES ON THE BASIS OF FILTER OF EXPORT SALES LESS THAN 75%, NOT APPRECIATING THAT THE COMPANIES WERE OTHERWISE FUNCTIONALLY COMPARABLE TO THE APPELLANT. 3 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 NAME OF COMPANY OP/OC(%) CSS TECHNERGY LIMITED 5.89 B2B SOFTWARE TECHNOLOGIES LIMITED 0.53 INTENSE TECHNOLOGIES LIMITED - 44.81 2.6 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN REJECTING FOLLOWING COMPARABLE COMPANIES ON THE FILTER OF SALES TURNOVER LESS THAN 5 CRORE NOT APPRECIATING THAT THE SAID COMPANIES WERE OTHERWISE FUNCTIONALLY COMPARABLE TO THE APPELLANT: COMPANY NAME SALES (IN CR.) B2B SOFTWARE TECHNOLOGIES LTD. 4.19 CRESSANDA SOLUTIONS LTD. 1.41 2.7 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN CONSIDERING TATA ELXI LIMITED IN THE FINAL SET OF COMPARABLE COMPANIES NOT APPRECIATING THAT THE SAID COMPANY NOT ONLY HAD A VERY HIGH TURNOVER, IT ALSO DOES NOT SATISFY THE TEST OF COMPARABILITY LAID DOWN UNDE R RULE 10B(2) OF THE INCOME TAX RULES. 2.8 THAT THE DRP/TPO ERRED ON FACTS AND IN REJECTING CG VAK SOFTWARE & EXPORTS LIMITED FROM THE FINAL SET OF COMPARABLE COMPANIES ALLEGEDLY HOLDING THAT THE SAID COMPANY IS NOT PASSING THE FILTER OF EMPLOYEE COST TO TOTAL COST LESS THAN 25%. 2.9 THAT THE DRP/TPO ERRED ON FACTS AND IN LAW IN NOT ALLOWING APPROPRIATE RISK ADJUSTMENT TO ESTABLISH COMPARABILITY ON ACCOUNT OF THE APPELLANT BEING A LOW - RISK - BEARING CAPTIVE SERVICE PROVIDER AS OPPOSED TO THE COMPARABLE COMPA NIES WHO WERE INDEPENDENT SOFTWARE DEVELOPMENT SERVICE PROVIDER. 2.10 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP/TPO ERRED IN REJECTING THE CLAIM OF THE APPELLANT REGARDING RISK ADJUSTMENT, HOLDING THAT IN ABSENCE OF ROBUST AND 4 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 RELIABLE DATA, BOTH FOR THE APPELLANT AND FOR THE COMPARABLES, RISK ADJUSTMENT CANNOT BE CONSIDERED FOR ENHANCING COMPARABILITY. 3. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTION 234B AND SECTION 234C OF THE AC T. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. GROUND NOS. 2 TO 2.10 OF THE GROUNDS OF APPEAL RELATE TO ADJUSTMENT OF RS. 1,26,14,209/ - TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT SERVICES PROVIDED BY THE APPELLANT COMPANY. 3.1 THE FACTS IN BRIEF ARE THAT THE APPELLANT IS A COMPANY INCORPORATED ON JULY, 2004 , AS A WHOLLY OWNED SUBSIDIARY OF AGILIS INTERNATIONAL INC. THE APPELLANT IS ENGAGED IN PROVIDING SOFTWARE DEVELOPMENT SERVICES TO ITS AE I.E. AGILIS INTERNATIONAL INC. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE RECEIVED A TOTAL CONSIDERATION OF RS. 12,50,07,838/ - IN RESPECT OF INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT SERVICES TO ITS AE . F OR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT SERVICES, THE ASSESSEE APPLIED TRANSACTIONAL NET MARGIN METHOD AS THE MOST APPROPRIATE METHOD BY CONSIDERING ITSELF AS THE TESTED PARTY AND OPERATING PROFIT TO OPERATING COST RATIO (OP/OC) AS THE MOST APPROPRIATE PROFIT LEVEL INDICATOR (PLI) . THE PLI OF THE ASSESSEE IS COMPUTED AT 7.91% AS UNDER: 5 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 PARTICULARS AMOUNT (RS.) REVENUE FROM SOFTWARE DEVELOPMENT SERVICES 125,007,838 GAIN ON FOREIGN EXCHANGE FLUCTUATION 1,596,327 OTHERS 26,633 OPERATING REVENUE 126,630,798 PERSONNEL EXPENSES 80,567,701 OPERATING AND OTHER EXPENSES 34,212,432 DEPRECIATION 2,564,192 OPERATING COST 117,344,325 OPERATING PROFIT 9,286,473 OP/OC (%) 7.91% 3.2 FOR THE APPLICATION OF TRANSACTIONAL NET MARGIN METHOD, THE ASSESSEE CONSIDERED 39 COMPARABLE COMPANIES WITH WEIGHTED AVERAGE OPERATING PROFIT MARGIN (OP/OC) OF 7.83% AS UNDER: COMPANY NAME OP/TC ASM TECHNOLOGIES LTD. 10.89 ACE SOFTWARE EXPORTS LTD. 14.89 ADITYA BIRLA MINACS TECHNOLOGIES LTD. [MERGED] (3.34) B2B SOFTWARE TECHNOLOGIES LTD. (19.05) BELLS SOFTECH LTD. 17.22 CG - VAK SOFTWARE & EXPORTS LTD. 2.35 CSS TECHNERGY LTD. 2.27 CAMBRIDGE TECHNOLOGY ENTERPRISES LTD. 12.30 CRESSANDA SOLUTIONS LTD. 9.39 CYBERTECH SYSTEMS & SOFTWARE LTD. 65.30 DYNACONS SYSTEMS & SOLUTIONS LTD. 1.30 FIRSTOBJECT TECHNOLOGIES LTD. 8.39 HOV SERVICES LTD. 58.38 HYPERSOFT TECHNOLOGIES LTD. (13.55) INDO - CITY INFOTECH LTD. 5.31 INFRONICS SYSTEMS LTD. 7.85 6 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 INTENSE TECHNOLOGIES LTD. 2.81 INTERTEC TECHNOLOGIES LTD. 11.01 POLARIS ENTERPRISE SOLUTIONS LTD. (7.891) SIP TECHNOLOGIES & EXPORTS LTD. (56.88) SAGARSOFT (INDIA) LTD. (31.67) SAKSOFT LTD. 31.55 SANKHYA INFOTECH LTD. 13.84 SANRAA MEDIA LTD. 16.07 S A VEN TECHNOLOGIES LTD. 8.96 SOLIX TECHNOLOGIES LTD. 8.84 TRIGYN TECHNOLOGIES LTD. 58.12 TRINETHRA INFRA VENTURES LTD. 7.88 EVOKE TECHNOLOGIES (INDIA) PVT. LTD. 20.02 CEPHA IMAGING PVT. LTD. (30.38) COMPULINK SYSTEMS LTD. [MERGED] (10.21) J&B SOFTWARE (INDIA) PVT. LTD. [MERGED] (8.26) TWINSTAR INDUSTRIES LTD. 1.91 G - CUBE WEBWIDE SOFTWARE PVT. LTD. 16.89 EMERGYS SOFTWARE PVT. LTD. 29.01 SJ CORPORATION LTD. 18.89 SKAVA SYSTEMS PVT. LTD. 37.19 VMOKSHA TECHNOLOGIES PVT. LTD. (6.09) VRINCHI TECHNOLOGIES LTD. 11.14 AVERAGE 7.83 3.3 ON THE BASIS OF THE AFORESAID, IT WAS SUBMITTED THAT SINCE OP/OC RATIO OF THE ASSESSEE AT 7.91% WAS HIGHER THAN THE AVERAGE OPERATING PROFIT TO COST RATIO OF COMPARABLE UNCONTROLLED ENTERPRISES AT 7.83 %, THEREFORE, THE INTERNATIONAL TRANSACTION OF PROVISION OF SOFTWARE DEVELOPMENT SERVICES ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES WAS AT ARMS LENGTH PRICE. 3.4 A R EFERENCE WAS MADE UNDER SECTION 92CA OF THE ACT BY THE ASSESSING OFFIC ER FOR DETERMINATION OF ARMS LENGTH PRICE FOR THE 7 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE DURING THE INSTANT YEAR. THE TPO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE REJECTED THE COMPARABLES SELECTED BY THE ASSESSEE AND PREPARED A FRESH SET OF EIGHT COMPARABLES AND DETERMINED THE PLI OF THE COMPARABLES AT 29.45%. THE LIST OF COMPARABLES AS PREPARED BY THE TPO IS AS UNDER: S.NO. COMPANY NAME OP/OC(%) 1. EVOKE TECHNOLOGIES LIMITED 18.56% 2. CTIL LIMITED 18.11% 3. SANKHYA INFOTECH 18.11% 4. INFINITE DATA SYSTEMS PVT. LTD. 88.25% 5. PERSISTENT SYSTEMS AND SOLUTIONS LTD. 11.37% 6. SONATA SOFTWARE LTD. 35.87% 7. TATA ELXSI LTD. (SEG) 20.29% 8. ZYLOG SYSTEMS LTD. 25.07% AVERAGE 29.45% 3.5 FURTHER, THE TPO RE - COMPUTED THE OPERATING PROFIT TO COST RATIO OF THE ASSESSEE AT 6.54% AFTER EXCLUDING FOREIGN EXCHANGE FLUCTUATION INCOME FROM TOTAL OPERATING INCOME CONSIDERING THE SAME TO BE NON - OPERATING INCOME, AS UNDER: PARTICULARS AMOUNT (RS.) REVENUE FROM SOFTWARE DEVELOPMENT SERVICES 125,007,838 OTHERS 11,112 OPERATING REVENUE 125,018,950 OPERATING COST 117,344,325 OPERATING PROFIT 7,674,625 OP/OC (%) 6.54% 3. 6 ON THE BASIS OF THE ABOVE, TPO PROPOSED AN ADJUSTMENT AT RS. 2,68,83,279/ - AS BELOW: 8 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 OPERATIONAL COST 117,344,325 ARMS LENGTH PRICE AT A MARGIN OF 29.45% 151,902,229 PRICE RECEIVED 125,018,950 105% OF THE PRICE RECEIVED 131,269,898 PROPOSED ADJUSTMENT U/S 92CA 26,883,279 3. 7 ON APPEAL BEFORE THE DRP, THE DRP VIDE AN ORDER DATED 2.12.2014 DIRECTED THE TPO TO EXCLUDE THREE COMPARABLES NAMELY M/S. INFINITE DATA SYSTEMS PVT. LTD., M/S. SONATA SOFTWARE LTD. AND M/S. ZYLOG SYSTEMS LTD. FROM THE FINAL SET OF COMPARABLE COMPANIES. ACCORDINGLY, AVERAGE OPERATING PROFIT TO OPER ATING COST RATIO STOOD REDUCED TO THE COMPARABLE LIST COMPANIES TO 17.29% AND, AS A RESULT, ADJUSTMENT TO RS. 1,26,14,209/ - WHICH WAS DETERMINED IN THE MANNER HEREUNDER: S.NO. COMPANY NAME ADJUSTED PBIT/COST (%) 1 CTIL LTD. 18.11 2 EVOKE TECH 18.56 3 PERSISTENT SYSTEMS AND SOLUTIONS LTD. 11.37 4 SANKHYA INFOTECH 18.11 5 TATA ELXI 20.29 AVERAGE 17.29 3. 8 ON THE BASIS OF RECOMPUTED MEAN MARGIN OF THE COMPARABLES AT 17.29%, THE COMPUTATION OF THE ARMS LENGTH PRICE OF THE ASSESSEE WAS MADE AS FOLLOWS: OPERATIONAL COST 117,344,325 ARMS LENGTH PRICE AT A MARGIN OF 17.29% 137,633,159 PRICE RECEIVED 125,018,950 PROPOSED ADJUSTMENT U/S 92CA 12,614,209 9 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL ON RECORD. DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 2.5 , 2.9 AND 2.10 OF THE GROUNDS OF APPEAL WHICH ARE DISMISSED AS NOT BEING PRESSED. 5. TAKING UP REMAINING GROUNDS, IT WAS SUBMITTED THAT GROUND NO. 2 TO 2.1 ARE GENERAL GROUNDS AN D, GROUND NO. 2.2 TO 2.4 AND, 2.6 TO 2.8 ARE SPECIFIC GROUNDS CHALLENGING THE ADJUSTMENT MADE AND, DISPUTED IN THIS APPEAL. VIS - - VIS GROUND NO. 2.2 OF THE GROUND OF APPEAL, HE CONTENDED THAT DRP HAS ERRED ON FACTS AND LAW IN UPHOLDING THE TREATMENT GIVEN BY THE TPO TO CONSIDER FOREIGN EXCHANGE FLUCTUATION INCOME AS NON OPERATING ITEM AND THEREBY RE - COMPUTING THE OPERATING PROFIT TO COST RATIO OF THE APPELLANT AT 6.54% AS AGAINST 7.91% CONSIDERED IN THE TRANSFER PRICING DOCUMENTATION. IT WAS SUBMITTED THAT EXCHANGE FLUCTUATION INCOME/EXPENSES IS AN INTEGRAL PART OF THE SALES MADE OR EXPENSE INCURRED BY THE APPELLANT DURING THE COURSE OF ITS BUSINESS AND ACCORDINGLY SHOULD BE CONSIDERED AS OPERATING INCOME/EXPENSE . IT WAS FURTHE R SUBMITTED THAT APPLICATION OF TNMM INVOLVES COMPARISON OF NET PROFIT I.E. OPERATING PROFIT MARGIN, BEING THE RATIO OF OPERATING PROFIT TO SALES AS AN INDICATOR OF THE TOTAL RETURN OF THE BUSINESS ACTIVITY OF THE TESTED PARTY, VIZ., THE ASSESSEE AND THE COMPARABLE UNCONTROLLED ENTITIES . IT WA S SUBMITTED THAT IN TERMS OF RULE 10B (1)(E) OF THE RULES FOR THE PURPOSE OF UNDERTAKING BENCHMARKING ANALYSIS APPLYING TNMM THE NET PROFIT FROM THE INTERNATIONAL 10 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 TRANSACTION IS TO BE CONSIDERED AND THERE IS NO SCOPE FOR ARBITRARILY EXCLUDING ANY ITE M OF INCOME OR EXPENSE FOR THE PURPOSE OF MAKING THE COMPARISON OF THE NET PROFIT FROM THE INTERNATIONAL TRANSACTION WITH THAT OF THE UNRELATED PARTIES . REFERENCE IN THIS REGARD IS ALSO MADE TO THE OECD GUIDELINES ON TRANSFER PRICING, WHEREIN, IT HAS BEEN HELD THAT FOREIGN EXCHANGE GAINS AND LOSSES SHOULD BE INCLUDED OR EXCLUDED FOR THE DETERMINATION OF THE NET PROFIT DEPENDS ON WHETHER THE FOREIGN EXCHANGE GAIN OR LOSSES ARE OF A TRADING NATURE AND WHETHER OR NOT THE TESTED PARTY IS RESPONSIBLE FOR THEM. R ELIANCE WAS PLACED ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. SONY INDIA PVT. LTD. REPORTED IN 114 ITD 448 AND M/S. TECHBOOKS INTERNATIONAL PVT. LTD. VS. ACIT IN ITA NO. 722/DEL/2014 WHEREIN IT HAS BEEN HELD THAT FOREIGN EXCHANGE FLUCTUATION SHOULD BE CONSIDERED AS OPERATING ITEM WHILE COMPUTING OPERATING PROFIT. THE LEARNED DR HOWEVER SUPPORTED THE ACTION OF THE DRP AND TPO IN TREATING FOREIGN EXCHANGE FLUCTUATION AS OPERATING ITEM. 5.1 HAVING CONSIDERED THE SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT THE ISSUE IS NO LONGER RES - INTEGRA AND STANDS DECIDED IN THE CASE OF M/S. SSP IND IA PVT. LTD. ITA NO. 1309/D/2014 DATED 29.5.2015 WHEREIN TOO BASIS OF THE DRP ON SAFE HARBOUR RULES WAS REJECTED BY HOLDING AS UNDER: 14 HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THE ISSUE IS NO LONGER RES - INTEGRA AND STANDS CONCLUDED BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF WESTFALIA 11 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 SEPARATOR INDIA PVT. LTD. VS. ACIT ITA NO. 4446/D/02 FOR ASSESSMENT YEAR 2003 - 04 WHEREIN IT HAS BEEN HELD AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FOREX GAIN OR LOSS IS THE DIFFERENCE BETWEEN THE PRICE AT WHICH AN IMPORT OR EXPORT TRANSACTION WAS RECORDED IN THE BOOKS OF ACCOUN T ON THE BASIS OF RATE OF FOREIGN EXCHANGE THEN PREVAILING AND THE AMOUNT ACTUALLY PAID OR RECEIVED AT THE RATE OF FOREIGN EXCHANGE PREVAILING AT THE TIME OF ACTUAL PAYMENT OR RECEIPT. SINCE SUCH FOREX LOSS OR GAIN IS A DIRECT OUTCOME OF THE PURCHASE OR SA LE TRANSACTION, IT PARTAKES OF THE SAME CHARACTER AS THAT OF THE TRANSACTION TO WHICH IT RELATES. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. PRAKASH I. SHAH (2008) 115 ITD 167 (MUM) (SB) HAS HELD THAT FOREIGN EXCHANGE FLUCTUATION GAIN IS A P ART OF EXPORT TURNOVER. THOUGH SUCH DECISION WAS RENDERED IN THE CONTEXT OF SECTION 80HHC, BUT THE SAME LOGIC APPLIES GENERALLY AS WELL. THE ESSENCE OF THE MATTER IS THAT ANY GAIN OR LOSS ARISING OUT OF CHANGE IN FOREIGN CURRENCY RATE IN RESPECT OF TRANSAC TION FOR IMPORT OR EXPORT OF GOODS IS NOTHING, BUT INHERENT PART OF THE PRICE OF IMPORT OR THE VALUE OF EXPORT. THE HON'BLE SUPREME COURT IN SUTLEJ COTTON MILLS LTD. VS. CIT 116 ITR 1 (SC) HAS HELD THAT : 'WHERE PROFIT OR LOSS ARISES TO AN ASSSESSEE ON ACC OUNT OF APPRECIATION OR DEPRECIATION ITA NOS.4446 & 4447/DEL/2007 IN THE VALUE OF FOREIGN CURRENCY HELD BY IT, ON CONVERSION INTO ANOTHER CURRENCY, SUCH PROFIT OR LOSS WOULD ORDINARILY BE TRADING PROFIT OR LOSS IF THE FOREIGN CURRENCY IS HELD BY THE ASSESS EE ON REVENUE ACCOUNT OR AS A TRADING ASSET OR AS PART OF CIRCULATING CAPITAL EMBARKED IN THE BUSINESS'. WHEN WE READ THE RATIO OF THE CASE OF SUTLEJ COTTON (SC)(SUPRA) IN JUXTAPOSITION TO THAT OF THE SPECIAL BENCH IN CASE OF PRAKASH I SHAH (SUPRA), THERE REMAINS NO DOUBT THAT FOREX GAIN OR LOSS FROM A TRADING TRANSACTION IS NOT ONLY AN ITEM OF REVENUE NATURE, BUT IS, IN FACT, A PART OF THE PRICE OF IMPORT OR VALUE OF EXPORT TRANSACTION, AS THE CASE MAY BE. OPERATING EXPENSE IS ORDINARILY AN EXPENSE THAT A BUSINESS INCURS AS A RESULT OF PERFORMING ITS NORMAL BUSINESS OPERATIONS. AS THE BUSINESS OF 'ASSEMBLY' DONE BY THE 12 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 ASSESSEE UNDER THIS SEGMENT IS NOT POSSIBLE WITHOUT PURCHASES AND FOREX GAIN IS IN RELATION TO SUCH PURCHASE TRANSACTIONS, WE HAVE NO HESITA TION IN HOLDING THAT IT IS AN ITEM OF OPERATING COST. 15 THE LEARNED DR DURING THE COURSE OF ARGUMENTS, SUPPORTED THE ACTION OF THE AUTHORITIES BELOW ONLY ON THE GROUND THAT DRP HAS REJECTED THE CONTENTION OF THE APPELLANT BY OBSERVING AS UNDER: THE OPER ATING INCOME/EXPENDITURE WAS NEVER DEFINED IN ANY OF THE LEGISLATION SO FAR. IT WAS THE CONVENTIONAL WISDOM WHICH WENT INTO THE COMPONENTS OF OPERATING INCOME/EXPENDITURE WHILE CALCULATING THE OPERATING PROFIT. HOWEVER, THE POSITION HAS CHANGED SINCE THE N OTIFICATION OF CBDT ISSUED ON 18.9.2013. THIS IS THE NOTIFICATION ON SAFE HARBOUR RULES. RULE 10TA(J)(K) AND (L) DEFINE THE CONCEPT OF OPERATING EXPENSE, OPERATING REVENUE AND OPERATING PROFIT RESPECTIVELY. ACCORDING TO THIS RULE, LOSS OR INCOME AR ISING ON ACCOUNT OF FOREIGN CURRENCY FLUCTUATIONS ARE EXCLUDED FROM THE CALCULATION OF OPERATING EXPENSE AND OPERATING INCOME RESPECTIVELY. THEREFORE THE TPO WAS CORRECT IN EXCLUDING FOREX ITEMS FROM THE CALCULATION OF OPERATING PROFIT. THIS OBJECTION OF THE ASSESSEE IS REJECTED. 16 WE FIND THAT THE AFORESAID BASIS THAT FOREIGN EXCHANGE GAIN/LOSS SHOULD BE TREATED AS NON - OPERATING ITEM IS BASED ON THE NOTIFICATION OF CBDT ISSUED ON 18.9.2018 ON SAFE HARBOUR. HOWEVER, SUCH A CONTENTION HAS BEEN REJECTED IN THE AFORESAID ORDER OF THE COORDINATE BENCH WHEREIN IT WAS HELD AS UNDER: 4.8. THE LD. AR RELIED ON RULE 10T(J) TO CONTEND THAT LOSS ARISING ON ACCOUNT OF FOREIGN CURRENCY FLUCTUATIONS CANNOT BE INCLUDED IN THE OPERATING EXPENSE. WE ARE NOT PERSUADED TO GIVE ANY MILEAGE TO THE LD. AR ON THIS COUNT FOR THE SIMPLE REASON THAT RULE 10T IS A PART OF SAFE HARBOR RULES NOTIFIED ON 18.09.2013 WHICH ARE NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 5.2 IN LIGHT OF THE ABOVE, WE DIRECT THE AO/TP O TO TREAT THE FOREIGN EXCHANGE GAIN/LOSS AS AN OPERATING ITEM. AS SUCH, THE GROUND RAISED BY THE APPELLANT IS ALLOWED. 13 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 6 . TAKING UP GROUND NO. 2.4 AND 2.6, THE LEARNED AR CONTENDED THAT DRP/TPO HAVE ERRED BOTH IN LAW AND ON FACTS IN REJECTING M/S. B2B SOFTWARE TECHNOLOGIES LIMITED AND M/S. CRESSANDA SOLUTIONS LTD. AS COMPARABLES BY ADOPTING THE FILTER OF THE SALES TURNOVER LESS THAN 5 CRORE NOT APPRECIATING THAT THE SAID COMPANIES WERE OTHERWISE FUNCTIONALLY COMPARABLE TO THE APPELLANT. IT WAS SUBMITTED THAT IN THE TRANSFER PRICING DOCUMENTATION, THE ASSESSEE HAS APPLIED THE TURNOVER FILTER, WHEREIN THE COMPANIES HAVING TURNOVER LESS THAN 1 CRORE AND GREATER THAN 50 CRORES WERE REJECTED. IT WAS SUBMITTED THAT THE TPO, HOWEVER IN THE IMPUGNED ORDER INCREA SED THE THRESHOLD LIMIT OF TURNOVER FILTER FROM 1 CRORE TO 5 CRORE AND FURTHER, REJECTED THE UPPER THRESHOLD LIMIT OF 50 CRORE. IT WAS SUBMITTED THAT INCREASE IN THRESHOLD LIMIT OF TURNOVER FILTER FROM 1 CRORE TO 5 CRORE IS NOT AT ALL INDICATIVE OF THE FUN CTIONS PERFORMED BY THE COMPANY AND HENCE, REJECTION OF THE COMPANIES ON THE BASIS OF SUCH QUANTITATIVE FILTERS, RATHER THAN FUNCTIONAL OR ASSET PROFILE, WOULD NOT MEET THE COMPARABILITY STANDARD REQUIRED IN APPLICATION OF TNMM. IT WAS SUBMITTED THAT THE A SSESSEE IS ITSELF HAVING A TURNOVER OF RS. 12.50 CRORES AND ACCORDINGLY, INCREASING THE THRESHOLD LIMIT TO 5 CRORE WOULD FURTHER NARROW DOWN THE LIST OF POTENTIAL COMPARABLE COMPANIES. IT IS THUS PRAYED THAT THE FOLLOWING COMPARABLE COMPANIES HAVING TURNOV ER GREATER THAN 1 CRORE OUGHT TO BE CONSIDERED IN THE FINAL SET OF COMPARABLE COMPANIES: 14 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 S.NO. COMPANY NAME SALES (IN CR.) 1. B2B SOFTWARE TECHNOLOGIES LTD. 4.19 2. CRESSANDA SOLUTIONS LTD. 1.41 6 .1 HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THE DR P REJECTED THE CONTENTION OF THE APPELLANT FOR INCLUSION OF M/S. B2B SOFTWARE TECHNOLOGIES LTD. AND CRESSANDA SOLUTIONS LTD. AS COMPARABLE FOR THE FOLLOWING REASONS: THE COMPANIES HAVING TURNOVER OF LESS THAN RS. 5 CRORE ARE GENERALLY EXCLUDED B ECAUSE THE MARGINS EARNED BY THESE COMPANIES FLUCTUATE TO EXTREMES BECAUSE OF THE NARROW BASE. THE RELIABILITY OF THE DATA IN RESPECT OF THE SMALL COMPANIES IS ALSO NOT ALWAYS VERY HIGH. THESE COMPANIES CONTRIBUTION TOWARDS OVERALL TURNOVER OF THE INDUSTR Y IS NEGLIGIBLE. THE RELAXIBILITY OF THE FINANCIAL DATA FOR COMPANIES WITH LOW LEVELS OF SALES/OPERATING INCOME CAN BE SIGNIFICANTLY REDUCED BECAUSE THE SAME PERSONS ARE OFTEN BOTH MAJOR SHAREHOLDERS AND ALSO THE KEY EMPLOYEES, THEREBY OBLITERATING THE ECO NOMIC DISTINCTION BETWEEN PROFITS AND SALARIES. SMALL COMPANIES WITH OPERATING REVENUES LESS THAN RS. 5 CRORE ARE EXCLUDED FROM COMPARISON BECAUSE THEY LACK COMPETITIVE STRENGTH, LACK OPERATIONAL EFFICIENCIES AND ALSO LACK HUMAN RESOURCES, IN THE CASE OF M/S HAWORTH INDIA (SUPRA) THE ITAT, DELHI HAS IMPLIEDLY APPROVED THIS FILTER. IN THIS CASE THE ITAT UPHELD THE TPOS ACTION IN REJECTING A COMPARABLE AS IT HAD TURNOVER OF LESS THAN RS.1 CRORE (RS. 18.78 LACS). SIMILARLY, ITAT, DELIH IN THE CASE OF CRM SE RVICES INDIA LTD. (2011 - TH - 86 - ITAT - DEL - TP) REJECTED A COMPARABLE AS ITS TURNOVER WAS LESS THAN RS. 1 CRORE. 1 5 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 6 .2 ON CONSIDER ATION OF THE ABOVE, WE ARE IN AN AGREEMENT WITH THE SUBMISSION OF THE LEARNED COUNSEL THAT THERE WAS NO JUSTIFICATION FOR THE TPO/DRP TO ADOPT RS. 5 CRORE AS THE THRESHOLD TURNOVER FOR THE PURPOSE OF A SELECTION OF COMPARABLE WHEN THE ASSESSEE WHICH HAS BE EN ADOPTED AS A TESTED PARTY HAS A TURNOVER OF RS. 12.50 CRORES. ONCE, THERE IS NO DISPUTE THAT TWO COMPANIES SELECTED BY THE COMPANY THOUGH HAVING TURNOVER LESS THAN 5 CRORES ARE FUNCTIONALLY COMPARABLE WITH THE ASSESSEE, THE BASIS ADOPTED TO REJECT THE S AME IS NOT TENABLE. HOWEVER, FROM THE ORDER OF TPO , IT IS EVIDENT THAT M/S. B2B SOFTWARE TECHNOLOGIES LTD. WAS ALSO EXCLUDED ON THE GROUND THAT IT HAD ALSO FAILED EXPORT FILTER WHICH FILTER HAS NOT BEEN CHALLENGED BEFORE US AND HAS BEEN ACCEPTED BY THE TAX PAYER. THUS, HAVING REGARD TO THE ABOVE , WE DIRECT THE INCLUSION OF M/S. CRESSANDA SOLUTIONS LTD. AS A COMPARABLE FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE. THE GROUNDS RAISED ARE PARTLY ALLOWED. 7 . TAKING UP GROUND NO. 2.7 OF THE GROUNDS OF A PPEAL. IT WAS CONTENDED BY THE LEARNED COUNSEL THAT TATA ELXSI LIMITED WAS ERRONEOUSLY CONSIDERED IN THE FINAL SET OF COMPARABLE COMPANIES DESPITE THE FACT THAT IT DID NOT SATISFY THE TEST OF COMPARABILITY LAID DOWN UNDER RULE 10B(2) OF THE RULES. THE TPO IN RESPECT OF THE AFORESAID COMPARABLES HELD THAT ALL THE ACTIVITIES OF M/S. TATA ELXSI LIMITED ARE PART OF SOFTWARE DEVELOPMENT INDUSTR Y AND THEREFORE, DISTINCTION CLAIMED BY THE TAXPAYER IS INCORRECT. THE DRP REJECT ED THE CONTENTION 16 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 OF THE APPELLANT THAT IT I S FUNCTIONALLY DIFFERENT BY CONCLUDING THAT THE COMPANY PROVIDES SOFTWARE DEVELOPMENT SERVICES WHICH ARE QUITE SIMILAR TO THE TAXPAYER AND THEREFORE, THE OBJECTION OF THE APPELLANT WAS REJECTED. BEFORE US, THE LEARNED COUNSEL FOR THE APPELLANT SUBMITT ED THAT THE COMPANY IS NOT COMPARABLE FOR THE REASON THAT TATA ELXSI LTD. IS HAVING A HIGH TURNOVER OF 376.37 CRORES. IT WAS SUBMITTED THAT THE COMPANIES WITH SUCH HIGH TURNOVER CA N NOT BE CONSIDERED COMPARABLE TO THE ASSESSEE SINCE THE SCALE OF OPERATIONS WOULD DIFFER SIGNIFICANTLY. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF AGNITY INDIA TECHNOLOGIES PVT. LTD. VS. ITO (ITA NO. 3856/DEL/2010) AND IT WAS SUBMITTED THAT THE APPEAL PREFERRED BY THE REVEN UE AGAINST THE EXCLUSION OF M/S. INFOSYS TECHNOLOGIES LTD. HAS BEEN DISMISSED BY THE HONBLE HIGH COURT. IT WAS FURTHER SUBMITTED THAT THE SAID COMPANY IS ENGAGED IN PRODUCT DESIGN SERVICES, INNOVATION DESIGN ENGINEERING SERVICES AND VISUAL COMPUTING LABS. IT WAS SUBMITTED THAT THE COMPANY IS ENGAGED IN SPECIALIZED AND NICHE DOMAIN OF SOFTWARE PRODUCTS/SERVICES AND THEREFORE CANNOT BE CONSIDERED AS COMPARABLE TO THE APPELLANT, A CONTRACT SOFTWARE DEVELOPMENT SERVICE PROVIDER. 7 .1 HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THE AFORESAID COMPARABLE WAS CONSIDERED B Y THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF ADAPTECH INDIA (P) LTD. VS. ITO (ITA NO. 481/HYD/2011) WHEREIN IT WAS HELD AS UNDER: 17 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 TATA ELXSI LTD. I) WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES. FROM THE INFORMATIONS AVAILABLE ON RECORD IT IS EVIDENT THAT, THE AFORESAID COMPANY ITSELF ACKNOWLEDGES THAT IT IS A SPECIALIZED EMBEDDED SOFTWARE DEVELOPMENT SERVICE PROVIDER, HENCE, CANNOT BE COMPARED WITH ANY OTHER SOFTWARE DEVELOPMENT COMPANY. THE COMPANY ALSO INFORMED, BECAUSE OF SPECIALIZATION AND DIVERSE NATURE OF ITS BUSINESS, IT IS VERY DIFFICULT TO SCALE UP ITS OPERATIONS. CONSIDERING THE AFORESAID FACTUAL ASPECTS, COORDINATE BENCHES OF THIS TRIBUNAL , INCLUDING THE HYDERABAD BENCHES, IN THE DECISIONS CITED BY LD. AR HAVE HELD THIS COMPANY NOT TO BE A COMPARABLE TO A PURE SOFTWARE DEVELOPMENT SERVICE PROVIDER LIKE THE PRESENT ASSESSEE. RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE ITAT IN RESPECT O F THE AFORESAID COMPANY, WE DIRECT AO/TPO TO EXCLUDE IT FROM LIST OF COMPARABLES. 7 .2 THE APPEAL FILED BY THE REVENUE AGAINST THE AFORESAID ORDER OF THE TRIBUNAL STANDS DISMISSED BY THE HIGH COURT OF ANDHRA PRADESH IN ITA NO. 638 OF 2014. SIMILAR VIEW HA S BEEN HELD IN THE CASE OF TELECORDIA TECHNOLOGIES INDIA PVT. LTD. VS. ACIT (ITA NO. 7821/MUM/2011), WHEREIN THE HONBLE TRIBUNAL HELD AS UNDER: 7.7 TATA ELXSI LIMITED.: FROM THE FACTS AND MATERIAL ON RECORD AND SUBMISSIONS MADE BY THE LEARNED AR, IT IS S EEN THAT THE TATA ELXSI IS ENGAGED IN DEVELOPMENT OF NICHE PRODUCT AND DEVELOPMENT SERVICES, WHICH IS ENTIRELY DIFFERENT FROM THE ASSESSEE COMPANY. WE AGREE WITH THE CONTENTION OF THE LEARNED AR THAT THE NATURE OF PRODUCT DEVELOPED AND SERVICES PROVIDED BY THIS COMPANY ARE DIFFERENT FROM THE ASSESSEE AS HAVE BEEN NARRATED IN PARA 6.6 ABOVE. EVEN THE SEGMENTAL DETAILS FOR REVENUE SALES HAVE NOT BEEN PROVIDED BY THE TPO SO AS TO CONSIDER IT AS A COMPARABLE PARTY FOR COMPARING THE PROFIT RATIO FROM PRODUCT AND SERVICES. THUS, ON THESE FACTS, 18 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 WE ARE UNABLE TO TREAT THIS COMPANY FIT FOR COMPARABILITY ANALYSIS FOR DETERMINING THE ARMS LENGTH PRICE FOR THE ASSESSEE, HENCE, SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE PARTIES. 7 .3 HAVING REGARD TO THE ABOVE JUDI CIAL PRONOUNCEMENTS, WE HOLD THAT TATA ELXSI LIMITED CANNOT BE CONSIDERED AS COMPARABLE FOR THE PURPOSE OF BENCHMARKING INTERNATIONAL TRANSACTION OF THE ASSESSEE. 8 . GROUND NO. 2.8 OF THE GROUNDS OF APPEAL RELATES TO THE REJECTION OF M/S. CG VAK SOFTWARE & EXPORTS LIMITED FROM FINAL SET OF COMPARABLES BY HOLDING THAT SUCH COMPANY IS NOT PASSING THE FILTER OF EMPLOYEE COST TO TOTAL COST LESS THAN 25%. 8 .1 HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF KENEXA TECHNOLOGIES PVT. LTD. VS. DCIT IN ITA NO. 243/HYD./2014 FOR ASSESSMENT YEAR 2009 - 10 BY OBSERVING AS UNDER: 43. IN GROUND NO. 2, 6, 5, THE ASSESSEE HAS OBJECTED TO THE REJECTION OF COMPARABLE COMPANIES BY TPO IN THE COURSE OF APPLYING EMPLOYEE COST FILTER. THE ITAT BANGALORE BENCH IN THE CASE OF CISO SYSTEMS INDIA PVT. LTD. HAS HELD WITH RESPECT OF CG - VAK SOLUTIONS & EXPORTS LTD. HAS HELD AS UNDER: (II) THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE WAS TH AT IN THE CASE OF ASSESSEE, THIS TEST IS SATISFIED. IN THIS REGARD OUR ATTENTION WAS DRAWN TO PAGE 818 TO 824 OF THE ASSESSEES PAPER BOOK WHEREIN ANNUAL REPORT OF THIS COMPANY HAS BEEN PROVIDED. ATTENTION WAS DRAWN TO THE FACT THAT IN THE PROFIT & LOSS AC COUNT OF THE AUDITED ACCOUNTS, HE COST OF SERVICES HAS BEEN SHOWN AS AN 19 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 EXPENDITURE AND IN SCHEDULE 15 TO THE NOTES TO ACCOUNTS, IT HAS BEEN ELABORATED AS FOLLOWS: - COST OF SERVICES RS. COST OF SERVICES OVERSEAS 2,77,32,337 COST OF SERVICES DOMESTIC 2,58,40,435 TRANSCRIPTION CHARGES 3,97,389 WEB DESIGNING CHARGES 1,64,602 STAFF WELFARE 11,43,144 STAFF TRAINING 3,63,496 CONTRIBUTION TO PF & ESI 15,47,906 GRATUITY 13,04,894 EX GRATIA 0 HRD EXPENSES 3,10,87 5,88,05,074 (III) IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE TPO IGNORED THE CONTRIBUTION TO PF & ESI, GRATUITY AND EX GRATIA PAYMENTS AND ARRIVED AT THE EMPLOYEE COST. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, DOING SO WAS NOT PROPER. IF ALL THE EMP LOYEE COSTS ARE PROPERLY CONSIDERED, THEN THIS COMPANY CAN PASS THE FILTER APPLIED BY THE TPO FOR EXCLUDING IT. (IV) WE HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE AND ARE OF THE VIEW THAT PRIMA FACIE THE SUBMISSION OF THE LD. COUN SEL ARE ACCEPTABLE. WE, HOWEVER, FEEL THAT IT WOULD BE JUST AND APPROPRIATE TO DIRECT THE TPO TO CONSIDER INCLUDING THIS COMPANY AS A COMPARABLE AFRESH IN THE LIGHT OF THE FACTS BROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. 44. FOLLOWING THE DECISION CITED ABOVE, WE SET ASIDE THE ISSUE OF COMPARABILITY OF CG - VAK SOLUTIONS & EXPORTS LTD. TO THE TPO FOR CORRECT APPLICATION OF EMPLOYEE COST FILTER. 8 .2 HAVING REGARD TO THE ABOVE, WE SET ASIDE THE SAID ISSUE OF COM PARABLES WITH M/S. CG VAK SOFTWARE & EXPORTS LIMITED TO THE 20 ITA NO. 786/DEL/2015 ASST. YEAR 2010 - 2011 TPO FOR CORRECT APPLICATION OF EMPLOYEE COST FILTER. GROUND RAISED IS THUS ALLOWED FOR STATISTICAL PURPOSES. 9 . GROUND NO. 3 IS REGARDING LEVY OF INTEREST WHICH IS CONSEQUENTIAL IN NATURE. 10. I N THE RESULT, APPEAL FILED IS PARTLY ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 26 - 06 - 2015. - SD / - - SD/ - ( S. V. MEHROTRA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 / 06 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI