Hyundai Motor India Engineering Private Limited., Hyd, Hyderabad V. DCIT, Circle-2(2), Hyderabad, Hyderabad

ITA 87/HYD/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6089 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-04-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 17-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K SRINIVASA REDDY
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 87/HYD/2017 ASSESSMENT YEAR: 2012-13 HYUNDAI MOTOR INDIA ENGG. PVT. LTD., HYDERABAD PAN AABCH 7867 C VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.R. VASUDEVAN REVENUE BY : SHRI K. SRINIVASA REDDY DATE OF HEARING 09-04-2018 DATE OF PRONOUNCEMENT 08-06-2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER PASSED U/S 143(3) R.W.S. 92CA R.W.S.144C OF THE INC OME TAX ACT, 1961 (IN SHORT THE ACT) DATED 05/12/2016 RELATING TO AY 2012-13. 2. BRIEF FACTS OF THE CASE ARE, THE ASSESSEE A PRIV ATE LIMITED COMPANY, FURNISHED ITS RETURN OF INCOME FOR THE AY 2012-13 ON 26/11/2012 ELECTRONICALLY U/S 139(1) OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT) DECLARING A TOTAL INCOME OF RS. 7, 67,05,660/- AND PAID TAX AMOUNTING TO RS. 134,13,799/-. 2.1 DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE COMPANY HAD ENTERED INTO INTERNATIONAL TRANSACTIONS TO AN E XTENT OF RS. 7,66,94,920/-, AND HENCE, REFERENCE WAS MADE TO THE TRANSFER PRICING 2 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. OFFICER (TPO) WITH PRIOR APPROVAL OF PR. CIT 2, H YDERABAD FOR DETERMINING ARMS LENGTH PRICE U/S 92CA OF THE IT A CT. 2.2 ASSESSEES PROFILE: THE ASSESSEE COMPANY IS ENGAGED IN PROVIDING/RENDER ING R&D SUPPORT SERVICES IN RESPECT OF CAD AND CAE TOOLS IN DESIGNING THE AUTOMOBILE PARTS AND IS INTO MODELLING AND ITERATIV E SIMULATION. IT RECEIVES THE BASIC DESIGN FROM ITS GROUP COMPANY. W ITH RESPECT OF CAD MODELLING, IT MADE A 3-D CAD MODELLING DATA OF VEHICLE COMPONENTS USING CAD SOFTWARE TOOLS PRIMARILY CTIA. THE CAE MODELLING SERVICES USING HYPERMESH COMPRISES OF FIN ITE MODELLING FOR THE COMPUTER SIMULATION WHICH WOULD INVOLVE BREAKIN G DOWN THE MODEL IN VARIOUS STRUCTURES. 2.3 INTERNATIONAL TRANSACTIONS: AS PER 3CEB REPORT, THE INTERNATIONAL TRANSACTIONS REFLECTED ARE AS UNDER: AE NATURE OF TRANSACTION AMOUNT (RS.) HYUNDAI AUTO EVER CORPORATION PURCHASE OF EQUIPMENT 20,88,403 PURCHASE OF COMPUTER 2,12,08,832 PURCHASE OF COMPUTER SOFTWARE 27,41,790 REIMBURSEMENT OF EXPENSES 49,08,346 PAYABLE 60,88,745 HYUNDIA MOTOR COMPANY PROVISIONS ITES 47,99,49,928 REIMBURSEMENT OF EXPENSES 3,63,21,335 RECEIVABLES 6,34,42,881 KIA MOTOR CORPORATION PROVISION OF ITES 23,26,70,265 RECEIVABLES 4,32,08,022 3 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. 2.4 EXAMINATION OF TP STUDY CONDUCTED BY ASSESSEE: THE ASSESSEE HAS CARRIED OUT THE ECONOMIC ANALYSIS AND HAS SUMMARIZED IT AS UNDER: NATURE OF INTERNATIONAL TRANSACTION AMOUNT (RS.) MAM PLI MARGIN OF ASSESSEE MARGIN OF COMPARABLE PROVISION OF ITES 71,26,20,193 TNMM OP/TC 9.00% 12.50% PURCHASE OF EQUIPMENT 20,88,403 TNMM OP/TC 15.00% 12.90% PURCHASE OF COMPUTERS 2,12,08,832 TNMM OP/TC 15.00% 12.90% PURCHASE OF COMPUTER SOFTWARE 27,41,790 TNMM OP/TC 15.00% 12.90% REIMBURSEMENT OF EXPENSES 4,12,29,681 TNMM OP/TC 15.00% 12.90 RECEIVABLES 10,66,50,903 - - - - PAYABLES 60,88,745 - - - - 2.5 ANALYSIS OF THE TRANSACTION: AS PER THE AUDITED STATEMENT OF ACCOUNTS, THE FINA NCIALS OF THE ASSESSEE ARE AS UNDER: DESCRIPTION AMOUNT (IN RS.) OPERATING REVENUE 82,46,34,775 OPERATING COST 75,65,77,602 OPERATING PROFIT 6,80,57,173 OP/OR% 8.25% OP/OC % 9.00% 2.6 ON GOING THROUGH THE TP DOCUMENT, THE TPO OBSER VED THAT THE METHOD OF SEARCH PROCESS SUFFERS FROM DEFECTS WHICH RESULTED IN SELECTION OF INAPPROPRIATE COMPARABLES AND REJECTIO N OF COMPANIES THAT ARE APPROPRIATE COMPARABLES. HE, THEREFORE, RE JECTED THE TP DOCUMENT AND AN INDEPENDENT ANALYSIS WAS MADE BY A GGREGATING ALL THE TRANSACTIONS UNDER TNMM. THE TPO SELECTED THE F OLLOWING COMPANIES AS FINAL COMPARABLES: 4 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. S.NO. COMPANY NAME OP/OC% 1. ACCENTIA TECHNOLOGIES LTD. 11.16 2. DATAMATICS GLOBAL SERVICES LTD. 16.84 3. ECLERX SERVICES LTD. 61.37 4. E4E HEALTH CARE 13.73 5. INFORMED TECHNOLOGIES INDIA LTD. 7.10 6. INFOSYS BPO LTD. 34.68 7. JINDAL INTELLICOM LTD. 1.98 8. MICROGENETIC SYSTEM LTD. 7.01 9. TCS E-SERIVE LTD. (MERGED) 65.82 10 CROSS DOMAIN SOLUTIONS PVT. LTD. 29.88 TOTAL 249.59 AVERAGE 24.96 2.7 AFTER APPLYING THE AVERAGE MARGINS OF THE COMPA RABLES TO THE FINANCIALS OF THE ASSESSEE, THE TPO DETERMINED THE ARMS LENGTH PRICE AS UNDER: DESCRIPTION AMOUNT (RS.) ARMS LENGTH MARGIN 24.96% LESS: WCA 1.04% ADJUSTED ARMS LENGTH MARGIN 23.92% OPERATING COST 75,77,31,854 ARMS LENGTH MARGIN (%) 23.92% ALP @ 123.92% OF OC 93,89,81,313 PRICE RECEIVED 82,46,34,775 ADJUSTMENT U/S 92CA 11,43,46,538 THE ARMS LENGTH PRICE OF THE ASSESSEE WAS RS. 93,8 9,81,313/- AND THE SHORTFALL OF RS. 11,43,46,538/- WAS TREATED AS ADJUSTMENT U/S 92CA OF THE IT ACT. 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE DRP AND DRP VIDE ITS ORDER DATED 31/10/2016, RETAINED T HE COMPARABLES SELECTED BY TPO BY OBSERVING AS BELOW AND FURTHER D IRECTED THE TPO/AO TO READJUST THE WCA AS UNDER: IN OUR OPINION, THE DIFFERENCES, IF ANY, IN RESPECT OF THE COMPARABLES, ARE TAKEN CARE OF BY TAKING THE ARITHM ETICAL MEAN OF THE COMPARABLES U/S 92C(2) OF THE ACT. HENCE, IN THE CIRCUMSTANCES MENTIONED ABOVE AND CONSIDERING THE F UNCTIONAL PROFILE OF THE ASSESSEE, WE ARE OF THE VIEW THAT TH E DETERMINATION OF THE ARMS LENGTH PRICE, BASED ON 1 0 5 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. COMPARABLES SELECTED BY THE TPO, IS REASONABLE. ACC ORDINGLY, OBJECTION NOS. 9 TO 13 ARE REJECTED. AS PER THE DIRECTIONS OF THE DRP, THE ADJUSTMENT U/ S 92CA(3) WAS DETERMINED AT RS. 10,76,02,725/- AGAINST RS. 11,43 ,46,538/- PROPOSED BY THE TPO. 4. AGGRIEVED BY THE ORDER OF DRP, THE ASSESSEE IS I N APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: GENERAL 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN CONFIRMING TRANSFER PRICING ADJ USTMENT OF RS. 10,76,02,725 ON ACCOUNT OF PROVISION OF INFORMA TION TECHNOLOGY ENABLED SERVICES ('ITES') BY THE APPELLA NT TO, ITS ASSOCIATED ENTERPRISES ('AES'). 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN REJECTING TRANSFER PRICING DOCU MENTATION MAINTAINED BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME-TAX RULES, 1962 ('R ULES') AND UNDERTAKING A FRESH ECONOMIC ANALYSIS DURING THE CO URSE OF ASSESSMENT PROCEEDINGS AND THEREBY MAKING AN ADJUST MENT OF RS. 10,76,02,725 TO THE INTERNATIONAL TRANSACTIONS. SELECTION OF UNCOMPARABLE COMPANIES 3. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE AO/ DRP ERRED IN ACCEPTING THE FOLLOWING C OMPARABLE COMPANIES AS SELECTED BY THE TPO: A) ECLERX SERVICES LIMITED; B) INFOSYS BPO LIMITED; C) TCS E-SERVE LTD; AND D) CROSSDOMAIN SOLUTIONS PRIVATE LIMITED. 4. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE AO/DRP ERRED IN NOT FOLLOWING THE ORDER OF HON'BLE INCOME TAX APPELLATE TRIBUNAL IN APPELLANT'S OWN CA SE FOR AY 2008-09, AY 2009-10 AND AY 2010-11. ERROR IN COMPUTATION OF MARGIN OF COMPARABLE COMPAN IES 5. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE AO/DRP ERRED IN CONFIRMING THE TPO'S STAND OF TREATING THE PROVISION FOR BAD AND DOUBTFUL DEBT AND BAD DEB TS WRITTEN OFF AS NON-OPERATING EXPENSES FOR THE PURPOSE OF MA RGIN COMPUTATION OF COMPARABLE COMPANIES AS SELECTED BY TPO. 6 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. REJECTION OF COMPARABLE COMPANIES 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE OR IN LAW, THE AO/ORP ERRED IN CONFIRMING THE REJECTION OF CRY STAL VOXX LIMITED AS NOT COMPARABLE. ADJUSTMENT SHOULD BE RESTRICTED TO THE INTERNATIONA L TRANSACTIONS 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE OR IN LAW, THE AO/ORP HAS ERRED IN MAKING THE ADJUSTMENT BY CO NSIDERING TOTAL REVENUE OF THE COMPANY WITHOUT APPRECIATING T HAT THE TRANSFER PRICING ADJUSTMENT SHOULD BE RESTRICTED ON LY TO THE VALUE OF INTERNATIONAL TRANSACTIONS WITH THE AE. WORKING CAPITAL ADJUSTMENT 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE OR IN LAW, ORP HAS ERRED IN DIRECTING THE AO/ TPO TO CONSIDER THE AVERAGE PRIME LENDING RATE (PLR) OF 13.85% FOR THE FY 201112, INSTEAD OF THE PLR OF 14.75% AS ADOPTED BY THE TPO VIDE HIS ORDER. USE OF FILTERS 9. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/ORP ERRED IN UPHOLDING THE USE OF DIFFERENT FINA NCIAL YEAR END FILTER FOR REJECTION OF COMPARABLE COMPANIES WH ILE UNDERTAKING THE COMPARATIVE ANALYSIS. REJECTION OF USE OF MULTIPLE YEAR DATA 10. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/ORP ERRED IN REJECTING THE USE OF MULTIPLE YEAR DATA AND USING DATA FOR FY 2011-12 ONLY. ADJUSTMENT FOR RISK DIFFERENCES 11. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN DISREGARDING THE RISK PROFILE O F THE APPELLANT VIS-A-VIS ALLEGED COMPARABLE COMPANIES SE LECTED BY THE TPO AND NOT ALLOWING RISK ADJUSTMENT AS PER THE PROVISIONS OF RULE 10B(1)(E) OF THE RULES. ARM'S LENGTH RANGE OF 5% 12. THAT THE AO/TPO BE DIRECTED TO RE-WORK THE PROF IT MARGINS OF THE APPELLANT VIS--VIS THE RESULTANT COMPARABLE COMPANIES AND TO ALLOW THE BENEFIT OF +/- RANGE AS PROVIDED I N PROVISO TO SECTION 92C(2) OF THE ACT. 5. GROUND NOS. 1 & 2 ARE GENERAL IN NATURE. AS REGA RDS GROUND NOS. 8 TO 12, NO ARGUMENTS WERE ADVANCED BY THE LD. COUNSEL FOR THE 7 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. ASSESSEE AT THE TIME OF HEARING, THEREFORE, THE SAM E ARE DISMISSED AS NOT PRESSED. 6. AS REGARDS GROUND NOS. 3 & 4, REGARDING SELECTIO N OF UNCOMPARABLE COMPANIES, NAMELY, I) ECLERX SERVICES LTD., II) INFOSYS BPO LTD., III) TCS ESERVE LTD., AND IV) CROSSDOMAIN SOLUTIONS PVT. LTD., LD. AR SUBMITTED THAT DRP HAS DISTINGUISHED L OW AND HIGH END COMPANIES, BUT FAILED TO EXCLUDE THE LOW END COMPAN IES. BY RELYING ON OWN ORDERS OF ASSESSEE IN EARLIER YEARS, HE SUBM ITTED AS UNDER: 6.1 ECLERX SERVICES LTD. LD. AR SUBMITTED THAT TH IS COMPANY CANNOT BE A COMPARABLE TO THE ASSESSEE COMPANY AS T HIS COMPANY IS A KNOWLEDGE PROCESS OUTSOURCING COMPANY AND AS PER THE ANNUAL REPORT OF THE COMPANY, IT IS ENGAGED IN THE PROVISI ON OF SERVICES IN BUSINESS UNITS OF FINANCIAL SERVICES AND SALE AND M ARKETING SUPPORT. HE SUBMITTED THAT THERE WAS AN EXTRAORDINARY EVENTS AS A SUBSIDIARY COMPANY OF ECLERX SERVICES LTD. WAS WOUND-UP. IT HA S SUPER NORMAL PROFITS DURING THE YEAR AND CANNOT BE COMPARED TO T HE ASSESSEE COMPANY. HE SUBMITTED THAT IT HAS DIVERSE ACTIVITIE S & NO SEGMENTAL DETAILS ARE AVAILABLE AND IT HAS HIGH TURNOVER OF R S. 472 CRORES. FURTHER, HE BROUGHT TO OUR NOTICE THAT, BY REFERRIN G TO ANNUAL REPORTS OF THIS COMPANY VIDE PAGE 395 OF PAPER BOOK, THIS C OMPANY HAS ACQUIRED AGILYST INC, USA. THE EXTRACTION OF THE SU BMISSION IS REPRODUCED BELOW: THI S YEAR ALSO SAW US ACQUIRE AGILYST INC, A US COMPAN Y PROVIDING OPERATIONS AND DATA ANALYSIS SUPPORT TO S OME OF THE LARGEST CABLE AND TELECOMMUNICATION COMPANIES IN TH E WORLD. WE ARE VERY EXCITED ABOUT THIS ACQUISITION AS IT PR OVIDES US ACCESS TO NEW CUSTOMERS AND SERVICES AND REDUCES OU R RELIANCE ON OUR EXISTING LARGE CUSTOMERS. THE AGILYST BUSINE SS MODEL IS ALSO VERY SIMILAR TO OURS AND SO WE SEE MANY BUSINE SS SYNERGIES, INCLUDING OPPORTUNITIES FOR CROSS-SELLIN G SERVICES ACROSS OUR COMBINED CUSTOMER BASE. THE ACQUISITION ALSO ADDS DELIVERY CAPABILITY IN CHANDIGARH - NOW OUR THIRD L OCATION AFTER MUMBAI AND PUNE IN INDIA, AND BRINGS AN ADDITIONAL 1,000 PEOPLE INTO THE ECLERX FAMILY. BY THIS ACQUISITION, THE FINANCIALS ARE NOT RELIABL E. 8 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. HE RELIED ON THE FOLLOWING CASES: 1. EXEVO INDIA PVT. LTD., VS. DCIT, ITA NO. 20/DEL/ 2017 AY 2012-13 2. FRACTAL ANALYTICS PVT. LTD., VS. ACIT, ITA NO. 1 024/MUM/17 3. S&P CAPITAL IQ PVT. LTD., ITA NO. 200 & 435/HYD/ 2016 4. HYUNDAI MOTOR INDIA ENGG. PVT. LTD. 5. HYUNDAI MOTOR INDIA ENGG. PVT. LTD., ITA NO. 128 /HYD/2016 & 216/HYD/2016 6.2 LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 6.3 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. AS PER THE SUBMISSION OF LD. AR, THIS COMPA NY HAS ACQUIRED NEW ENTITY. AGILYST INC, USA AND IT IS EXTRAORDINAR Y EVENT. BY FURTHER RELYING ON THE CASE LAW EXEVO INDIA PVT. LTD. (SUPR A), HE SUBMITTED THAT THIS COMPANY CANNOT BE COMPARED. WE CANNOT AGR EE WITH THE SUBMISSION OF THE COUNSEL ON THIS ASPECT AS THIS CO MPANY ACQUIRED NEW COMPANY IN USA, HOW IT WILL HAVE AN IMPACT ON T HE FINANCIALS DURING THIS YEAR SINCE, THE USA COMPANY IS AN INDEP ENDENT ENTITY AND ENGAGES IN USA AND HAVING ITS OWN FUNCTIONS MAY BE SIMILAR TO THE ASSESSEE. WE DO NOT SEE ANY IMPACT OF ACQUIRING IND EPENDENT ENTITY IN USA WILL HAVE ANY IMPACT ON THE FUNCTIONS OF THE ASSESSEE FURTHER. IT IS ACCEPTED THAT ASSESSEE AND ECELREX ARE BOTH C LASSIFIED AS HIGH END BPO. FURTHER, WE FIND THAT IN ASSESSEES OWN CA SE FOR AY 2011- 12, THE COORDINATE BENCH HAS HELD AS UNDER: 9.9. WE NOTICE THAT THIS COMPANY IS CATEGORISED AS KPO COMPANY AND THE SERVICES ARE SIMILAR BEING PROVIDED TO THE SERVICES BEING PROVIDED BY THE ABOVE COMPANY. FURTH ER, AS SEEN FROM THE SO CALLED EXTRAORDINARY EVENT, IT IS NOTICED THAT THE SAID COMPANY HAS WOUND-UP A SUBSIDIARY COMPANY W.E.F. 29-03-2011. SINCE IT HAS NOT ACQUIRED THE COMPANY W HOSE TURNOVER IS INCLUDED IN ASSESSEE-COMPANY BUT ONLY W OUND-UP A DORMANT COMPANY, WE ARE OF THE OPINION THAT IT DOES NOT HAVE ANY BEARING ON ASSESSEE'S OPERATING RESULTS. SUPER NORMAL PROFITS CANNOT BE A BASIS FOR EXCLUSION OF A COMPAN Y AND SINCE THE DRP HAS CONSIDERED THE OBJECTIONS, WE AGREE WIT H THE FINDINGS OF DRP. EVEN THOUGH THE COMPANY WAS EXCLUD ED IN EARLIER YEAR, WE ARE OF THE OPINION THAT EACH YEAR IS TO BE CONSIDERED SEPARATELY ON THE BASIS OF THE FACTS AND IN TP 9 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. MATTERS THE FACTS WILL VARY FROM YEAR TO YEAR. ACCO RDINGLY, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE EXCL UDED. TO THAT EXTENT, THE GROUND RAISED BY ASSESSEE IS REJEC TED. FOLLOWING THE DECISION OF THE COORDINATE BENCH AS A BOVE, WE EXCLUDE THIS COMPANY AS COMPARABLE. 6.4 INFOSYS BPO LTD. - LD. AR SUBMITTED THAT THIS C OMPANY CANNOT BE A COMPARABLE TO THE ASSESSEE COMPANY AS IT HAS F UNCTIONAL DISSIMILARITY AS WELL AS EXTRAORDINARY EVENTS TOOK PLACE AND IT HAS HIGH TURNOVER OF RS. 1,312 CRORES. HE RELIED ON THE FOLLOWING CASES: 1. EXEVO INDIA PVT. LTD., VS. DCIT, ITA NO. 20/DEL/ 2017 AY 2012-13 2. S&P CAPITAL IQ PVT. LTD., ITA NO. 200 & 435/HYD/ 2016 3. HYUNDAI MOTOR INDIA ENGG. PVT. LTD., ITA NO. 17 43/HYD/2014 4. HYUNDAI MOTOR INDIA ENGG. PVT. LTD., ITA NO. 128 /HYD/2016 & 216/HYD/2016 6.5 LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 6.6 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT IN AY 2008-09 AND 2009-10 THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE HAS EXCLUDE D THIS COMPANY AS COMPARABLE FROM THE LIST OF COMPARABLES BY OBSERVIN G AS BELOW: 11.1 WE ARE IN AGREEMENT WITH THE CONTENTIONS OF T HE COMPARABILITY ON TURNOVER RATIO OF ASSESSEE WITH THIS COMPANY ON THE GROUND THAT ASSESSEE'S TURNOVER IS ABOUT RS.15.79 CRORES, AS AGAINST TURNO VER OF RS.1016 CRORES OF THE INFOSYS. WE ARE ALSO OF THE VIEW THAT OTHER CON TENTIONS WITH REGARD TO THE BRAND VALUE AND BRAND BUILDING EXERCISE, HAVING HUG E ASSET BASE, CAN BE CONSIDERED TO ARRIVE AT THE CONCLUSION THAT INFOSYS BPO IS FUNCTIONALLY NOT SIMILAR TO THAT OF ASSESSEE. INFOSYS BPO STANDS ON ITS OWN AS AN EXCLUSIVE BPO OF THE INFOSYS TECHNOLOGIES AND IN EARLIER YEAR S, GENERALLY INFOSYS BPO IS EXCLUDED IN MANY OF THE CASES. CONSIDERING THESE ASPECTS, WE ARE OF THE OPINION THAT EVEN THOUGH THE PROFITS OF THE INFOSYS BPO LTD. IS REASONABLE AND NO SUPER PROFITS ARE EARNED, BECAUSE OF ITS BIG BRAND VALUE THIS COMPANY HAS TO BE EXCLUDED ON THE GROUNDS OF FUNCTIONAL DIS SIMILARITY ON FAR ANALYSIS. THEREFORE, WE DIRECT THE ASSESSING OFFICE R/TPO TO EXCLUDE THIS COMPANY. 10 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. FURTHER, DRP HAS EXCLUDED INFOSYS FROM THE LIST OF COMPARABLES IN THE AY 2010-11 BY FOLLOWING ITAT ORDER OF EARLIER YEARS . FOLLOWING THE SAME, WE DIRECT THE AO TO EXCLUDE THE SAID COMPANY AS COMPARABLE. 6.7 TCS ESERVE LTD. - LD. AR SUBMITTED THAT THIS CO MPANY CANNOT BE A COMPARABLE TO THE ASSESSEE COMPANY AS IT HAS F UNCTIONAL DISSIMILARITY AS WELL AS DIVERSIFIED BUSINESS AND H AS HIGH TURNOVER. HE RELIED ON THE DECISION OF THE COORDINATE BENCH OF T HIS TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11 IN ITA NO. 1917/ HYD/2014, VIDE ORDER DATED 13/11/2015. 6.8. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER S OF REVENUE AUTHORITIES. 6.9 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. IN ASSESSEES OWN CASE FOR AY 2009-10 (SUPR A), THE COORDINATE BENCH HAS HELD AS UNDER: 11.2.2. WE FIND THAT THE ASSESSEE'S CONTENTIONS ABO UT THE PRESENCE OF 'BRAND VALUE' AND OWNING OF 'INTANGIBLE S' IS SUPPORTED BY THE EVIDENCE ON RECORD. HOWEVER, AS RE GARDS THE EXTRAORDINARY EVENT OR EXCEPTIONAL CIRCUMSTANCE THE RE IS NO MATERIAL PLACED BEFORE US BY THE LD. COUNSEL FOR TH E ASSESSEE. THEREFORE, MERELY BECAUSE THE TPO IN ANOTHER CASE H AS HELD THAT THERE IS AN EXTRAORDINARY EVENT FOR WHICH THIS COMPANY HAS TO BE EXCLUDED FROM THE LIST OF COMPARABLES, IT CAN NOT BE EXCLUDED. SUCH CLAIM HAS TO BE SUPPORTED BY EVIDENC E ON RECORD. AS REGARDS THE FUNCTIONAL DISSIMILARITY AND HUGE TURNOVER AND BRAND VALUE IS CONCERNED WE FIND THAT THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR A.Y. 2009-10 WHILE CONSI DERING THE COMPARABILITY OF THE ASSESSEE WITH INFOSYS BPO LTD. , HAS TAKEN NOTE OF THE POSSESSION OF THE BRAND VALUE AND INTAN GIBLES WHICH INFLUENCED THE FINANCIAL RESULTS OF THE COMPANY. TH E HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AGNITY INDI A TECHNOLOGIES P. LTD., (2013) 219 TAXMAN 26 (DEL.), HELD THAT HUGE TURNOVER COMPANIES LIKE INFOSYS AND WIPRO CANN OT BE CONSIDERED AS COMPARABLE TO SMALLER COMPANIES LIKE ASSESSEE THEREIN. IN THE CASE BEFORE THE HON 'BLE HIGH COURT (SUPRA), THE TURNOVER OF THE ASSESSEE WAS ABOUT RS.15.79 CRORES AS AGAINST THE TURNOVER OF RS.1 0 16 CRORES OF THE INFOSYS. CO NSIDERING THESE FACTS, THE HON'BLE HIGH COURT HAD DIRECTED FO R EXCLUSION OF INFOSYS BPO BECAUSE OF ITS BRAND VALUE ARID ALSO ON THE GROUNDS OF FUNCTIONAL DISSIMILARITY AND HUGE TURNOV ER. THOUGH, 11 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. THE COMPANY BEFORE US IS TCS E-SERVICE LTD., AND NO T INFOSYS BPO, WE FIND THAT THE TURNOVER OF THE ASSESSEE COMP ANY FOR THIS ASSESSMENT YEAR IS AROUND RS.50 CRORES AS AGAINST T HE TURNOVER OF TCS E-SERVE LIMITED OF RS.1405.10 CRORES. THEREF ORE, FOLLOWING THE TURNOVER FILTER AS WELL AS TAKING NOT E OF THE FACT THAT IT OWNS AND POSSESSES BRAND VALUE AND INTANGIB LES AS COMPARED TO THE ASSESSEE WHICH DOES NOT OWN SUCH AS SETS, WE DIRECT THAT THIS COMPANY BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES. ACCORDINGLY, ASSESSEE'S GROUNDS OF APP EAL NO.6 IS PARTLY ALLOWED. FOLLOWING THE SAID DECISION, WE DIRECT THE AO/TPO T O EXCLUDE THE SAID COMPANY AS COMPARABLE. 6.10 CROSSDOMAIN SOLUTIONS PVT. LTD. - LD. AR SUBMI TTED THAT THIS COMPANY CANNOT BE A COMPARABLE TO THE ASSESSEE COMP ANY AS THIS COMPANY IS FUNCTIONALLY DISSIMILAR AS IT HAS A DIVE RSIFIED KNOWLEDGE PROCESS OUTSOURCING COMPANY PROVIDING SERVICES IN I NSURANCE, HEALTH CARE, HR AND ACCOUNTING DOMAINS. COMPANY ALSO OFFER S BUSINESS EXCELLENCE MARKET RESEARCH AND DATA ANALYTICS AND I T SERVICES. IT WAS ALSO SUBMITTED THAT THE COMPANY IS ENGAGED IN SOFTW ARE DEVELOPMENT ACTIVITIES. IT WAS ALSO SUBMITTED THAT IN ASSESSEE' S OWN CASE IN AY. 2008-09, THIS COMPANY WAS REJECTED BY THE ITAT DUE TO THE FACT THAT IT HAS DIVERSIFIED ACTIVITY AND FURTHER, SEGMENTAL INF ORMATION WAS NOT AVAILABLE. IT WAS ALSO CONTENDED THAT THE MARGIN CA LCULATED BY THE TPO IS INCORRECT AND FURNISHED A REVISED COMPUTATIO N. THE ISSUE WAS WHETHER THE BAD DEBTS WERE NON-OPERATING EXPENSES A ND TPO HAS NOT FOLLOWED THE GUIDELINES ON THE ISSUE. 6.11. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDE RS OF REVENUE AUTHORITIES. 6.12 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. IN ASSESSEES OWN CASE FOR AY 2011-12, THE COORDINATE BENCH HELD AS UNDER: 9.11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. ASSESSEE HAS RAISED THE SAME OBJECTIONS BEFORE DRP WHICH GAVE A FINDING THAT THE ENGINEERING DESIGN SERVICES BEING RENDERED BY ASSES SEE ARE 12 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. AKIN TO KPO SERVICES OF THE ABOVE COMPANY. IT FURTH ER CONSIDERED THAT FUNCTIONAL COMPARABILITY NEED TO BE DECIDED ON THE BASIS OF THE INFORMATION AVAILABLE IN THE ANNUA L REPORT AND NOT BASED ON THE WEBSITE INFORMATION WHICH MAY VAR Y AND MAY NOT BE RELIABLE. IT WAS FURTHER NOTED THAT IN THE C ASE OF M/S. EXCELLENCE DATA RESEARCH PVT. LTD., IN ITA NO. 159/ HYD/2015, THE ITAT REJECTED THE OBJECTION OF ASSESSEE FOR EXC LUSION OF ABOVE COMPANY NOTING THAT THE ANNUAL REPORT REFERS ONLY SERVICE AND IS IN THE PAY ROLL SERVICE ACTIVITY. THUS, STAT ING DRP REJECTED ASSESSEE'S OBJECTIONS. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAID OBJECTIONS AS THE VERY BASI S OF THE CONTENTIONS ARE BASED ON THE WEBSITE INFORMATION BU T NOT ON THE ANNUAL REPORT. HOWEVER, THE DRP HAS DIRECTED THE TP O TO VERIFY THE MARGIN WHICH ASSESSEE SUBMITS THAT HAS NOT BEEN CONSIDERED. THEREFORE, WHILE RETAINING THE COMPANY AS A COMPARABLE ONE, WE DIRECT THE AO/TPO TO EXAMINE THE CONTENTIONS WITH REFERENCE TO MARGIN COMPUTATION OF THE ABOVE SAID COMPANY AFTER GIVING DUE OPPORTUNITY TO ASSESS EE TO MAKE SUBMISSIONS. THIS ISSUE IS CONSIDERED PARTLY ALLOWE D. FOLLOWING THE SAID DECISION, WE REJECT THE CONTENTI ON OF THE ASSESSEE AND RETAIN THIS COMPANY AS COMPARABLE. 7. AS REGARDS GROUND NO. 5 REGARDING TREATING THE P ROVISION FOR BAD AND DOUBTFUL DEBTS AND BAD DEBTS WRITTEN OFF AS NON OPERATING EXPENSES FOR THE PURPOSE OF MARGIN COMPUTATION OF C OMPARABLE COMPANIES AS SELECTED BY THE TPO, THE TPO OBSERVED THAT PROVISION FOR DOUBTFUL DEBTS ARE CONSIDERED AS OPERATING EXPE NSES ONLY WHEN THE SAME EXPENSES ARE INCURRED EVERY YEAR FOR THE L AST THREE YEARS UPTO AND INCLUDING FY 2011-12. THESE EXPENSES ARE I NCURRED AT ALMOST CONSISTENT LEVEL IN TERMS OF ITS RATIO WITH THE TURNOVER. OTHERWISE, THE SAME IS EXCLUDED FROM OPERATING EXPE NSES TREATING THE SAME AS EXTRA ORDINARY OR RESTRICTED TO THE EXTENT OF REASONABLENESS BASED ON THE THREE YEARS FIGURES. HE OPINED THAT T HE PROVISION FOR DOUBTFUL DEBTS ARE ALLOWED PROVIDED A COMPANY FOLLO WS A CONSISTENT APPROACH TO MAKE PROVISION EVERY YEAR, OTHERWISE SU CH EXPENSES BECOME EXTRAORDINARY AND THUS ARE EXCLUDED FROM OPE RATING EXPENSES. 13 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. 7.1 AGGRIEVED, THE ASSESSEE RAISED OBJECTIONS BEFOR E THE DRP AND BEFORE THE DRP IT WAS SUBMITTED THAT THE PROVISION FOR BAD AND DOUBTFUL DEBTS SHOULD BE CONSIDERED AS OPERATING IN NATURE. ON THIS COUNT, THE ASSESSEE SOUGHT FOR RECOMPUTATION OF MAR GIN IN THE CASE OF ECLERX SERVICES LTD., INFOSYS BPO LTD., TCS E-SERVE LTD AND DATAMATICS GLOBAL SERVICES LTD. 7.2 THE DRP AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE, UPHELD THE ACTION OF THE TPO BY OBSERVING AS UNDER: HAVING CONSIDERED THE SUBMISSION, IT IS NOTICED BY US THAT THE APPROACH OF THE ASSESSEE IS CONTRADICTORY WHICH IS EVIDENT FROM THE FACT THAT IN ONE SIDE IT SOUGHT TO CONSIDER THE BAD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS AS OPERATING I N NATURE. AND ON THE OTHER SIDE IN THE CASE OF MICROGENETIC SYSTE M LTD., WHERE THE TPO HAS INCREASED THE OPERATING COST WITH REGARD TO RS. 13,50,479 REDUCED FROM THE OPERATING COST ON AC COUNT OF 'PROVISION NO LONGER REQUIRED'. NO OBJECTION HAS BE EN RAISED. THIS PANEL HAS BEEN CONSISTENTLY HOLDING THAT PROVI SIONS ARE NOT AN ASCERTAINED LIABILITY WHICH IS NOT ALLOWABLE FOR PURPOSE OF COMPUTATION OF BUSINESS PROFIT UNDER THE IT ACT. WE ARE ALSO OF THE VIEW THAT THE PROVISION FOR BAD & DOUBTFUL DEBT S IS NOT MADE IN ALL THE CASES. THERE IS NO RATIONALE TO CONSIDER SUCH PROVISION AS OPERATING IN NATURE. EVEN OTHERWISE, FOR THE COM PARABILITY ANALYSIS, SUCH PROVISIONS ARE EXCLUDED FROM THE TES TED PARTIES AS WELL AS THE COMPARABLE, THE ERROR IN THE MARGINS OF THE RELEVANT YEAR ARE TAKEN CARE OF. THIS VIEW OF THE P ANEL FINDS SUPPORT FROM SEVERAL DECISIONS OF THE HON'BLE ITAT, FOR EXAMPLE, IN THE CASE OF M/S TELCORDIA TECHNOLOGIES INDIA PVT. LIMITED (22 TAXMANN.COM 96/ 137 ITO 1 (MUM), IS SQU ARELY APPLICABLE TO THE ASSESSEE CASE IN WHICH IT WAS DEC IDED THAT THE PROVISION FOR DOUBTFUL DEBT CANNOT FORM PART OF OPE RATING COST. FURTHER. IN THE CASE OF THYSSEN KRUPP INDUSTRIES IN DIA PVT. LTD., ((2013) 33 TAXMANN.COM 107), THE HON'BLE MUMBAI TRI BUNAL HELD THAT PROVISION FOR DOUBTFUL DEBTS IS TO BE CON SIDERED AS NON-OPERATING IN NATURE BECAUSE IT IS ONLY A PROVIS ION. WHILE WORKING OUT THE OPERATING PROFIT, ONLY ITEMS OF REC EIPTS AND EXPENDITURE, WHICH HAVE DIRECT RELATION FOR DETERMI NING THE PROFIT HAVE TO BE TAKEN INTO ACCOUNT. IN THE CASE OF FOUR SOFT LTD, VS. OY. CIT [2011] 142 ITJ 358/(2012) 16 ITR (TRIB.) 73 (HYD.), IT WAS HELD THAT FOR COMPUTING THE NET MARGIN OF THE A SSESSEE FOR THE PURPOSES OF TRANSFER PRICING, ONLY THE COST REL ATED TO THE TRANSACTION WITH THE AES HAS TO BE CONSIDERED AND T HAT BAD DEBTS/REIMBURSEMENTS HAVE TO BE EXCLUDED. ACCORDING LY, THE ABOVE OBJECTION IS REJECTED. 14 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. 7.3 AGGRIEVED BY THE DRP DECISION, THE ASSESSEE IS IN APPEAL BEFORE US AND SUBMITTED THAT THE ISSUE IN DISPUTE I S SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF ITAT, HY DERABAD IN THE CASE OF M/S KENEXA TECHNOLOGIES PVT. LD., IN ITA NO . 243/HYD/2014 VIE ORDER DATED 14/11/2014 WHEREIN THE COORDINATE B ENCH HAS HELD AS UNDER: 40. WITH RESPECT TO GROUND NO. 2.6.3 AND 2.6.4, IT WAS ARGUED BY THE LEARNED COUNSEL THAT THE TPO ERRED IN COMPUT ING THE MARGINS OF COMPARABLE COMPANIES BY CONSIDERING THE PROVISION FOR BAD AND DOUBTFUL DEBTS AND BAD DEBTS AS NON-OPE RATIVE EXPENDITURE. 41. WE PLACE RELIANCE ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF SONY INDIA PVT. LTD. VS. DCIT, ITA NO. 1189/DEL/2005, 819/DEL/2007 AND 820/DEL/2007. THE R ELEVANT PORTION IS EXTRACTED BELOW: '106.2 THUS, CREATION OF UNPAID LIABILITY AND ITS W RITE BACK IS A NORMAL INCIDENT OF A BUSINESS OPERATION WHICH IS CARRIED EVERYWHERE IN ACCOUNTS TO HAVE TRUE PICTURE OF PROFITS OF THE RELEVANT PERIOD. HAVING REGARD TO STATUTORY PROVISIONS, IT CANNOT BE SAID THAT PROVISIONS OR WRITING BACK OF LIABILITY IS NOT PART OF OPERATING PROFIT OR WOULD NOT BE TAKEN INTO CONSIDE RATION FOR COMPUTING THE SAME. WE CAN THEREFORE MAKE A GENERAL OBSERVATION THAT AL L BUSINESS ENTERPRISES ARE MAKING AND WRITING BACK LIABILITIES AS A NORMAL INCIDENT OF OPERATING BUSIN ESS. THEREFORE ON FACTS WE DO NOT SEE ANY JUSTIFICATION FOR EXCLUDING PROVISIONS WRITTEN BACK IN THE PROFIT AND LOSS ACCOUNT AS NOT FORMING PART OF THE OPERATING PROFIT OF THE TAXPAYER. ACCORDINGLY CLAIM OF THE TAXPAYER IS ACCE PTED. 107. THE NEXT ITEM RELATES TO BALANCES WRITTEN BACK . IN OUR CONSIDERED OPINION, FINDING GIVEN IN RESPECT OF PROVISIONS WRITTEN BACK IS EQUALLY APPLICABLE TO BA LANCES WRITTEN BACK MORE PARTICULARLY WHEN LD. CIT(A) HAS NOT GIVEN ANY SEPARATE FINDING AND THE TRANSFER PRICING OFFICER HAS SAID NOTHING SPECIFICALLY ON THIS ITEM. THE BALANCES WRITTEN BACK SHOULD ALSO BE TREATED AS PAR T OF OPERATING PROFIT. WE DIRECT ACCORDINGLY.' 42. WE ARE OF THE VIEW THAT IN THE INSTANT CASE BAD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS ARE PART OF TH E OPERATING EXPENSES AND WE DIRECT THE TPO TO RE-COMPUTE THE MA RGINS 15 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. OF COMPARABLE COMPANIES BY INCLUDING BAD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS AS OPERATING EXPENSES FO R THE PURPOSE OF COMPUTING PROFIT AND LOSS OF COMPARABLE COMPANIES. 7.4 LD. DR, ON THE OTHER HAND, NEITHER CONTROVERTED THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE NOR BROUG HT ANY CONTRARY DECISION IN THIS REGARD. 7.5 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. AS THE ISSUE IN DISPUTE IS SIMILAR TO THE I SSUE DECIDED IN THE CASE OF M/S KENEXA TECHNOLOGIES PVT. LTD. (SUPRA), FOLLOWING THE DECISION OF THE COORDINATE BENCH, WE DIRECT THE AO/ TPO TO RECOMPUTE THE MARGINS OF COMPARABLE COMPANIES BY INCLUDING B AD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS AS OPERATING E XPENSES FOR THE PURPOSE OF COMPUTING PROFIT AND LOSS OF COMPARABLE COMPANIES. ACCORDINGLY, THIS GROUND IS ALLOWED. 8. AS REGARDS GROUND NO. 6 REGARDING REJECTION OF CRYSTAL VOXX LTD. AS NOT COMPARABLE BY AO/DRP, THE TPO OBSERVED THAT THIS COMPANY FAILED THE SERVICE INCOME FILTER AT ENTITY LEVEL AND HAS PERSISTENT LOSSES AT SEGMENT LEVEL AND HENCE NOT CO NSIDERED. 8.1 BEFORE THE DRP, THE ASSESSEE SUBMITTED THAT THI S COMPANY QUALIFIES ALL THE FILTERS APPLIED BY THE TPO AND TH EREFORE, THE TPO WAS NOT JUSTIFIED IN REJECTING THE ABOVE COMPANY. 8.2 DRP AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE, UPHELD THE ACTION OF THE TPO BY OBSERVING AS UNDER: HAVING CONSIDERED THE SUBMISSION, WE PERUSED THE O RDER OF THE TPO FROM WHICH IT IS NOTICED THAT THE ABOVE COMPANY WAS PROPOSED AS AN ADDITIONAL COMPARABLE BY THE ASSESSE E. HOWEVER, THE TPO REJECTED THE INCLUSION OF THE ADDI TIONAL COMPARABLE DUE TO THE REASON THAT THE COMPANY FAILE D THE SERVICE INCOME FILTER AND ALSO HAS PERSISTENT LOSSE S AT THE SEGMENTAL LEVEL. ON A PERUSAL OF THE ANNUAL REPORT, IT IS NOTICED BY US THAT THE FINDING OF THE TPO ARE NOT IN CONFOR MITY WITH THE ANNUAL REPORT. HOWEVER, IT IS NOTICED BY US FROM TH E ANNUAL REPORT, THAT THE ENTIRE REVENUE OF RS. 3,05,34,534 HAS BEEN SHOWN AS 'PROFESSIONAL INCOME'. NOWHERE IN THE ANNU AL REPORT IS THERE ANY CLARITY WITH REGARD TO FUNCTIONS PERFO RMED BY THE 16 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. ABOVE COMPANY EXCEPT THAT, IN THE SEGMENTAL REPORTI NG, IT IS MENTIONED THAT THE COMPANY'S OPERATION PREDOMINANTL Y RELATES TO SINGLE SEGMENT, NAMELY 'BPO ACTIVITY. THE MENTI ON OF THE WORD 'PREDOMINANTLY' INDICATES THAT THE COMPANY IS ALSO PERFORMING OTHER FUNCTIONS, IN REGARD TO WHICH NO I NFORMATION IS AVAILABLE. FURTHER, THE COMPANY CANNOT BE RETAINED AS A COMPARABLE EVEN IF IT IS CONSIDERED THAT THE COMPAN Y IS PROVIDING BPO SERVICES, CONSIDERING THE HIGH END SE RVICES (KPO) PROVIDED BY THE ASSESSEE. ACCORDINGLY, THE AB OVE COMPANY CANNOT BE CONSIDERED AS A COMPARABLE. 8.3 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 8.4 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE CONTENTION OF THE LD. AR BEFORE US IS T HAT THE DRP HAS TAKEN DECISION CONTRARY TO THE DECISION OF TPO, BUT , THE DRP HAS NOT GIVEN OPPORTUNITY TO THE ASSESSEE TO REPRESENT ITS CASE. THEREFORE, IN THE INTEREST OF JUSTICE, WE REMIT THE ISSUE BACK TO THE FILE OF TPO FOR FRESH CONSIDERATION OF THE ISSUE IN ACCORDANCE WIT H LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. AS REGARDS GROUND NO. 7 REGARDING ADJUSTMENT SH OULD BE RESTRICTED TO THE VALUE OF INTERNATIONAL TRANSACTIO NS, THE SUBMISSION OF THE ASSESSEE BEFORE THE TPO IS THAT AS PER SECTION 92CA(3) OF THE ACT, THE ARMS LENGTH PRICE SHALL BE DETERMINED IN RELATION TO THE INTERNATIONAL TRANSACTION WITH AE AND THE ADJUSTMEN T CAN ONLY BE DONE WITH RESPECT TO THE VALUE OF INTERNATIONAL TRANSACT ION WITH AE COVERED UNDER PROVISIONS OF THE ACT APPLICABLE FOR AY 2012- 13 AND NOT ON THE TOTAL TURNOVER. THE TPO REJECTING THE SUBMISSIONS O F THE ASSESSEE, PROPOSED ADJUSTMENT CONSIDERING ENTITY LEVEL. 9.1 WHEN THE ASSESSEE RAISED OBJECTIONS BEFORE THE DRP, THE DRP REJECTED THE OBJECTION OF THE ASSESSEE ON THE GROUN D THAT THE ASSESSEE IS REQUIRED TO FURNISH THE EVIDENCE TO SUP PORT THAT IN RESPECT OF THE INVOICES RAISED FOR REVENUE OF RS. 71,26,20, 193/-, THE COST INVOLVED IS ONLY RS. 67,86,85,898. SINCE, ASSESSEE FAILED TO FURNISH SUCH EVIDENCE, EITHER BEFORE THE TPO OR BEFORE THEM , THE OBJECTION WAS REJECTED. 17 ITA NO. 87 /HYD/2017 HYUNDAI MOTOR INDIA ENGG. PVT. LTD. 9.2 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 9.3 CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. SINCE THE ASSESSEE FAILED TO FURNISH THE EV IDENCE IN RESPECT OF THE INVOICES RAISED FOR REVENUE OF RS. 71,26,20,193 /- EITHER BEFORE THE TPO OR BEFORE THE DRP, THE DRP REJECTED THE OBJECTI ONS RAISED BY THE ASSESSEE. TO MEET THE ENDS OF JUSTICE, WE REMIT THI S ISSUE BACK TO THE FILE OF THE TPO WITH A DIRECTION TO GIVE ONE MORE O PPORTUNITY TO THE ASSESSEE TO SUBMIT THE REQUIRED INFORMATION TO SUBS TANTIATE ITS CLAIM. WE DIRECT THE ASSESSEE TO FILE THE REQUIRED INFORMA TION TO SUBSTANTIATE ITS CLAIM. THIS GROUND IS ALLOWED FOR STATISTICAL P URPOSES. 10. OTHER GROUNDS ARE NOT ARGUED BEFORE US, THEREFO RE, THE SAME ARE DISMISSED AS NOT PRESSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE, 2018 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED: 8 TH JUNE, 2018 KV COPY TO:- 1) HYUNDAI MOTOR INDIA ENGG. PVT. LTD., SURVEY NO . 5/2 & 5/3, OPP. HITECH CITY RAILWAY STATION (MMTS), HYDER ABAD 500 084 2) DCIT, CIRCLE 2(2), 5 TH FLOOR, SIGNATURE TOWERS, KONDAPUR, HYD. 3) DRP - 1, BENGALURU 4) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 5) GUARD FILE