LIONBRIDGE TECHNOLOGIES P. LTD, MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 9032/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62539 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJEET KUMAR JAIN
• Keywords: Transfer pricing; International transaction; Revised return
• Section: 143(3); 92F; 234B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ITA NO.9032/MUM/2010 : ASST. YEAR 2006-2007 M/S.LIONBRIDGE TECHNOLOGIES PVT. LTD. 6 TH FLOOR, SPECTRA BUILDING HIRANANDANI BUSINESS PARK, POWAI MUMBAI 400 076. PAN : AABCT3380Q. THE DY.COMMISSIONER OF INCOME-TAX RANGE 8(2) MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI PERCY PARDIWALA & MS.AARTI SATH E RESPONDENT BY : SHRI AJEET KUMAR JAIN DATE OF HEARING : 14.06.2012 DATE OF PRONOUNCEMENT : 20.06.2012 O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE DCIT U/S 143(3) READ WITH SECTION 144C(13) OF THE I NCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE `ACT) ON 07.10.2010 IN REL ATION TO THE ASSESSMENT YEAR 2006-07. 2. THE MAJOR ISSUE IN THIS APPEAL IS AGAINST THE CO NFIRMATION OF ADDITION OF ` 8,86,68,683 ON ACCOUNT OF TRANSFER PRICING ADJUSTME NT U/S 92CA(3) OF THE ACT. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS A COMPANY ENGAGED IN THE DEVELOPMENT AND SALE OF COMPUTER SOFTWARE AND P ROVIDING OTHER RELATED SERVICES. IT FILED ITS RETURN ON 21.10.2006 DECLARI NG TOTAL INCOME OF ` 87,64,611. THEREAFTER, THE ASSESSEE E-FILED REVISED RETURN ON 24.10.2006 DECLARING TOTAL INCOME OF ` 87,64,536. FROM THE FORM NO.3CEB SUBMITTED BY THE A SSESSEE ALONG WITH THE RETURN OF INCOME, THE A.O. OBSERVED THAT THE ASSESSEE ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS AS SOCIATED ENTERPRISES ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 2 (HEREINAFTER CALLED AES). THE A.O. MADE A REFEREN CE U/S 92CA(1) TO THE TRANSFER PRICING OFFICER (HEREINAFTER CALLED TPO) FOR THE DETERMINATION OF ARMS LENGTH PRICE (HEREINAFTER CALLED ALP) IN RE LATION TO THE INTERNATIONAL TRANSACTIONS. THE TPO NOTICED THAT THE ASSESSEE ENT ERED INTO 10 TYPES OF INTERNATIONAL TRANSACTIONS WITH ITS AES. THE ENTIRE DISPUTE IN THE PRESENT APPEAL REVOLVES AROUND THE FIRST TYPE OF TRANSACTIONS BEIN G RECEIPT OF FEES TOWARDS INFORMATION TECHNOLOGY (IT) / INFORMATION TECHNOLOG Y ENABLED SERVICES (ITES) REPORTED BY THE ASSESSEE AT ` 31,53,20,904. THE ASSESSEE USED TRANSACTIONAL NET MARGIN METHOD (HEREINAFTER CALLED TNMM) FOR THE PURPOSES OF DETERMINATION OF ALP. IN SUPPORT OF ITS ALP, THE ASSESSEE FURNISHED TRANSFER PRICING REPORT. ALL INTERNATIONAL TRANSACT IONS WITH ITS AES WERE PUT IN ONE BASKET WITH RESPECT TO IT SERVICES, IT ENABLED SERVICES (HEREINAFTER CALLED `ITES) AND MARKETING & SUPPORT SERVICES. THE TPO O BSERVED THAT THE MAIN TRANSACTIONS WERE OF THE NATURE OF IT AND ITES. ON THE BASIS OF SEARCH FROM PROWESS AND CAPITALINE DATABASES, THE ASSESSEE IDEN TIFIED 43 COMPANIES AS COMPARABLES WHICH HAVE BEEN TABULATED ON PAGES 3 AN D 4 OF THE TPOS ORDER. AFTER CONSIDERING THE TWO YEARS WEIGHTED AVERAGE P ROFIT OF SUCH COMPARABLE CASES, THE ASSESSEE DETERMINED PROFIT LEVEL INDICAT OR (OPERATING PROFIT/TOTAL COST) MARGIN IN RESPECT OF SUCH COMPARABLE CASES AT 17.20%. AS AGAINST THIS BENCHMARKED PROFIT PERCENTAGE, THE ASSESSEE HAD DIS CLOSED ITS ACTUAL MARGIN AS PER THE BOOKS OF ACCOUNT AT 12.53% ON OVERALL BASIS , DIVIDED INTO 16.77% FROM THE INTERNATIONAL TRANSACTIONS WITH THE AES AND 10. 80% FROM THE TRANSACTIONS WITH NON-AES. AFTER EXERCISING OPTION U/S 92C(2), IT WAS DECLARED THAT THE PRICE CHARGED BY THE ASSESSEE FROM ITS AES WAS AT A RMS LENGTH. 3. THE TPO OBSERVED THAT THE ASSESSEE ADOPTED TWO YEARS DATA TO WORK OUT WEIGHTED AVERAGE FOR COMPUTING PLI OF OPERATING PRO FIT/TOTAL COST OF COMPARABLE COMPANIES, WHICH WAS NOT IN ACCORDANCE W ITH RULE 10D(4). IN HIS OPINION, THE REQUIREMENT WAS TO ADOPT THE RELEVANT YEARS FINANCIALS ALONE. ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 3 DURING THE COURSE OF PROCEEDINGS BEFORE THE TPO, IT WAS STATED ON BEHALF OF THE ASSESSEE THAT EVEN GOING BY THE INTERNAL COMPARABLE S, IT EARNED OP / TC MARGIN OF 16.77% FROM ITS AES, WHICH WAS HIGHER THAN ITS O P / TP MARGIN OF 10.80% FROM ITS NON-AES, WARRANTING NO ADJUSTMENT. THE AS SESSEE ALSO FURNISHED ITS UPDATED MARGIN OF COMPARABLE COMPANIES ON THE BASIS OF TRANSFER PRICING REPORT FOR FINANCIAL YEAR 2005-2006 ALONE AT 17.36% . THE TPO OBSERVED THAT THE PRICE CHARGED BY THE ASSESSEE FOR PROVIDING IT / IT ES WAS NOT DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92C(1) AN D (2). HE NOTICED THAT THE TYPE OF SERVICES OFFERED TO AES WERE NOT THE SAME A S THOSE OFFERED TO NON-AES AND HENCE THE COMPARISON OF MARGINS BETWEEN AES AND NON-AES WAS IRRELEVANT. THE ASSESSEE WAS SPECIFICALLY ASKED TO CLARIFY WHETHER ALL THE SERVICES RENDERED BY IT WERE IN THE NATURE OF SOFTW ARE DEVELOPMENT OR IN THE NATURE OF ITES. THE ASSESSEE SUBMITTED THAT ITS SER VICE TO AES AS WELL AS NON- AES WERE ITES AS IT WAS NOT ENGAGED IN ANY HIGH-END APPLICATION SOFTWARE DEVELOPMENT. CONSIDERING THE ASSESSEES SUBMISSIONS AND TAKING INTO ACCOUNT THE NATURE OF SERVICES RENDERED BY THE ASSESSEE, TH E TPO CATEGORIZED THE SERVICES RENDERED BY THE ASSESSEE AS IT/ITES. THERE AFTER, HE TOOK UP THE TASK OF FINDING COMPARABLE CASES IN THE CATEGORY OF IT/ITES . FROM THE PROWESS AND CAPITALINE DATABASES, THE TPO, AFTER ELIMINATING CE RTAIN CASES INITIALLY CHOSEN, FINALLY SHORT-LISTED 33 COMPANIES WHICH WERE DECLAR ED AS COMPARABLE. THE LIST OF SUCH 33 COMPANIES WITH THE AMOUNT OF TURNOVER AN D PLI (OP TO TC) IN PERCENTAGE HAS BEEN TABULATED ON PAGES 12 AND 13 O F THE TPOS ORDER. FROM SUCH TABULATION, THE TPO WORKED OUT AVERAGE OP / T C MARGIN OF THE COMBINED IT / ITES COMPARABLE COMPANIES AT 21.99%. THIS PLI WAS USED BY THE TPO AS ARMS LENGTH MARGIN TO WORK OUT THE AMOUNT OF THE P ROPOSED ADJUSTMENT ON ACCOUNT OF TRANSFER PRICING IN ASSESSEES CASE. HE RE IT IS IMPORTANT TO MENTION THAT THE ASSESSEE RAISED VARIOUS OBJECTIONS TO SOME OF THE CASES CHOSEN BY THE TPO AS COMPARABLES. SUCH OBJECTIONS OF THE ASSESSEE AND THE REMARKS OF THE TPO HAVE BEEN INCORPORATED ON PAGES 13 TO 17 OF HIS ORDER. AFTER REJECTING THE ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 4 ASSESSEES OBJECTIONS IN THIS REGARD, THE TPO CONC LUDED THAT THE COMPARABLE COMPANIES FINALLY SELECTED BY THE HIM, REPRESENTED THE IT/ITES INDUSTRY IN A TRUE SENSE. IN THIS WAY, THE TPO PROCEEDED TO COMPU TE THE AMOUNT OF ADJUSTMENT AT ` 8.86 CRORE AS UNDER:- TABLE A INCOME FROM IT / ITES SERVICES (A) 1,054,164,147 TOTAL COSTS (B) 936,825,010 OPERATING PROFIT (C) 117,339,137 OP / TC*100 12.53% ARMS LENGTH MARGIN (D) 21.99% SERVICE FEE CHARGED TO AE 1,054,164,147 5% UPPER LIMIT OF (A) 1,199,974,471 ARMS LENGTH SERVICE FEE (F) = (B)*(D) + (B) 1,142,8 32,830 AMOUNT OF ADJUSTMENT (F) (A) 88,668,683 4. FROM THE ABOVE TABLE IT CAN BE SEEN THAT THE TPO APPLIED ARMS LENGTH MARGIN AT 21.99%, WORKED OUT BY HIM ON THE BASIS OF 33 COMPARABLE CASES AS FINALLY CHOSEN BY HIM. THAT IS HOW ARMS LENGTH SER VICE FEE WAS DETERMINED AT ` 114,28,32,830 AS AGAINST ` 105,41,64,147 DECLARED BY THE ASSESSEE. RESULTANTLY ADJUSTMENT OF ` 8.86 CRORE WAS PROPOSED. THE A.O. PASSED DRAFT ORDE R U/S 143(3) READ WITH SECTION 144C(1) ON 29.12.2009, MAKING AD DITION OF ` 8.86 CRORE U/S 92CA(3). WHEN THE MATTER CAME UP BEFORE THE DISPUTE RESOLUTION PANEL (HEREINAFTER CALLED `DRP), THE ASSESSEE RAISED VAR IOUS OBJECTIONS. NOT CONVINCED WITH THE ASSESSEES SUBMISSIONS / OBJECTI ONS, THE DRP VIDE ITS ORDER DATED 28.09.2010 CONFIRMED THE ADJUSTMENT OF ` 8.86 CRORE. THE A.O. IN HIS FINAL ORDER PASSED ON 07.10.2010, MADE THE ADDITION FOR ` 8.86 CRORE ACCORDINGLY. THE ASSESSEE IS AGGRIEVED AGAINST THIS ADDITION MAD E BY THE AO IN HIS ORDER PASSED U/S 143(3) R.W.S. 144C(13). ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 5 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. FROM THE FACTS RECORDED ABOVE IT IS DISCERN IBLE THAT THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AES AND AL SO NON-AES. IT EARNED REVENUE TOTALING ` 105.41 CRORE FROM IT / ITES SPLIT INTO TWO PARTS VI Z. ` 31.59 CRORE FROM AES AND ` 73.81 CRORE FROM NON-AES. FROM TABLE-A ABOVE, REPR ODUCED FROM THE TPOS ORDER, IT CAN BE SEEN THAT THE ASSESSEE INCURRED TOTAL COST OF ` 93.68 CRORE, THE DETAIL OF WHICH IS AVAILABLE ON PAGE 147 OF THE PAPER BOOK. THE TOTAL COST IN RELATION TO INTERNATIONAL TRANSACTIONS WITH THE AES COMES TO ` 27.06 CRORE AS AGAINST WITH THE NON-AES AT ` 66.62 CRORE. THE TOTAL OPERATING PROFIT OF ` 11.73 CRORE CONSISTS OF OPERATING PROFIT FROM INTER NATIONAL TRANSACTIONS WITH AES AT ` 4.53 CRORE AND FROM TRANSACTIONS WITH THE NON-AES A T ` 7.19 CRORE. THE RATIO OF OPERATING PROFIT TO TOTAL COST FROM AES IS AT 16.77%; FROM NON-AES AT 10.80%; AND AGGREGATE AT 12.53%. AT THIS STAGE IT IS RELEVANT TO MENTION THAT THE DETAIL AT PAGE 147 OF THE PAPER BOOK SHOWING TH E ALLOCATION OF REVENUES, COST AND PROFITABILITY BETWEEN AES AND NON-AES WAS AVAIL ABLE BEFORE TPO AS WELL AS DRP. BOTH THE AUTHORITIES HAVE REFERRED TO SUCH DETAILS IN THEIR RESPECTIVE ORDERS. THE FIGURES AS SO GIVEN HAVE NOT BEEN CONTR OVERTED BY ANY OF THESE AUTHORITIES. THUS IT CAN BE SEEN THAT MARGIN IN THE CASE OF INTERNATIONAL TRANSACTIONS WITH AES STANDS AT 16.77% AS AGAINST THE TRANSACTIONS WITH NON- AES AT 10.80%. THE ASSESSEE DECLARED ARMS LENGTH M ARGIN ON THE BASIS OF TWO YEARS DATA AT 17.20%, WITH WHICH THE TPO DID NOT A GREE. IN HIS OPINION, AND RIGHTLY SO, THE DATA TO BE USED IN ANALYZING THE C OMPARABILITY OF AN UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRANSACTION CAN B E THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTI ON IS ENTERED INTO. THIS IS THE PRESCRIPTION OF RULE 10B(4). IF WE EXCLUDE THE OTHE R YEARS PROFIT MARGIN FROM AVERAGE OF THE 43 COMPARABLE CASES TAKEN NOTE OF BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY, THE AVERAGE PROFIT MARGIN COMES TO 1 7.36%. THIS FACT IS VERIFIABLE FROM PAGE 5 OF THE TPOS ORDER. THE TPO CHOSE THREE CASES FROM THE ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 6 ASSESSEES LIST OF 43 COMPARABLE CASES AND FOUND OU T 30 CASES AT HIS OWN, WHICH IN HIS OPINION WERE COMPARABLE. ON THE BASIS OF FIN AL LIST OF SUCH 33 COMPARABLES CASES, HE WORKED OUT MARGIN OF 21.99%. 6. VARIOUS OBJECTIONS HAVE BEEN RAISED BEFOR E US AND WERE ALSO RAISED BEFORE THE AUTHORITIES BELOW ON THE CASES SELECTED BY THE TPO. FOR THE TIME BEING, WE ARE NOT DEALING WITH SUCH OBJECTIONS AND PROCEEDING WITH THE PRESUMPTION THAT THE TPO RIGHTLY EXCLUDED 40 COMPAR ABLE CASES GIVEN BY THE ASSESSEE AND INDUCTED 30 CASES AT HIS OWN. THE AVER AGE PROFIT MARGIN FROM SUCH 33 CASES HAS BEEN DETERMINED BY THE TPO AT 21.99%. A LOOK AT THE TABLE-A DIVULGES THAT THE TPO CONSIDERED TOTAL REVENUES FRO M INTERNATIONAL TRANSACTIONS WITH AES AND ALSO NON-AES AT ` 105.41 CRORE. IN THE SAME BREATH, HE CONSIDERED OP / TC MARGIN AT 12.53% DECLARED BY THE ASSESSEE I N TOTAL, WHICH AGAIN COMPRISES OF 16.77% FROM ITS INTERNATIONAL TRANSACT IONS WITH AES AND 10.80% FROM THE TRANSACTIONS WITH NON-AES. THAT IS HOW TH E TPO CONSIDERED THE TRANSACTIONS BOTH WITH AES AND NON-AES FOR THE PURP OSE OF RECOMMENDING ADJUSTMENT OF ` .8.86 CRORE. 7. IT IS AXIOMATIC THAT THE TRANSFER PRICING ADJUSTMENT CAN BE MADE ONLY WITH REFERENCE TO THE INTERNATIONAL TRANSACTIONS WITH TH E AES AND NOT NON-AES. SPECIAL PROVISIONS RELATING TO THE COMPUTATION OF I NCOME FROM INTERNATIONAL TRANSACTIONS WERE INTRODUCED THROUGH SECTIONS 92 TO 92F BY THE FINANCE ACT, 2001 WITH A VIEW TO PROVIDE A STATUTORY FRAME WORK WHICH CAN LEAD TO THE COMPUTATION OF REASONABLE PROFITS AND TAXES IN INDI A IN CASE OF INTERNATIONAL TRANSACTIONS BETWEEN ENTERPRISES OF A MULTI-NATIONA L GROUP. THE OBJECT OF THESE PROVISIONS IS TO ENSURE THAT THE TRANSACTIONS BETWE EN TWO AES ARE NOT ARRANGED IN SUCH A MANNER SO AS TO REDUCE THE INCIDENCE OF T AX DUE IN INDIA. SUCH OBJECT IS ACHIEVED BY DETERMINING ALP AS PER THE RELEVANT PROVISIONS OF THE ACT, WHICH IS THEN COMPARED WITH THE PRICE AT WHICH INTE RNATIONAL TRANSACTIONS ARE ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 7 ACTUALLY ENTERED INTO AND RECORDED IN THE BOOKS OF ACCOUNT. THE DIFFERENCE BETWEEN THE ALP AND THE ACTUAL PRICE, IF LEADING TO THE LOWERING OF INCOME DUE IN INDIA, IS ADDED BY WAY OF TRANSFER PRICING ADJUS TMENT. FROM THE SCHEME OF CHAPTER X OF THE ACT, CONTAINING THE SECTIONS AS AF ORE-REFERRED, IT IS MANIFEST THAT THE ADDITION ON ACCOUNT OF TRANSFER PRICING AD JUSTMENT CAN BE MADE ONLY IN RESPECT OF INTERNATIONAL TRANSACTIONS WITH THE AES AND NOT THE NON-AES. IT IS QUITE NATURAL ALSO BECAUSE THERE CAN BE NO SCOPE FO R ARRANGING THE TRANSACTIONS WITH NON-AES SO AS TO REDUCE THE DUE TAX IN INDIA. THAT IS THE REASON FOR WHICH THE TRANSACTIONS WITH NON-AES HAVE BEEN EXCLUDED FR OM THE AMBIT OF CHAPTER X OF THE ACT. 8. COMING BACK TO THE FACTS OF THE INSTANT CA SE IT IS OBSERVED THAT THE ADDITION OF ` 8.86 CRORE HAS BEEN MADE BY THE AO ON THE BASIS OF THE ADJUSTMENT PROPOSED BY THE TPO ON THE INTERNATIONAL TRANSACTIO NS NOT ONLY WITH AES BUT NON-AES AS WELL. THIS COURSE OF ACTION HAS NO FORCE OF LAW. WHEN WE CONCENTRATE ON THE INTERNATIONAL TRANSACTIONS OF TH E ASSESSEE WITH ITS AES, IT CAN BE OBSERVED THAT THE MARGIN FROM OP/TC COMES TO 16. 77%. ON THE OTHER HAND, THE TPO DETERMINED THE AVERAGE RATIO OF OP/TC AT 21 .99% FROM HIS CHOSEN 33 COMPARABLE CASES. IF 5% PLUS MINUS MARGIN IS ALLOWE D IN TERMS OF SECTION 92C(2), THE ARMS LENGTH SERVICE FEE WILL COME AT ` .115.90 ( ` .100 + ` .21.99 = ` .121.99 MINUS ` .6.09 [5% OF ` .121.99] ). AS AGAINST THIS, THE SERVICE FEE CHARGED BY THE ASSESSEE IS ` .116.77 ( ` .100 + ` .16.77 [16.77% OF ` .100] ). THUS IT CAN BE SEEN THAT THE ARMS LENGTH SERVICE FEE AT ` 115.90 IS LESS THAN THAT CHARGED BY THE ASSESSEE AT ` 116.77. THE ABOVE PERCENTAGES WHEN APPLIED TO THE A CTUAL FIGURES, GIVE THE FOLLOWING RESULTS:- ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 8 T ABLE - B PARTICULARS AMOUNT (IN INR) A. REVENUE FROM AES 315,983,443 B. TOTAL COST IN RELATION TO REVENUE FROM AES 270, 607,530 C. PROFIT FROM TRANSACTIONS WITH AES (A-B) 45,375,9 13 D. ALP REVENUE (CONSIDERING 21.99% OP/TC AS DETERMINED BY TPO)- [B+21.99% OF B] 330,114,126 E.95% OF ALP REVENUE ( 95% OF D) 313,608,420 F. ADJUSTMENT (E-A) NIL 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENT LY SUPPORTED THE VIEW CANVASSED BY THE TPO BY STATING THAT THE STATEMENT SHOWING ALLOCATION OF REVENUE, COST AND PROFITABILITY BETWEEN THIRD PARTI ES AND AES GIVING RATIO OF OPERATING PROFIT TOTAL COST AT 12.53% IN AGGREGATE AND 16.77% ON INTERNATIONAL TRANSACTIONS WITH AES AND 10.80% ON TRANSACTIONS WI TH NON-AES, WAS NOT AVAILABLE BEFORE THE TPO. HE ALSO RAISED ANOTHER OB JECTION BY ARGUING THAT THE FINAL LIST OF 33 COMPARABLE CASES DRAWN BY THE TPO COMPRISED OF TWO SETS OF COMPARABLE CASES, VIZ., ONE SET OF ENTITY LEVEL CAS ES AND THE OTHER SET OF SEGMENT LEVEL CASES. HE ARGUED THAT THE PROFIT MARGIN OF 21 .99% WAS DETERMINED BY THE TPO BY CONSIDERING NOT ONLY THE REVENUES FROM IT/IT ES IN RELATION TO SOME OF THESE COMPARABLE COMPANIES BUT ALSO FROM THE FIGURE S OF ENTITY IN RELATION TO OTHER COMPARABLE CASES. IT WAS ACCENTUATED THAT TH ERE WAS A DIRE NEED TO RESTORE THE MATTER TO THE FILE OF TPO FOR A FRESH DETERMINA TION OF PLI BY CONSIDERING ONLY THOSE COMPARABLE CASES WHICH INVOLVE IT/ITES, THEREBY EXCLUDING THE NON-ITES REVENUES FROM THE OTHER SET OF COMPARABLES . 10. WE ARE NOT CONVINCED WITH THE SUBMISSIONS PUT F ORTH ON BEHALF OF THE REVENUE. INSOFAR AS THE FIRST CONTENTION, REGARDING NON-AVAILABILITY OF STATEMENT SHOWING SEPARATE PROFIT MARGINS FROM TRANSACTIONS W ITH AES AND NON-AES BEFORE THE AUTHORITIES BELOW, IS CONCERNED, IT IS FOUND THAT THE TPO HAS TAKEN ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 9 NOTE OF THIS FACT ON PAGE 5 OF HIS ORDER. IT HAS BE EN CATEGORICALLY RECORDED BY HIM THAT THE ASSESSEE SUBMITTED BEFORE HIM THE OP / TC MARGIN OF 16.77% WHICH WAS EARNED BY IT FROM THE AES SEGMENT AND SUC H MARGIN WAS HIGHER THAN OP / TC MARGIN OF 10.80% FROM THE NON-AES SEGMENT. THIS INDICATES THAT THE ENTIRE DETAIL ABOUT THE ALLOCATION OF COST AND REVE NUE BETWEEN AES AND NON-AES WAS VERY MUCH AVAILABLE BEFORE THE TPO. IT IS STILL FURTHER NOTED THAT THE ASSESSEE SUBMITTED A NOTE ON ALLOCATION OF REVENUES AND COST BETWEEN AES AND NON-AES SEGMENT BEFORE DRP AS WELL VIDE ITS LETTER DATED 15 TH SEPTEMBER, 2010, A COPY OF WHICH IS AVAILABLE ON PAGE 268 ONWARDS OF THE PAPER BOOK. THESE FACTS INDICATE THAT THE ALLOCATION OF TOTAL REVENUE S AND TOTAL COST BETWEEN AES AND NON-AES, WAS VERY MUCH AVAILABLE BEFORE THE TPO AS WELL AS DRP. NONE OF THESE AUTHORITIES HAVE ADVERSELY COMMENTED ON SU CH ALLOCATION. IT, THEREFORE, IMPLIES THAT THEY ACCEPTED THESE FIGURES AS CORRECT . 11. THE OTHER CONTENTION OF THE LEARNED DEP ARTMENTAL REPRESENTATIVE IS AGAIN DEVOID OF ANY FORCE. THE TPO FINALLY CHOSE 33 UNCONTROLLED COMPARABLE CASES ON THE BASIS OF THEIR REVENUES FROM IT/ITES. IF WE PERUSE TABLE-A, IT CAN BE SEEN THAT SUCH 33 COMPARABLE CASES HAVE BEEN BRO ADLY CLASSIFIED IN TWO CLASSES VIZ., SEGMENT AND TOTAL. FOR EXAMPLE, THE C OMPARABLE CASE GIVEN BY TPO AT SR.NOS.5, 6, 7, 8 ETC. HAVE BEEN MARKED WITH SEG. WHICH REPRESENTS THE SEGMENTAL RESULTS FROM IT/ITES. THE OTHER CASES ARE THOSE IN WHICH THERE IS NO SEPARATE IDENTIFICATION. THESE CASES INCLUDE ACE SO FTWARE LIMITED AT SR.NO.1, ALLSEC TECHNOLOGIES LTD. AT SR.NO.2, INFOSYS LIMITE D AT SR.NO.17, AZTEC SOFTWARE LIMITED AT SR.NO.14 ETC. THESE ARE THE COMPANIES WH ICH ARE EXCLUSIVELY ENGAGED IN RENDERING IT/ITES. TO CONTEND THAT THE TPO WRONG LY RECORDED THE FIGURES OF TURNOVER AND RATIO OF OP TO TC IN THE CASE OF SUCH LATER CATEGORY OF COMPARABLE CASES ON THE ENTITY LEVEL, WHICH ALSO COMPRISES NON -IT/ITES SERVICES, IS WITHOUT ANY BEDROCK. IN FACT, THE COMPANIES IN SECOND CATEG ORY ARE THOSE WHICH APPEAR TO BE EXCLUSIVELY ENGAGED IN RENDERING IT/ITES. THE TPO HAS RECORDED ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 10 TURNOVER AND OP/TC RATIO OF SUCH COMPANIES ON ENTIT Y LEVEL BECAUSE OF THEIR BEING SOLELY INVOLVED IN IT/ITES AND IN RESPECT OF THE OTHER CATEGORY, WHERE SUCH COMPARABLE COMPANIES ARE INVOLVED NOT ONLY IN IT/ITES, THE FIGURES OF TURNOVER AND OP /TC MARGIN HAVE BEEN ADOPTED IN RES PECT OF IT/ITES SEGMENT ALONE. IT CAN BE OBSERVED FROM THE EARLIER PARTS O F THE TPOS ORDER THAT HE CONFINED HIMSELF ONLY TO IT/ITES FOR THE PURPOSES O F BENCH MARKING. IN SUCH A CASE, THERE COULD HAVE BEEN NO QUESTION OF THE TPO EMBARKING UPON THE FIGURES IN RELATION TO NON-IT/ITES SEGMENTS OF SOME OF THE COMPARABLE CASES AS CHOSEN BY HIM. APART FROM MAKING A GENERAL STATEMENT THAT THE TPO ALSO CONSIDERED THE FIGURES FROM NON-IT/ITES SEGMENTS IN SOME OF TH E COMPARABLE CASES, NO MATERIAL HAS BEEN PLACED ON RECORD TO SUBSTANTIATE THIS ARGUMENT. IF THE LD. DR WAS CONFIDENT OF HIS VIEWPOINT CANVASSED BY HIM, TH EN HE SHOULD HAVE BROUGHT ON RECORD THE FIGURES OF SOME OF SUCH COMPANIES TO DEMONSTRATE THAT THE TPO COMMITTED MISTAKE, WHICH WARRANTED FRESH APPRAISAL. WE, THEREFORE, DO NOT FIND ANY FORCE IN THE SUBMISSION ADVANCED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THIS ISSUE. 12. FROM THE ABOVE TABLE-B, IT IS MANIFEST THAT TH E SERVICE FEE CHARGED BY THE ASSESSEE FROM INTERNATIONAL TRANSACTIONS WITH I TS AES IS MORE THAN THE ALP DETERMINED BY APPLYING THE PLI AS FOUND OUT BY THE TPO AND HENCE NO ADDITION/ADJUSTMENT IS CALLED FOR. IT IS IMPERATIV E TO NOTE THAT THE ABOVE WORKING IS WITHOUT PREJUDICE TO THE VIEW POINT OF T HE ASSESSEE THAT THE TPO WRONGLY CHOSE 30 CASES AND REJECTED 40 CASES RIGHT LY CHOSEN BY IT. WE, THEREFORE, ORDER FOR THE DELETION OF ADDITION OF ` 8.86 CRORE. 13. THE NEXT GROUND OF THE ASSESSEES APPEAL IS AGA INST THE CHARGING OF INTEREST U/S 234A. INTEREST U/S 234A IS CHARGED WHE N THERE IS A DEFAULT IN FURNISHING THE RETURN OF INCOME. THIS SECTION, INTER ALIA , PROVIDES THAT WHERE ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 11 THE RETURN OF INCOME FOR ANY ASSESSMENT YEAR IS FUR NISHED AFTER THE DUE DATE OR IS NOT FURNISHED, THE ASSESSEE BECOMES LIABLE TO PAY I NTEREST AT THE PRESCRIBED RATE FOR EVERY MONTH OR A PART OF MONTH COMPRISED IN THE PERIOD COMMENCING ON THE DATE IMMEDIATELY FOLLOWING DUE DATE UP TO THE DATE OF FURNISHING OF THE RETURN. ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS OB SERVED THAT THE ASSESSEE FURNISHED ITS RETURN OF INCOME ON 21.10.2006 AND TH EREAFTER REVISED RETURN WAS E-FILED ON 24.10.2006. THE ASSESSMENT YEAR UNDER CO NSIDERATION IS 2006-2007. THE DUE DATE FOR FURNISHING THE RETURN OF INCOME IN THE CASE OF ASSESSEE FOR SUCH YEAR WAS 31.10.2006. WHEN ADMITTEDLY THE RETURN HAS BEEN FILED BY THE ASSESSEE BEFORE THE DUE DATE, THERE COULD HAVE BEEN NO QUES TION OF CHARGING ANY INTEREST U/S 234A. WE ORDER ACCORDINGLY. 14. THE LAST GROUND ABOUT THE CHARGING OF INTEREST OF INTEREST U/S 234B IS CONSEQUENTIAL AND ACCORDINGLY DISPOSED OFF. 15. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF JUNE, 2012. SD/- SD/- (VIVEK VARMA) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 20 TH JUNE, 2012. DEVDAS* ITA NO.9032/MUM/2010 M/S.LIONBRIDGE TECHNOLOGIES PRIVATE LIMITED. 12 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE DISPUTE RESOLUTION PANEL-II, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.