DCIT, V. M/s Oracle Solutions Services (India) Pvt. Ltd.,

ITA 880/BANG/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7694 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: U
• Keywords: Related party transaction; Transfer pricing; International transaction; Cost of acquisition; Wholly owned subsidiary
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, B ENGALURU BEFORE S HRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER I T (TP) A NO. 880 / BANG/2 0 13 (ASSESSMENT YEAR: 2005 - 06 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1 2(2), BENGALURU. VS. APPELLANT M/S.ORACLE SOLUTIONS SERVICES (INDIA) PVT.LTD. PRESTIGE TECHNOLOGY PARK, VENUS BLOCK, PHASE - I, LEVEL 6 - 9, SY.NO.29, SARJAPUR MARATHAHALLI MAIN ROAD, BENGALURU - 560087. PAN: AAACE 4354 L RESPONDENT AND CROSS OBJN.NO.59/BANG/2016 (IN I T (TP) A NO. 880 /BANG/2 013) (ASSESSMENT YEAR: 2005 - 06) (BY THE ASSESSEE) ***** ASSESSEE BY: MS.NEERA MALHOTRA, CIT(DR) REVENUE BY: S/SHRI P.K.PRASAD & UMASHANKAR GAUTAM, ADVOCATES DATE OF HEARING : 03/07/2017 DATE OF PRONOUNCEMENT : 09 /0 8 /2017 O R D E R PER I NTURI RAMA RAO, AM : THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME - TAX (APPEALS) - IV, [ CIT(A) - IV ] , BENGALURU, DATED 06/03/2013 FOR THE ASSESSMENT YEAR 2 00 5 - 06. IT (TP) A NO . 880 /BANG/201 3 PAGE 2 OF 21 2 . BRIEFLY FACTS OF THE CASE ARE THAT THE RESPONDENT - ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE COMPANIES ACT, 1956. IT IS WHOLLY OWNED SUBSIDIARY OF ORACLE N E THE R LANDS. IT IS E NGAGED IN THE BUSINESS OF PROVIDING SOFTWARE CONSULTING SERVICES TO THE ORACLE GROUP. IT IS REGISTERED AS 100% EOU. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005 - 06 WAS FILED ON 07/12/2006 DECLARING INCOME OF RS.1,59,29,0 61/ - . THE ASSESSEE - COMPANY ALSO REPORTED THE FOLLOWING INTERNATIONAL TRANSACTIONS: RENDERING OF CONSULTANCY SERVICES ... RS.83,21,05,022/ - REIMBURSEMENT OF EXPENSES (PAID) ... RS. 82,91,029/ - 3. THE ASSESSEE - COMPANY HAD ALSO SUBMITTED TRA NSFER PRICING STUDY REPORT ADOPTING THE OPERATING PROFIT TO TOTAL COST (OP/TC) AS A PROFIT LEVEL INDICATOR FOR THE TRANSFER PRICING STUDY. THE ASSESSEE - COMPANY APPLIED TRANSACTIONAL NET MARGIN METHOD [TNMM] WHICH WAS CONSIDERED TO BE THE MOST APPROPRIATE METHOD FOR PURPOSES OF BENCH MARKING THE INTERNATIONAL TRANSACTIONS. THE ASSESSEE - COMPANY S PROFIT MARGIN WAS COMPUTED AT 14.19% AND THE ASSESSEE - COMPANY CLAIMED THAT THE SAME WAS COMPARABLE WITH OTHER COMPANIES RENDERING SOFTWARE DEVELOPMENT SERVICES. F OR THE PURPOSE OF TRANSFER PRICING STUDY, THE ASSESSEE - COMPANY HAD CHOSEN 8 COMPARABLE ENTITIES AND ARITHMETIC AVERAGE OF OPERATING PROFIT MARGINS OF SAID COMPARABLES WAS COMPUTED AT 8 %. ACCORDING TO THE ASSESSEE - COMPANY, ITS PLI WAS MUCH HIGHER THAN THE ARITHMETIC MEAN OF THE COMPARABLE ENTITIES. HENCE, IT WAS CLAIMED THAT THE IT (TP) A NO . 880 /BANG/201 3 PAGE 3 OF 21 TRANSACTIONS WITH ITS AE ARE AT ARM S LENGTH. THE ASSESSEE - COMPANY HAS SELECTED THE FOLLOWING 8 ENTITIES AS COMPARABLES WHOSE AVERAGE PROFIT MARGIN WAS COMPUTED AT 8 %: 4. THE ASSESSING OFFICER (AO) REFERRED THE MATTER TO THE TRANSFER PRICING OFFICER (TPO) FOR THE PURPOSE OF BENCH MARKING THE INTERNATIONAL TRANSACTIONS. 5. THE TPO, BY AN ORDER DATED 31/10/2008 , PASSED U/S 92CA(3) OF THE IT ACT, 1961 COMPUTED THE TRANSFER P RICING ADJUSTMENT AT RS. 10,02,66,954 / - . THE TPO ACCEPTED THE TNMM ADOPTED BY THE ASSESSEE - COMPANY BUT REJECTED THE TRANSFER PRICING STUDY REPORT. THE TPO PROCEEDED TO IDENTIFY A DIFFERENT SET OF COMPARABLE ENTITIES FOR THE PURPOSE OF DETERMINING THE ALP. WHILE DOING SO, THE LD. TPO HAD APPLIED THE FOLLOWING FILTERS: IT (TP) A NO . 880 /BANG/201 3 PAGE 4 OF 21 APPLYING THE ABOVE FILTERS, THE TPO REJECTED 7 COMPARABLES OUT OF 8 COMPARABLES SELECTED BY THE ASSESSEE - COMPANY IN THE TP STUDY AND INTRODUCED 1 6 NEW COMPANIES FINALLY SELECTED THE FOLLOWING COMPARABLES: 6. THE TPO COMPUTED AVERAGE PROFIT MARGIN OF THE COMPARABLES FINALLY SELECTED AT 26.59 % AND AFTER GIVING WORKING CAPITAL ADJUSTMENT THE ADJUSTED ARITHMETICAL MEAN PLI WAS DETERMINED AT 2 7.69 %. ON THE ABOVE SAID BASIS, THE TPO COMPUTED THE TRANSFER PRICING ADJUSTMENT AS FOLLOWS: IT (TP) A NO . 880 /BANG/201 3 PAGE 5 OF 21 7. THE AO PASSED ASSESSMENT ORDER DATED 26/11/2008 U/S 143(3) AFTER MAKING TP ADJUSTMENT U / S 92CA AND ALSO RESTRICTING DEDUCTION U/S 10A OF THE ACT. 8. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, AN APPEAL WAS FILED BEFORE THE CIT(A) WHO, VIDE IMPUGNED ORDER, HELD THAT APPLYING TURNOVER FILTER OF RS.1 TO RS.200 CRORES AND ABNORMAL PROFITS OR LOSS MORE THAN 50% WERE HELD TO BE INCOMPARABLE AND ACCORDINGLY DIRECTED EXCLUSION OF THE FOLLOWING 7 COMPANIES FROM THE LIST OF COMPANIES: IT (TP) A NO . 880 /BANG/201 3 PAGE 6 OF 21 THE CIT(A) ALSO DIRECTED EXCLUSION OF THE COMPARABLE TATA ELXSI ON ACCOUNT OF FUNCTIONAL DIFFERENCES AND ALSO DIRECTED EXCLUSION OF BODHTREE CONSULTING LTD. AS THIS COMPANY WAS HELD TO BE ENGAGED IN ITES AND ABSENCE OF SEGME NTAL INFORMATION. THE CIT(A) ALSO DIRECTED EXCLUSION OF GEOMETRIC SOFTWARE SOLUTIONS LTD., ON THE GROUND THAT IT IS FUNCTIONALLY DIFFERENT FROM THAT OF ASSESSEE - COMPANY AND NO SEGMENTAL INFORMATION WAS AVAILABLE. THE CIT(A) UPHELD THE ACTION OF THE TPO IN INCLUSION OR EXCLUSION OF THE OTHER COMPARABLE ENTITIES. AS REGARDS DEDUCTION U/S 10A, THE CIT(A) HELD FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI (349 ITR 98) THAT EXPENDITURE INCURRED IN FOREIGN CUR RENCY IN THE FORM OF INSURANCE, FREIGHT AND TELECOMMUNICATION CHARGES ATTRIBUTABLE TO DELIVERY OF COMPUTER SOFTWARE, THE SAME SHOULD BE REDUCED FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER. 9. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US RA ISING THE FOLLOWING GROUNDS OF APPEAL: IT (TP) A NO . 880 /BANG/201 3 PAGE 7 OF 21 10. THE ASSESSEE HAS FILED CROSS OBJECTIONS AS UNDER: IT (TP) A NO . 880 /BANG/201 3 PAGE 8 OF 21 SUBSEQUENTLY, THE ASSESSEE FILED REVISED CROSS OBJECTIONS AS UNDER: IT (TP) A NO . 880 /BANG/201 3 PAGE 9 OF 21 IT (TP) A NO . 880 /BANG/201 3 PAGE 10 OF 21 11. NOW, WE SHALL TAKE UP THE REVENUE S APPEAL. GR OUND NOS . 1, 7 AND 8 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 12. GROUND NO.2 CHALLENGES THE DIRECTION OF THE CIT(A) TO REDUCE EXPENDITURE INCURRED IN FOREIGN CURRENCY IN THE FORM OF INSURANCE, FREIGHT AND TELECOMMUNICATION TO BE RE DUCED FROM TOTAL TURNOVER AS WELL AS EXPORT TURNOVER. THE DIRECTION OF THE CIT(A) IS IN CONSONANCE WITH THE LAW LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TATA ELXSI (349 ITR 98) WHEREIN IT HAS BEEN HELD THAT IF THE EXPENDIT URE IS TO BE EXCLUDED FROM THE EXPORT TURNOVER THEN THE SAME HAS TO BE EXCLUDED FROM THE TOTAL TURNOVER AS WELL. T HIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 13. GROUND NO S .3 AND 4 CHALLENGES THE DIRECTION OF THE CIT(A) TO EXCLUDE COMPARABLES ON T HE GROUND THAT TURNOVER OF THOSE COMPANIES FALL OUTSIDE THE RA N GE OF RS.1 TO RS.200 CRORES OR THEY EARN ABNORMAL PROFITS OR INCURRED ABNORMAL LOSSES. AS REGARDS TURNOVER FILTER , LEARNED COUNSEL FOR THE ASSESSEE NOT PRESSED DURING THE COURSE OF HEARING. AS REGARDS FILTER OF ABNORMAL PROFITS OR LOSSES AS HELD BY THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF DCIT V. QUARK SYSTEMS P. LTD ( 38 SOT 207 ) , NO COMPARABLE CAN BE EXCLUDED ON THE GROUND THAT THE COMPANY IS EARNING ABNORMAL PROFITS OR INCURRING ABNOR MAL LOSSES. ACCORDINGLY, GROUND NO S .3 AND 4 ARE ALLOWED. IT (TP) A NO . 880 /BANG/201 3 PAGE 11 OF 21 14. GROUND NO.5 CHALLENGES DIRECTION OF THE CIT(A) TO DELETE THE COMPARABLES, M/S.BOTHDTREE CONSULTING LTD., AND M/S.GEOMERTRIC SOFTWARE SOLUTIONS ON FUNCTIONAL DIFFERENCES. THE ISSUE OF COMPA RABILITY OF TH ESE COMPANIES HAD COME UP FOR DISCUSSION IN THE CASE OF M/S.NTT DATA GLOBAL DELIVERY SERVICES LTD. IN IT(TP)A NO.1487/BANG/2013 DATED 06/04/2016 WHEREIN IT WAS HELD AS FOLLOWS: BODHTREE CONSULTING LTD. 9.1 THE LEARNED AR OF THE ASS ESSEE - COMPANY SUBMITTED THAT THE COMPARABLES CHOSEN BY THE TPO VIZ., BODHTREE CONSULTING, EXENSYS SOFTWARE SOLUTIONS, FLEXTRONICS SOFTWARE SYSTEMS, GEOMETRIC SOFTWARE SOLUTIONS, SANKHYA INFOTECH, TATA ELXSI AND THIRDWARE SOLUTIONS ARE NOT COMPARABLE ON AC COUNT OF FUNCTIONAL DIFFERENCES. HE RELIED ON THE ORDER OF THE CO - ORDINATE BENCH OF TRIBUNAL IN IT(TP)A NO.532/BANG/2013 DATED 30/07/2015 IN THE CASE OF DCIT VS. KODIAK NETWORKS INDIA PVT. LTD., WHEREIN THE TRIBUNAL HELD THAT ON ACCOUNT OF WIDE FLUCTUATIO NS IN THE MARGIN, BODHTREE CONSULTING CANNOT BE TREATED AS COMPARABLE. THE RELEVANT PARAGRAPHS ARE AS UNDER: 34. AS CAN BE SEEN FROM THE ABOVE ANALYSIS, THIS COMPANY HAS ERRATIC MARGINS AND GROWTH OVER THE YEARS. THE MARGINS OF BODHTREE ARE CONSIS TENTLY CHANGING. THIS REFLECTS THAT THE REVENUE RECOGNITION POLICY FOLLOWED BY BODHTREE IS NOT PROPER AND IS RESULTING IN CONSISTENT CHANGE IN MARGINS. FURTHER, THE GROWTH RATE OVER THE YEARS IS ALSO FLUCTUATING TO EXTREMES. FURTHER, GROWTH IN REVENUES IS NOT SUPPORTED BY GROWTH IN EXPENSES. IN SOME CASES, EXPENSE GROWTH IS HIGHER THAN THE REVENUE GROWTH. ALSO SALARY COST RATIO IS WIDELY FLUCTUATING. THESE CIRCUMSTANCES ARE PECULIAR IN NATURE AND REQUIRE FURTHER ANALYSIS, WITHOUT WHICH THIS COMPANY SHOULD B E REJECTED AS A COMPARABLE. 35. WE ARE OF THE VIEW THAT THE BASIS ON WHICH THE ASSESSEE SEEKS TO EXCLUDE BODHTREE CONSULTING LTD. IN THIS YEAR IS ACCEPTABLE AND ACCORDINGLY BODHTREE CONSULTING LTD. IS DIRECTED TO BE IT (TP) A NO . 880 /BANG/201 3 PAGE 12 OF 21 EXCLUDED FROM THE LIST OF COMPARA BLE COMPANIES. WE HOLD ACCORDINGLY. 9.2 FROM A PERUSAL OF THE ORDER OF THE CO - ORDINATE BENCH IN THE CASE OF KODIAK NETWORKS INDIA PVT. LTD (SUPRA) IT IS CLEAR THAT THE TRIBUNAL HAS FOLLOWED ITS EARLIER DECISION IN MINDTECH INDIA LTD. VS. DCIT IN ITA NO.70/B/2014 DATED 21/8/2014 WHEREIN IT WAS HELD THAT ON ACCOUNT OF CHANGE IN METHOD OF ACCOUNTING OF THE REVENUE RECOGNITION, THERE WERE FLUCTUATIONS IN THE PROFIT MARGINS OF THE COMPANY. THE DECISION IN MINDTECH INDIA LTD. IS IN RELATION TO ASSESSMENT Y EAR 2009 - 10 AND THE DECISION WAS BASED ON THE REASONING THAT THERE WERE FLUCTUATIONS IN THE MARGINS OF THE COMPANY WHEREAS IN THE PRESENT CASE WE ARE CONCERNED WITH THE ASSESSMENT YEAR 2005 - 06. IT IS CLEAR FROM THE CHART PRODUCED IN PARA.33 OF ORDER IN I T(TP)A NO.532/BANG/2013 IN THE CASE OF KODIAK NETWORKS INDIA PVT. LTD., THAT THE FINANCIAL DATA FROM THE FINANCIAL YEAR 2004 - 05 WAS FURNISHED. WHEN COMPARED TO FINANCIAL YEAR 2004 - 05, THERE WERE NO WIDE FLUCTUATIONS IN THE FINANCIAL RESULTS OF THE COMPANY IN THE FINANCIAL YEAR 2005 - 06. THEREFORE, IN OUR CONSIDERED OPINION, THIS COMPANY CANNOT BE EXCLUDED FROM THE LIST OF COMPARABLES ON THE GROUND OF WIDE FLUCTUATIONS IN THE MARGINS OF THE COMPANY, WITHOUT GOING INTO THE ISSUE WHETHER WIDE FLUCTUATION WOULD HAVE ANY IMPACT ON THE COMPARABILITY. 9.3 HOWEVER, THE ASSESSEE - COMPANY S CONTENTION BEFORE THE TPO AS WELL AS BEFORE US IS THAT THIS COMPANY IS ENGAGED IN THE SALE OF IT PRODUCTS AS WELL AS SOFTWARE DEVELOPMENT SERVICES AND NO SEGMENT DETAILS WERE AV AILABLE. IT WAS FURTHER SUBMITTED THAT THIS COMPANY HAD RELATED PARTY TRANSACTION. 9.4 WE FIND THAT THE ABOVE SUBMISSIONS ARE NOT SUPPORTED BY THE ANNUAL FINANCIAL RESULTS OF THE COMPANY ENCLOSED IN THE PAPER BOOK PLACED AT PAGES 895 TO 920. FROM THE D IRECTOR S REPORT AT PAGE 906 OF THE PAPER BOOK, IT IS CLEARLY STATED THAT THE COMPANY HAS ONLY ONE SEGMENT I.E. SOFTWARE DEVELOPMENT. IN THE NOTES TO THE ACCOUNTS, AT PAGE 920 OF THE PAPER BOOK, IT IS CLEARLY MENTIONED THAT EXCEPT MANAGERIAL REMUNERATION PAID TO MANAGING DIRECTOR, THERE WERE NO OTHER RELATED TRANSACTIONS. THEREFORE, THE SUBMISSIONS OF THE ASSESSEE - COMPANY ON THIS SCORE CANNOT BE ACCEPTED AS DEVOID OF ANY SUBSTANCE. 9.5 IN THE RESULT, WE UPHOLD THE ACTION OF TPO IN INCLUDING THIS COMP ANY IN THE LIST OF COMPARABLES. IT (TP) A NO . 880 /BANG/201 3 PAGE 13 OF 21 GEOMETRIC SOFTWARE SOLUTIONS: 12. THIS COMPANY WAS SELECTED BY THE ASSESSEE - COMPANY AND ACCEPTED BY THE TPO AS IT SATISFIED ALL THE FILTERS APPLIED BY HIM. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESS EE - COMPANY OBJECTED TO THE INCLUSION OF THIS COMPANY ON THE GROUND OF FUNCTIONAL DISSIMILARITIES IN THIS CONNECTION HE RELIED ON THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA). WE HEARD T HE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. ON PERUSAL OF THE ORDER IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA), WE FIND THAT THIS COMPANY WAS NOT CONSIDERED IN THE SAID DECISION. THEREFORE, THE RELIANCE PLACED BY THE LEARNED AR OF THE ASSESSEE - COMPANY ON THIS DECISION IS MISPLACED. THEREFORE, WE DO NOT FIND ANY REASON TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE CITED SUPR A, WE UPHOLD THE ACTION OF THE TPO/AO TO INCLUDE IN THE LIST OF COMPARABLES THE COMPARABLES BODHTREE CONSULTING LTD . AND GEOMETRIC SOFTWARE SOLUTIONS : 1 5 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. 1 6 . T HE ASSESSEE FILED REV ISED CROSS OBJECTIONS SEEKING IN CLUSION OF THE ENTIT IES SPANKO TELESYSTEMS & SOLUTIONS LTD , AND EXCLUSION OF ENTITIES EXENSYS SOFTWARE SOLUTIONS LTD., THIRDWARE SOLUTIONS, FLEXTRONICS SOFTWARE SYSTEMS LTD., ON THE GROUND THAT THERE ARE FUNCTIONAL DISSIM ILARITIES WITH THAT OF THE IT (TP) A NO . 880 /BANG/201 3 PAGE 14 OF 21 ASSESSEE - COMPANY BEFORE US. THE ASSESSEE ALSO SEEKS EXCLUSION OF SANKHYA INFOTECH AND SATYAM COMPUTER SERVICES LTD., ON THE GROUND THAT FINANCIAL RESULTS ARE NOT RELIABLE. 17. BEFORE WE DELVE ON THE MERITS OF THE SUBMISSIO NS MADE BY THE ASSESSEE - COMPANY, IT IS CRUCIAL TO GO INTO THE MAINTAINABILITY OF THE VERY CROSS OBJECTIONS ITSELF. THE PROVISIONS OF SUB - SECTION (4) OF SECTION 253 PROVIDE FOR FILING OF CROSS OBJECTIONS EITHER BY THE ASSESSEE OR THE REVENUE AGGRIEVED BY T HAT PART OF THE ORDER OF THE CIT(A). THEREFORE, SINE QUA NON CONDITION IS THAT CROSS OBJECTIONS CAN BE RAISED ONLY IN RESPECT OF ISSUES WHICH WERE FORMING PART OF THE ORDER OF THE CIT(A). FROM MERE PERUSAL OF THE ORDER OF THE CIT(A), IT IS CLEAR THAT THE RE WAS NO DISCUSSION IN THE ORDER OF THE CIT(A) ON THE FUNCTIONAL DIFFERENCES OF THE ABOVE COMPANIES. THE CIT(A) DIRECTED EXCLUSION OF THE FOLLOWING COMPANIES ON THE GROUND THAT THE TURNOVER OF THE COMPANIES IS MORE THAN RS.200 CRORE OR THE SAID COMPANIES FALL OUTSIDE THE RANGE OF RS.1 TO RS.200 CRORES OR ON ACCOUNT OF ABNORMAL PROFITS OR LOSS. . AS HELD BY US, IN THE REVENUE S APPEAL, THIS CANNOT BE HELD TO BE A GOOD FILTER AND THE ASSESSEE HAD NOT EVEN PRESSED TURNOVER FILTER IT (TP) A NO . 880 /BANG/201 3 PAGE 15 OF 21 IN THE REVENUE APPEAL. MERE PERUSAL OF THE ORDER OF THE CIT(A) IT IS CLEAR THAT THERE WAS NO DISCUSSION BY THE CIT(A) ABOUT FUNCTIONAL DISSIMILARITIES OF THESE ENTITIES. HENCE, CROSS OBJECTIONS ITSELF ARE NOT MAINTAINABLE. 18. IN RESPECT OF SPANKO TELESYSTEMS & SOLUTIONS LTD ., THE ASSESSEE SEEKS INCLUSION OF THIS COMPANY ON THE GROUND THAT THOUGH THE COMPANY S BUSINESS CONSISTS O F THREE SEGMENTS, SEGMENTAL DETAILS WERE AVAILABLE AND SHOULD HAVE BEEN CONSIDERED. EVEN IN RESPECT OF THIS COMPANY, THERE WAS NO DISCUSSION BY THE CIT(A) ON THIS ASPECT. HENCE, THE CROSS OBJECTIONS ARE NOT MAINTAINABLE. 19. EVEN ON MERITS, THE SAID ENTITIES CANNOT BE EXCLUDED FROM THE LIST OF COMPARABLES AS HELD BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.NTT DATA GLOBA L DELIVERY SERVICES LTD ., IN IT(TP)A) 1487/BANG/2013 DATED 06/04/2016 WHEREIN IT HAS BEEN HELD AS FOLLOWS: 10. AS REGARDS EXENSYS SOFTWARE SOLUTIONS LTD., THIS COMPARABLE WAS SELECTED BY THE TPO. THE ASSESSEE - COMPANY OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES ON THE GROUND THAT IT IS ENGAGED IN THE SOFTWARE PRODUCTS AND HAD RELATED PARTY TRANSACTIONS. THIS CONTENTION WAS REBUTTED BY THE TPO BY DRAWING ATTENTION TO THE ANNUAL REPORT OF THE COMPANY, WHEREIN IT WAS SPECIFICALLY STATED THAT THE COMPANY IS NOT ENGAGED IN ANY SOFTWARE PRODUCT SALES. THE TPO BY EXERCISING THE POWER U/S 133(6) OF THE IT ACT CALLED FOR INFORMATION FROM THE SAID COMPANY WHEREIN THE SAID COMPANY HAD STATED VIDE ITS LETTER DATED 14/11/2007 THAT IT HAD NO RELATED PARTY TRANSACTIONS. 10.1 THE LD.AR OF THE ASSESSEE - COMPANY HAD RELIED ON THE ORDER OF THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ITO VS. SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. IN IT(TP)A NO.1302/BANG/2011 DATED 11/6/2015 WHEREIN THIS TRIBUNAL, VIDE PARA.14 OF ITS ORDER, HAD DIRECTED THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES ON THE GROUND THAT THE IT (TP) A NO . 880 /BANG/201 3 PAGE 16 OF 21 COMPANY IS DEALING IN THE SOFTWARE PRODUCTS AND EARNED ABNORMAL PROFITS ON ACCOUNT OF AMALGAMATION ETC. 10.2 WE PERUSED THE ANNUAL REPORT OF THIS COMPANY PACED AT PAGES 1097 TO 1129 OF THE PAPER BOOK. FROM PERUSAL OF PAGE 1104 OF THE PAPER BOOK IT IS CLEAR THAT THE NATURE OF BUSINESS OF THE COMPANY IS SOFTWARE DEVELOPMENT SERVICES. THEREFORE, THE SUBMISSION OF THE ASSESSEE - COMPANY THAT IT IS ENGAGED IN THE SOFTWARE PRODUCTS IS NOT SUPPORTED BY THE MATERIAL ON RECORD. HOWEVER, IN THE DIRECTOR S REPORT (PAGE 1106 OF PAPER BOOK), IT IS STATED THAT THE COMPANY HOLOOL INDIA LTD., IS AMALGAMATED WITH ASSESSEE - COMPANY W.E .F. 1/4/2004 AND IT WAS FURTHER STATED THAT THE COMBINED FINANCIAL RESULTS WERE STATED IN THE ANNUAL REPORT. BUT IT IS NOT THE CASE OF THE ASSESSEE - COMPANY THAT THE AMALGAMATING COMPANY IS FUNCTIONALLY DISSIMILAR. IN FACT, THE NOTES TO ACCOUNTS STATES TH AT THIS AMALGAMATED COMPANY I.E. HOLOOL INDIA LTD. IS ALSO ENGAGED IN THE SAME BUSINESS AS THAT OF THE ASSESSEE - COMPANY. THEREFORE, THE EVENT OF MERGER ITSELF CANNOT A FACTOR FOR EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES, AS HELD BY THE MUMBA I BENCH OF THE TRIBUNAL IN THE CASE OF WILLS PROCESSING SERVICES (INDIA) (P) LTD. VS. DCIT (32 TAXMANN.COM 18) (MUM). HENCE, THIS COMPANY CANNOT BE EXCLUDED FROM THE LIST OF COMPARABLES. 11. AS REGARDS FLEXTRONICS SOFTWARE SYSTEMS LTD ., THIS COMPARABLE WAS INTRODUCED BY THE TPO AND THE ASSESSEE - COMPANY OBJECTED FOR INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES AS IT HAS RELATED PARTY TRANSACTIONS, AND DERIVES REVENUE BOTH FROM THE PRODUCT SALES AS WELL AS SERVICE. THE TPO REBUTTED THE CONTENTION O F THE ASSESSEE - COMPANY BY DRAWING ATTENTION TO THE FINANCIAL RESULTS OF THE COMPANY WHEREIN IT IS CLEARLY STATED THAT THE RELATED PARTY TRANSACTIONS ARE LESS THAN 25% AND THE SEGMENTAL DETAILS ARE MADE AVAILABLE. IT IS FURTHER NOTICED THAT THE REVENUE FRO M THE SERVICES CONSTITUTES MORE THAN 85%. THEREFORE, IT CAN BE TREATED AS A SOFTWARE DEVELOPMENT SERVICES COMPANY AS IT PASSES THROUGH REVENUE FILTERS ADOPTED BY TPO. DURING THE COURSE OF HEARING BEFORE US, THE LD.AR OF THE ASSESSEE - COMPANY HAD RELIED ON T HE ORDER OF THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ITO VS. SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. IN IT(TP)A NO.1302/BANG/2011 DATED 11/6/2015 AND DCIT VS. TEXTRON GLOBAL TECHNOLOGY CENTRE PVT. LTD. IN IT(TP)A NO.29/BANG/2012 DATED 20/03/ 2015. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE TPO. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CO - ORDINATE BENCH IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA) DELETED THI S COMPANY AS COMPARABLE, VIDE PAR.26 OF THE ORDER, ON THE GROUND THAT THIS COMPANY WAS ENGAGED IN THE PRODUCT SALES ALSO AND THEREFORE, IT IS FUNCTIONALLY DISSIMILAR. BUT FROM THE ORDER OF THE TPO AS WELL AS THE FINANCIAL RESULTS OF THE COMPANY, IT IS CLE AR THAT 85% OF THE REVENUE OF THE COMPANY IS DERIVED FROM SOFTWARE SERVICES. THEREFORE, IT CAN BE SAFELY CLASSIFIED AS A SOFTWARE DEVELOPMENT SERVICES. THEREFORE, THIS COMPANY CANNOT BE EXCLUDED FROM THE LIST OF COMPARABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IT (TP) A NO . 880 /BANG/201 3 PAGE 17 OF 21 SANKHYA INFOTECH: 13. THIS COMPARABLE WAS SELECTED BY THE TPO. THE ASSESSEE - COMPANY OBJECTED TO THE INCLUSION OF THIS COMPANY AS A COMPARABLE ON THE GROUND THAT PERSONNEL COST (SALARY) IS LESS THAN 15% OF THE SALES, WHICH IS LESS THAN THE INDUSTRY AVERAGE OF 47%. THIS OBJECTION WAS OVERRULED BY THE TPO BY CITING THAT SALARY INCLUDES CONSULTANCY CHARGES AND OVERSEAS MANPOWER COST AND THE TWO ITEMS ARE INCLUDED IN THE PERSONNEL COST IT COMES TO 26%. 13.1 LEARNED AR OF THE ASSESSEE - COMPANY AGAIN RELIED ON THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA). 13.2 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. PERUS AL OF THE DECISION OF THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA) ON THIS COMPARABLE REVEALS THAT THE CO - ORDINATE BENCH HAD FOLLOWED THE DECISION OF DELHI TRIBUNAL IN THE CASE OF ITO VS. COL T TECHNOLOGY SERVICES INDIA PVT.LTD. (IN ITA NO.609/DEL/2011 DT.23/10/2012 AND NO REASONS WERE GIVEN BY THE TRIBUNAL AS TO WHY THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE. THEREFORE, WE ARE UNABLE TO DISCERN ANY RATIO IN THE DECISION CITED SUPRA. T HUS, THE LEARNED AR OF THE ASSESSEE - COMPANY COULD NOT ADDUCE ANY OTHER EVIDENCE IN SUPPORT OF EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. IN THE CIRCUMSTANCES, WE UPHOLD THE ACTION OF THE TPO IN INCLUDING THIS COMPANY IN THE LIST OF COMPARABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THIRDWARE SOLUTIONS: 15. THIS COMPANY WAS SELECTED BY THE TPO AND THE ASSESSEE - COMPANY OBJECTED TO THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES ON THE GROUND THAT THE FINANCIA L DATA WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME OF TRANSFER PRICING AUDIT. THE TPO HELD THAT THE DATA WAS AVAILABLE IN CAPITAL LINE AS WELL AS PROWESS DATA BASE. THE TPO FURTHER HELD THAT MORE THAN 50% OF THE REVENUE IS FROM SOFTWARE DEVELOPMENT SERVICES; THIS CAN BE CONSIDERED AS A COMPARABLE. 15.1 BEFORE US, LEARNED AR OF THE ASSESSEE - COMPANY SUBMITTED THAT THIS COMPANY CANNOT BE CONSIDERED AS COMPARABLE IN THE LIGHT OF THE DECISIONS OF THE CO - ORDINATE BENCH IN THE CASE (I) THE SUNQUEST I NFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA); (II) TEXTRON GLOBAL TECHNOLOGY CENTRE PVT. LTD (CITED SUPRA) AND (III) COLT TECHNOLOGY SERVICES INDIA PVT.LTD. (CITED SUPRA). 15.2 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CO - ORDINATE BENCH (DELHI) OF TRIBUNAL IN THE CASE COLT TECHNOLOGY SERVICES INDIA PVT.LTD. (CITED SUPRA) RECORDED THE FINDING ON THE ABOVE COMPANY AS FOLLOWS: IT (TP) A NO . 880 /BANG/201 3 PAGE 18 OF 21 THIRDWARE SOLUTIONS LTD, IT WAS SUBMITTED THAT THE SAID COMPANY HAS A DIVERSIFIED FUNCTIONAL PROF ESSIONAL PROFILE AND IS ALSO ENGAGED IN SALE OF SOFTWARE LICENSES. THEY INVEST IN R&D AND ALSO PROVIDES/SELLS SOFTWARE LICENSES AND THERE ARE NO SEGMENTAL RESULTS AVAILABLE IN ITS AUDITED FINANCIALS TO SEGREGATE PROFITABILITY FROM PROVISION OF SOFTWARE DEV ELOPMENT SERVICES AND FROM SALE OF SOFTWARE LICENCES. THESE INFORMATION WERE SUPPORTED BY THE ANNUAL REPORT FOR FINANCIAL YEAR 2004 - 05 OF THE SAID COMPANY. IN ITS ANNUAL REPORT A GENERIC DISCLOSURE WAS MADE THAT THE COMPANY IS INVOLVED IN TRADING OF SOFTWA RE AND PROVISION OF IT SERVICES. SCHEDULE 14 OF THE FINANCIAL STATEMENT OF THE SAID COMPANY PROVIDE INFORMATION ON DETAILS OF PURCHASES AS PER WHICH THE TOTAL PURCHASE COST INCURRED BY THE COMPANY WAS ABOUT RS. 56871743/ - AS AGAINST THE TOTAL COST OF RS. 1 75527264/ - WHICH IS ABOUT 32% OF THE TOTAL COST. BESIDES THE SAID COMPANY EARNED ABNORMALLY HIGH OP/TC MARGIN OF 66.11% DURING FINANCIAL YEAR 2004 - 05 INDICATING RISK DISSIMILARITY VIS A VIS THE ASSESSEE WHICH CLAIMED TO BE A COST PLUS LOW RISK CAPTIVE WHIC H CANNOT BE EXPECTED TO EARN SUCH HIGH PROFITABILITY. SIMILARLY CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF TEXTRON GLOBAL TECHNOLOGY CENTRE PVT. LTD (CITED SUPRA) RECORDED THE FINDING AS UNDER: 26. AS FAR AS THIRDWARE SOFTWARE SOLUTION LIMITED IS CO NCERNED, WE FIND FROM THE INFORMATION FURNISHED BY THE SAID COMPANY THAT THOUGH THE SAID COMPANY IS ALSO INTO PRODUCT DEVELOPMENT, THERE ARE NO SOFTWARE PRODUCTS THAT THE COMPANY INVOICED DURING THE RELEVANT FINANCIAL YEAR AND THE FINANCIAL RESULTS ARE IN RESPECT OF SERVICES ONLY. THUS, IT IS CLEAR THAT THERE IS NO SALE OF SOFTWARE PRODUCTS DURING THE YEAR BUT THE SAID COMPANY MIGHT HAVE INCURRED EXPENDITURE TOWARDS THE DEVELOPMENT OF THE SOFTWARE PRODUCTS. 23. IN VIEW OF THE AFORESAID DECISION RENDERED ON IDENTICAL FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT FOURSOFT LTD., AND THIRDWARE SOLUTIONS LTD., SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES. SIMILARLY CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA) 25. AS FAR AS THIRDWARE SOFTWARE SOLUTION LIMITED IS CONCERNED, WE FIND FROM THE INFORMATION FURNISHED BY THE SAID COMPANY THAT THOUGH THE SAID COMPANY IS ALSO INTO PRODUCT DEVELOPMENT, THERE ARE NO SOFTWARE PRODUCTS THAT THE COMP ANY INVOICED DURING THE RELEVANT FINANCIAL YEAR AND THE FINANCIAL RESULTS ARE IN RESPECT OF SERVICES ONLY. THUS, IT IS CLEAR THAT THERE IS NO SALE OF SOFTWARE PRODUCTS DURING THE YEAR BUT THE SAID IT (TP) A NO . 880 /BANG/201 3 PAGE 19 OF 21 COMPANY MIGHT HAVE INCURRED EXPENDITURE TOWARDS THE DEVELOP MENT OF THE SOFTWARE PRODUCTS. 26. AS FAR AS FLEXTRONICS SOFTWARE LIMITED IS CONCERNED, WE FIND THAT AT PAGE 90 OF HIS ORDER, THE TPO HAS ALSO OBSERVED THAT THE SAID COMPANY HAS INCURRED EXPENDITURE FOR SELLING OF PRODUCTS AND HAS INCURRED R & D EXPENDI TURE FOR DEVELOPMENT OF THE PRODUCTS. THE ABOVE FACTS CLEARLY DEMONSTRATE THAT THERE IS FUNCTIONAL DISSIMILARITY BETWEEN THE ASSESSEE AND THESE COMPANIES AND WITHOUT MAKING ADJUSTMENT FOR THE DISSIMILARITIES BROUGHT OUT BY THE TPO HIMSELF, THESE COMPANIES CANNOT BE TAKEN AS COMPARABLE COMPANIES. THE METHOD ADOPTED BY THE TPO TO ALLOCATE EXPENDITURE PROPORTIONATELY TO THE SOFTWARE DEVELOPMENT SERVICES AND SOFTWARE PRODUCT ACTIVITY CANNOT BE SAID TO BE CORRECT AND REASONABLE. WHEREVER, THE ASSESSING OFFICER/T PO CANNOT MAKE SUITABLE ADJUSTMENT TO THE FINANCIAL RESULTS OF THE COMPARABLE COMPANIES WITH THE ASSESSEE COMPANY TO BRING THEM ON PAR WITH THE ASSESSEE, THESE COMPANIES ARE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. THEREFORE, WE DIRECT THE ASSESSING OF FICER/TPO TO EXCLUDE THESE THREE COMPANIES FROM THE LIST OF COMPARABLES. 15.3 THE DECISION IN THE CASE OF SUNQUEST INFORMATION SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA) IS BASED ON THE NON - AVAILABILITY OF INFORMATION TO MAKE SUITABLE ADJUSTMENTS TO BRIN G THE COMPANY ON PAR WITH THE ASSESSEE - COMPANY. HOWEVER, IN THE PRESENT CASE, THE TPO MADE AVAILABLE FULL DETAILS OF THE REVENUE AND EXPENDITURE IN RESPECT OF EACH OF THE SEGMENTS AND SEGMENTAL DETAILS ARE VERY MUCH AVAILABLE. HOWEVER THIS COMPANY DOES NOT PASS THROUGH THE FILTER OF 75% OF REVENUE. THEREFORE, THIS COMPANY CANNOT BE CONSIDERED AS SOFTWARE DEVELOPMENT SERVICE PROVIDER. HENCE, WE DIRECT THE TPO/AO TO DELETE THIS COMPANY FROM THE LIST OF COMPARABLES. .............. 23. THE REVENUE IS CH ALLENGING DIRECTION OF THE CIT(A) TO EXCLUDE THE FOLLOWING COMPANIES FROM THE LIST OF COMPARABLES ON THE GROUND THAT THE TURNOVER OF THE ABOVE COMPANIES IS MORE THAN RS.200 CRORES RELYING ON THE DECISION IN THE CASE OF GENESIS INTEGRATING SYSTEMS (INDIA) P VT. LTD. VS. DCIT (20 TAXMANN.COM 715(BANG.): I. INFOSYS II. L&T INFOTECH III. SATYAM COMPUTER SYSTEMS THESE COMPANIES WERE SELECTED BY THE TPO AS COMPARABLES AND THE ASSESSEE - COMPANY OBJECTED TO THEIR INCLUSION IN THE LIST OF COMPARABLES ON THE GROUND OF TURNOVER OF THE ABOVE COMPANIES IS MORE THAN RS.200 CRORES AND THE COMPANIES HAD RELATED PARTY TRANSACTIONS. THE TPO REJECTED THE SUBMISSION BY HOLDING THAT THE TURNOVER HAD NO CO - RELATION WITH THE PROFIT IT (TP) A NO . 880 /BANG/201 3 PAGE 20 OF 21 MARGIN EARNED BY THE COMPANY AND ALSO REBUTTED THAT THE COM PANIES HAD RELATED PARTY TRANSACTIONS BY DRAWING THE ATTENTION OF THE ASSESSEE - COMPANY TO THE ANNUAL REPORTS OF THOSE COMPANIES. 24. WE NOW DEAL WITH EACH OF THESE COMPANIES. BEFORE ADVERTING TO THE COMPARABLES, IT IS WORTH MENTIONING HERE THAT THERE A RE DIVERGENT DECISIONS OF THE TRIBUNAL WHETHER HIGH TURNOVER IS A RELEVANT FOR ACCEPTING/REJECTING A COMPARABLE IN THE CASE OF A SERVICE COMPANY. FOR EXAMPLE, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF CAPGEMINI INDIA PVT LTD. VS. ACIT (TS 45 ITAT 20 13(MUM)(TP) HELD THAT THE TURNOVER WAS RELEVANT ONLY TO THE MANUFACTURING CONCERNS NOT TO THE SERVICE ORIENTED COMPANIES. ON THE OTHER HAND, THE COORDINATE (BANGALORE) BENCH OF THE TRIBUNAL IN THE CASE OF GENESIS INTEGRATING SYSTEMS (INDIA) PVT. LTD. (CIT ED SUPRA) HELD THAT TURNOVER IS A RELEVANT FACTOR FOR ACCEPTING/REJECTING THE COMPARABLE. HOWEVER, WITHOUT GOING INTO THE TURNOVER FACTOR, WE HOLD THAT INFOSYS LTD., CANNOT BE CONSIDERED AS COMPARABLE WITH THAT OF THE ASSESSEE - COMPANY SINCE INFOYSIS LTD. IS A GIANT IN THE AREA OF SOFTWARE DEVELOPMENT AND IT ASSUMED ALL RISKS LEADING TO HIGHER PROFIT. ON THE OTHER HAND, THE ASSESSEE - COMPANY IS A CAPTIVE UNIT OF ITS PARENT COMPANY IN US AND ASSUMED ONLY LIMITED RISK. IN THE SIMILAR CIRCUMSTANCES, THE HON BL E DELHI HIGH COURT IN THE CASE OF CIT VS. AGNITY INDIA TECHNOLOGIES P.LTD. HELD THAT INFOSYS CANNOT BE TREATED AS A COMPARABLE. EVEN SEVERAL CO - ORDINATE BENCHES OF TRIBUNAL HELD THAT INFOSYS LTD. CANNOT BE CONSIDERED AS COMPARABLE AS IT IS HAVING HIGH IN TANGIBLES AND GOODWILL. ACCORDINGLY, INFOSYS CANNOT BE CONSIDERED AS A COMPARABLE. 24.1 L&T INFOTECH, WAS OBJECTED BY THE ASSESSEE - COMPANY ON THE GROUND OF HIGH TURNOVER AND RELATED PARTY TRANSACTION. AS HELD IN PARA ..ABOVE, THE TURNOVER FILTER W AS NOT A RELEVANT CRITERIA IN THE SERVICE INDUSTRY. THEREFORE, THIS OBJECTION BY THE ASSESSEE - COMPANY IS RULED OUT. THE OTHER OBJECTION OF THE ASSESSEE - COMPANY IS THAT IT HAD RELATED PARTY TRANSACTION. THE TPO HAD BROUGHT ON RECORD THAT L&T INFOTECH HAS RELATED PARTY TRANSACTION OF ONLY 8%. WE DO NOT SEE ANY OTHER REASON TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLE. THEREFORE, WE UPHOLD THE ACTION THE TPO IN INCLUDING THIS COMPANY IN THE LIST OF COMPARABLES. 24.2 AS REGARDS SATYAM COMPUTER SYSTEMS, THERE IS NO DISPUTE THAT THIS COMPANY IS FUNCTIONALLY SIMILAR. THE ONLY OBJECTION OF THE ASSESSEE - COMPANY FOR INCLUDING THIS COMPANY IS HIGH TURNOVER. AS HELD BY US ABOVE, TURNOVER IS NOT A RELEVANT CRITERIA IN THE SERVICE INDUSTRY AND THE COMPAN Y IS ALLEGED TO HAVE INDULGED IN MALPRACTICES ONLY IN THE SUBSEQUENT PERIODS AND THEREFORE, WE DO NOT SEE ANY OTHER REASON TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. HENCE, WE UPHOLD THE ACTION OF THE TPO IN INCLUDING THIS COMPANY IN THE LIST O F COMPARABLES. IT (TP) A NO . 880 /BANG/201 3 PAGE 21 OF 21 20. IN THE RESULT, THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH AUGUST , 2017 S D/ - SD/ - ( SUNIL KUMAR YADAV ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PLACE : BENGALURU. D A T E D : 09 / 0 8 /201 7 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE