LIONBRIDGE TECHNOLOGIES P. LTD, NAVI MUMBAI V. ASST CIT 15(2)(1), MUMBAI

ITA 912/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0723 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 92D; 234B; 115JB

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI G.S. PANNU , AM AND SHRI RAVISH SOOD , JM I.T. (TP) A. NO . 912/MUM/2016 ASSESSMENT YEAR: 2011 - 12 M/S. LIONBRIDGE TECHNOLOGIES PVT. LTD 3 RD FLOOR, RELIABLE TECH PARK OFF THANE, BELA PUR ROAD AIROLI, NAVI MUMBAI 400 708 VS. ASST CIT 15(2)(1) R. NO. 403 , 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 PAN/GIR NO. AABCT3380Q ( APPELLANT ) : ( RESPONDENT ) I.T. (TP) A. NO .1600/MUM/2016 ASSESSMENT YEAR: 2011 - 12 ASS T CIT 15(2)(1) R. NO. 403, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 VS. M/S. LIONBRIDGE TECHNOLOGIES PVT. LTD. LTD., 3 RD FLOOR, RELIABLE TECH PARK OFF THANE, BELAPUR ROAD AIROLI, NAVI MUMBAI 400 708 PAN/GIR NO. AABCT3380Q ( APPELLA NT ) : ( RESPONDENT ) A SSESSEE BY : MS. KRISHNA PHATARPHEKAR & MS. KEERTHIGA SHARMA RE VENUE B Y : MS. PRIYANKA WADA & SHRI DEBASHIS CHANDA DATE OF HEARING : 17.02.2017 DATE OF PRONOUNCEMENT : 17 .05.2017 P AGE | 2 O R D E R PER RAVISH SOOD, JUDIC IAL MEMBER: TH AT BOTH THE ASSESSEE AND THE REVENUE HAD FILED AN APPEAL AGAINST THE ORDER PASSED BY THE A.O U/S 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT A CT), DATED 29.01.2016 . WE HEREIN TAKE UP THE APPEAL FILED BY THE ASSESSEE COMPAN Y. I T A.NO.912/MUM/2016 : THE ASSESSEE ASSAILING THE ORDER PASSED BY THE A.O U/S 143(3) R.W.S 144C(13) HAD RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE US : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TRANSFER PRICING OFFI CER (TPO) AND THE LEARNED ASSESSING OFFICER (AO) UNDER THE DIRECTIONS OF THE HONBLE DISPUTE RESOLUTION PANEL (DRP) ERRED IN MAKING AN ADJUSTMENT OF RS. 10,49,16,556/ - UNDER CHAPTER X OF THE INCOME TAX ACT, 1961 (THE ACT); 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED . TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN CONDUCTING A FRESH BENCHMARKING ANALYSIS, USING NON - CONTEMPORANEOUS DATA AND APPLYING INAPPROPRIATE FILTERS IN SELECTING COMPARABLE C OMPANIES; 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN REJECTING COMPANIES WHICH UNDERTAKE P AGE | 3 FUNCTIONS, EMPLOY ASSETS AND BEAR RISKS SIMILAR TO THE APPELLA NT, WHICH WERE SELECTED BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION; 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN SELECTING COMPANIES AS COMPAR ABLE FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE WITHOUT CONSIDERING THE FACT THAT THEIR FUNCTIONS UNDERTAKEN, ASSETS EMPLOYED AND RISKS BORNE WERE NOT COMPARABLE TO THAT OF THE APPELLANT; 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN INCLUDING PASS - THROUGH COSTS, BEING IN THE NATURE OF REIMBURSEMENT OF OUTSOURCED COSTS INCURRED BY THE APPELLANT, WHILE COMPUTING THE MARGIN EARNED BY THE APPELLANT FROM THE INTERNATIONAL TRANSACTIONS ENTERED BY IT; 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN NOT CONSIDERING GAIN ON ACCOUNT OF FOREIGN EXCHANGE FLUCT UATION AS AN OPERATING ITEM WHILE COMPUTING THE MARGIN EARNED BY THE APPELLANT FROM THE INTERNATIONAL TRANSACTIONS ENTERED BY IT; 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN DISREGARDING THE TRANSFER PRICING STUDY REPORT MAINTAINED BY THE APPELLANT AS PER SECTION 92D OF THE P AGE | 4 ACT READ WITH RULE 10D OF THE INCOME TAX RULES, 1962 AND THE VARIOUS SUBMISSIONS MADE BY THE APPELLANT; 8. ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT WAS CLAIMING TAX EXEMPTION UNDER SECTION 10A OF THE ACT AND ACCORDINGLY HAD NO INTENTION TO SH IFT PROFITS OUTSIDE INDIA BY MANIPULATING THE PRICES CHARGED IN ITS INTERNATIONAL TRANSACTIONS WHICH IS A PRE - REQUISITE CONDITION TO MAKE ANY ADJUSTMENT UNDER THE PROVISION OF CHAPTER X OF THE ACT; 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN REFERRING THE MATTER TO THE TPO AND THE LEARNED AO/TPO AND THE HONBLE DRP FURTHER ERRED IN DISREGARDING THE BENCHMARKING ANALYSIS UNDERTAKEN BY THE APPELLANT WITHOUT RECORDING ANY REASON TO SHOW THAT THE CONDITIONS MENTIONED I N SECTION 92C(3) OF THE ACT HAVE BEEN SATISFIED; 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN REJECTING THE PLEA FOR USE OF MULTIPLE YEAR DATA AS SPECIFIE D IN PROVISO TO RULE 10B(4) OF THE INCOME TAX RULES, 1962; 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO AND THE LEARNED AO UNDER THE DIRECTIONS OF THE HONBLE DRP ERRED IN DENYING THE BENEFIT OF +/ - 5 PERCENT RANGE AS ENVIS AGED BY THE PROVISIO NS OF SECTION 92C(2) OF THE ACT. P AGE | 5 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF M/S LIONBRIDGE MAURITIUS LIMITED AND IS ENGAGED IN THE BUSINESS OF DESIGN, DEVELOPMENT AND EXPORT OF THE C OMPUTER SOFTWARE AND PROVIDING INFORMATION TECHNOLOGIES ENABLED SERVICES. THE ASSESSEE COMPANY HAD E - FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29.11.2011, DECLARING TOTAL INCOME OF RS. 60,16,051/ - AND BOOK PROFIT OF RS. 11,04,22,963/ - U/S 115JB OF THE ACT , WHICH WAS TREATED AS ITS DEEMED TOTAL INCOME . THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY PROCEEDINGS U/S 143(2). THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O CONSIDERING THE NATURE OF INTERNATIONAL TRANSACT IONS ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS ASSOCIATE ENTERPRISES (AES), THEREIN MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING OF THE ARMS LENGTH PRICE (ALP) OF SUCH INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS AE S. BEFORE THE TPO : 3. THE TPO DURING T H E COURSE OF THE PROCEEDINGS BEFORE HIM THEREIN OBSERVED THAT THE ASSESSEE WHICH HAD A UNIQUE INTEGRATED MODEL FOR SERVICE DELIVERY WHICH ENABLED IT TO OFFER A RANGE OF LOW END ITES SERVICES AND SOFTWARE DEVELOPMEN T SERVICES LIKE APPLICATION MAINTENANCE, TESTING SERVICES, LOCALIZATION SERVICES TO THE LIONBRIDGE GROUP AND ITS INDEPENDENT CUSTOMERS, HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AES DURING THE YEAR UNDER CONSIDERATION, AS UNDER: - S.NO. INTERN ATIONAL TRANSACTIONS AMOUNT (RS) 1. PROVISION OF SOFTWARE DEVELOPMENT AND RS. 102,22,67,933/ - P AGE | 6 LOCALIZATION SERVICES. THE TPO OBSERVED THAT THE ASSESSEE HAD USED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD (MAM) AND OPERATING PROFIT/TOTAL COST (OP/OC) AS PROFIT LEVEL INDICATOR (PLI) FOR ANALYZING THE INTERNATIONAL TRANSACTIONS PERTAINING TO PROVISION OF SOFTWARE DEVELOPME N T AND LOCALIZATION SERVICES TO ITS ASSOCIATE ENTERPRISES (AE) . IT WAS FURTHER OBSERVED BY THE TPO THAT AS P ER THE TRANSFER PRICING STUDY REPORT (TP S R) THE ASSESSEE HAD IDENTIFIED 18 COMPANIES AS COMPARABLE, AND BY PUTTING ACROSS ITS OP/TC OF 16.66% FOR F.Y. 2010 - 11 AS AGAINST THE 3 YEAR WEIGHTED ARITHMETIC MEAN OP/TC OF 17.52% OF THE AFORESAID COMPARABLES, THER EIN CLAIMED THAT ITS ALP WAS WITHIN THE RANGE OF 5% OF THE TRANSACTION PRICE . THE TPO HOWEVER BEING OF THE VIEW THAT AS PER RULE 10B(4) IT WAS MANDATORY ON THE PART OF THE ASSESSEE TO EXCLUSIVELY USE THE CURRENT YEAR DATA OF THE COMPA R ABLES , THEREFORE REQU IRED THE ASSESSEE TO FURNISH THE UPDATED OP/TC OF COMPARABLE COMPANIES USING DATA FOR F.Y. 2010 - 11 ONLY, IN COMPLIANCE TO WHICH THE ASSESSEE FURNISHED THE ARITHMETIC MEAN OF THE PLI OF SUCH COMPARABLES COMPANIES FOR F.Y. 2010 - 11, WHICH WORKED OUT AT 11.54% . 4. THE TPO AFTER EXAMINING THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY THE ASSESSEE AND THE SEARCH CRITERIA ADOPTED BY THE ASSESSEE IN RESPECT OF THE COMPARABLES IDENTIFIED BY IT, THEREIN APPLIED CERTAIN ADDITIONAL FILTERS OR CRITERIA TOWARDS SELEC TING PROPER COMPARABLES WHICH WERE FUNCTIONALLY SIMILAR TO THAT OF THE ASSESSEE, APART FROM THE FILTERS APPLIED BY THE ASSESSEE , AND CAME UP WITH A FINAL LIST OF COMPARABLES AND THE RESPECTIVE MEAN MARGIN S , AS UNDER: - P AGE | 7 S.NO. NAME OF THE COMPANY OP/TC (TPO WORKING) COMPARAB LE 1. FIRSTOBJECT TECHNOLOGIES LTD. 6.20% ASSESSEE 2. GOLDSTONE TECHNOLOGIES LTD. 7.01% ASSESSEE 3. L G S GLOBAL LTD. 13.60% ASSESSEE 4. R S SOFTWARE (INDIA) LTD. 16.37% ASSESSEE 5. VIRINCHI TECHNOLOGIES LTD. 19.29% ASSESSEE 6. ACROP ETAL TECHNOLOGIES LTD (SEG) 23.95% TPO 7. INFOSYS LTD. 43.53% TPO 8. KALS INFORMATION SYSTEMS LIMITED. 12.31% TPO 9. PERSISTENT SYSTEMS & SOLUTIONS LTD. 22.12% TPO 10. ACCENTIA TECHNOLOGIES LIMITED. 29.18% TPO 11. SANKHYA INFOTECH LTD. 26.20% TPO 12 . ICRA TECHNOANLAYTICS LTD. 25.24% TPO 13. TCS E - SERVE LTD. 69.31% TPO 14. WIPRO TECHNOLOGIES LTD. 54.42% TPO 15. LARSEN AND TOUBRO INFOTECH LIMITED. 12.43% TPO 16. ZYLOG SYSTEMS LIMITED 28.72% TPO ARITHMETIC MEAN 25.62% THE TPO THUS OBSERVING THA T THAT THE OP/TC OF THE ASSESSEE AT 13.60% WAS LESS THAN THE OP/TC OF 25.62% EARNED BY THE COMPARABLE COMPANIES, THEREIN HELD THAT THE OP/TC OF THE IT/ITES SERVICES RENDERED BY THE ASSESSEE WAS OUTSIDE THE 5% RANGE AVAILABLE UNDER THE REGULATIONS, AND THUS THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS AES WERE NOT AT ARM S LENGTH PRICE . THE TPO IN THE P AGE | 8 BACKDROP OF THE AFORESAID FACTS CARRIED OUT AN ADJUSTMENT OF RS. 10,82,06,652/ - , AS UNDER: - PARTICULARS LIONBRIDGE TECHNOLOGIES PVT. LTD. ARMS LEN GTH P & L (AS PER FINAL SET OF COMPARABLES) INCOME FROM SOFTWARE DEVELOPMENT & LOCALIZATION SERVICES. RS. 102,22,67,933/ - RS. 113,04,74,585/ - TOTAL COST (TC) RS. 89,99,16,084/ - RS. 89,99,16,084/ - OPERATING PROFIT (OP) RS. 12,23,51,849/ - RS. 23,05,58,501 / - OP/TC(%) 13.60% 25.62% ADJUSTMENT RS. 10,82,06,652/ - THE TPO THUS ON THE BASIS OF HIS AFORESAID WORKING THEREIN PROPOSED AN UPWARD ADJUSTMENT OF RS. 10,82,06,652/ - . DRAFT ASSESSMENT B Y A.O: 5 . THE A.O ON RECEIPT OF THE REPORT OF THE TPO PASSED A DRAFT ORDER U/S 143(3) R.W.S 144C(1) OF THE ACT ON 04.03.2015 AND CARRIED OUT AN UPWARD ADJUSTMENT OF RS. 10,82,06,652 U/S 92CA(3). THE A.O FURTHER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS RECASTED THE CLAIM OF THE ASSESSEE T OWARDS DEDUCTION U/S 10A OF THE ACT, AS UNDER: - (I). THE A.O OBSERVING THAT THE ASSESSEE HAD INCURRED EXPEN SES AGGREGATING TO RS. 9,31,07,198/ - IN THE NATURE OF PROFESSIONAL CHARGES, TRAVELLING EXPENSES, LEASED LINE AND OTHER IT CHARGES IN FOREIGN CURRE NCY FOR PROVIDING TECHNICAL SERVICES OUTSIDE INDIA , THUS BEING OF THE VIEW THAT THE SAID EXPENSES AS PER CLAUSE (IV) OF P AGE | 9 EXPLANATION 2 OF SEC. 10A WERE LIABLE TO BE REDUCED FROM THE EXPORT TURNOVER, THEREFORE ON THE BASIS OF HIS SAID CONVICTION THOUGH RED UCED THE SAME FROM THE EXPORT TURNOVER, BUT HOWEVER DECLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE TOTAL TURNOVER OF THE ASSESSEE WAS ALSO REQUIRED TO BE SIMULTANEOUSLY REDUCED BY THE SAID AMOUNT. (II) . THE A.O FURTHER OBSERVING THAT THE ASSESSEE HAD CREDITED FOREIGN EXCHANGE GAIN OF RS. 24,51,796/ - , THEREIN NOT BEING PERSUADED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE SAID GAIN HAD ARISEN ON ACCOUNT OF BUSINESS TRANSACTIONS OF THE ASSESSEE FROM THE STP UNIT , AND WAS ON ACCOUNT OF REALIZATION OF EXPORT CONSIDERATION OF COMPUTER SOFTWARE WHICH WAS THE HARDCORE BUSINESS OF THE ASSESSEE, THEREIN HELD THAT THE FOREIGN EXCHANGE GAIN WAS NOT A PROFIT ACTUALLY DERIVED FROM THE EXPORT ACTIVITY OF THE ASSESSEE AND WAS A MERE RECOGNITION OF T HE INCOME IN COMPLIANCE TO THE REQUIREMENT OF THE ACCOUNTING STANDARD . THE A.O THUS CONCLUDED THAT THE FOREIGN EXCHANGE GAIN CREDITED BY THE ASSESSEE IN ITS P & LOSS A/C COULD NOT BE TREATED AS PROFIT OF THE ASSESSEE FROM EXPORT ACTIVITY, AND SUCH WAS NO T ELIGIBLE FOR DEDUCTION U/S 10A. 6. THE A.O AFTER DELIBERATING ON THE AFORESAID ISSUES THEREIN CARR IED OUT AN UPWARD ADJUSTMENT OF RS. 10,82,06,652 / - U/S 92CA(3) , AND FURTHER RESTRICT ING THE ASSESSES CLAIM OF DEDUCTION U/S 10A TO AN AMOUNT OF RS. 11,84,60,314/ - , THEREIN PROPOSED TO ASSESS THE INCOME OF THE ASSESSEE COMPANY AT RS. 13,02,22,185/ - UNDER THE NORMAL PROVISIONS, AND DETERMINED THE BOOK PROFIT U/S 115JB AT RS. 11,04,22,963 / - . P AGE | 10 BEFORE DRP : 7 . THE ASSESSEE BEING AGGRIEVED WITH THE DRA FT ORDER PASSED BY THE A.O FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP) ON 10.04.2015 . THE ASSESSEE ASSAILED THE UPWARD ADJUSTMENT OF RS. 10,82,06,652 / - PROPOSED BY THE TPO U/S 92CA(3) , AS WELL AS THE RECASTING OF THE CLAIM OF THE ASSESSEE T OWARDS DEDUCTION U/S 10A OF THE ACT. THE ASSESSEE CHALLENGED THE UPWARD ADJUSTMENT OF RS. 10,82,06,652/ - PROPOSED BY THE TPO, ON MULTIPLE GROUNDS, VIZ. REJECTION OF THE TP DOCUMENTATION OF THE ASSESSEE ON THE GROUND THAT CONTEMPORANEOUS DATA WAS NOT USED FOR F.Y. 2010 - 11; AO/TPO HAD ERRED IN DISREGARDING THE MULTIPLE YEAR ANALYSIS UNDERTAKEN BY THE ASSESSEE IN ACCORDANCE WITH RULE 10B(4) FOR COMPUTING THE MARGINS OF THE COMPARABLE COMPANIES; THE AO/TPO HAD ER R ED IN RECOMPUTING THE ALP OF THE ASSESSEE AT 2 5.62% AS AGAINST THE ALP OF 17.52% AS PROVIDED IN THE TP DOCUMENTATION; THE AO/TPO HAD ERRED IN REJECTING THE COMPARABLE COMPANIES SELECTED BY THE ASSESSEE WITHOUT CONSIDERING THE FAR ANALYSIS OF THE ASSESSEE VIS - A - VIS COMPARABLES SELECTED AND FURTHER CHER RY PICKING COMPARABLES WITHOUT SHARING METHODICAL SEARCH PROCESS FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS; THE AO/TPO HAD ERRED IN REJECTING THE FILTERS APPLIED BY THE ASSESSEE AND HAD WRONGLY INTRODUCED ADDITIONAL COMPARABLES WITHOUT APPRECIATING T HAT SUCH COMPARABLES OPERATE IN A FUNCTIONALLY DIFFERENT BUSINESS ACTIVITY VIS - - VIS THE ASSESSEE OR WERE HAVING A TURNOVER NOT COMPARABLE WITH THE ASSESSEE; THE AO/TPO HAD ERRED IN COMPUTING THE PLI OF THE ASSESSEE AT 13.60% AS AGAINST THE PLI OF 16.66% P ROVIDED IN THE TP DOCUMENTATION AND HAD ERRED IN IGNORING THE FACT THAT THE OUTSOURCING COST OF RS. 15,06,13,619/ - WAS A PASS THROUGH COST , AS WELL AS NOT CONSIDERING THE FOREIGN EXCHANGE GAIN OF P AGE | 11 RS. 24,51,796/ - WHICH IS A PART OF THE GROSS SERVICE REVENUE EARNED FROM THE AES ; THE AO/TPO HAS ERRED IN NOT CARRYING OUT WORKING CAPITAL RISK ADJUSTMENT FOR FACTORING THE DIFFERENCE IN THE RISKS ASSUMED BY THE ASSESSEE VIS - - VIS COMPARABLE COMPANIES; THE AO/TPO HAS ERRED IN NOT GRANTING THE BENEFIT OF +/ - 5% RAN GE AS ENVISAGED BY THE PROVISION OF SEC. 92C(2); AND THE AO/TPO HAD ER R ED IN FAILING TO APPRECIATE THAT THE ASSESSEE COULD HAVE NO MOTIVE TO AVOID TAX AS IT WAS A STPI UNIT ENTITLED TO INCOME - TAX HOLIDAY UNDER SEC. 10A OF THE ACT. THE DRP THOUGH ACCEPTED THE OBJECTION OF THE ASSESSEE AS REGARDS SELECTION OF CERTAIN COMPANIES AS COMPARABLE BY THE TPO, VIZ. INFOSYS TECHNOLOGIES LIMITED (INFOSYS), LARSEN AND TOUBRO INFOTECH LIMITED, AND ICRA TECHNOANALYTICS LTD, AND DIRECTED THE AO/TPO TO EXCLUDE THE SAME FR OM THE FINAL LIST OF COMPARABLES, BUT HE HOWEVER DID NOT FA V OR WITH THE CONTENTIONS OF THE ASSESSEE AS REGARDS EXCLUSION OF CERTAIN OTHER COMPANIES WHICH WERE SELECTED BY THE TPO AS COMPARABLE, VIZ. TCS E - SERVE LIMITED (TCS), ACROPETAL TECHNOLOGIES LIMIT ED (ACROPETAL), KALS INFORMATION SYSTEMS LIMITED (KALS), PERSISTENT SYSTEMS LTD (PSL), ACCENTIA TECHNOLOGIES LIMITED , SANKHYA INFOTECH LTD. , WIPRO TECHNOLOGIES LTD AND ZYLOG SYSTEMS LIMITED. THE DRP STILL FURTHER REJECTED ALL THE OTHER OBJECTIONS RAI SED BY THE ASSESSEE IN RESPECT OF THE UPWARD ADJUSTMENT OF RS. 10,82,06,652 / - U/S 92CA(3) CARRIED OUT BY THE TPO , AS WELL AS UPHELD THE DENIAL OF +/ - 5% ADJUSTMENT BY OBSERVING THAT THE SAID CONTENTION OF THE ASSESSEE WAS NOT TENABLE AFTER THE AMENDMENT AN D AS SUCH HAD RIGHTLY BEEN REJECTED BY THE TPO . 8 . THAT AS REGARDS THE RECASTING OF THE ASSESSES CLAIM TOWARDS DEDUCTION U/S 10A OF THE ACT, THE DRP DEALT WITH THE CONTENTIONS RAISED BY THE ASSESSEE AS UNDER: - P AGE | 12 (I). THAT AS REGARDS THE ASSAILING OF TH E EXCLUSION OF THE FOREIGN CURRENCY EXPENSES INCURRED BY THE ASSESSEE FROM THE EXPORT TURNOVER , WITHOUT CARRYING OUT A SIMILAR EXCLUSION FROM THE TOTAL TURNOVER, IT WAS OBSERVED BY THE DRP THAT THE SAID ISSUE WAS DISCUSSED BY HIS PREDECESSOR IN THE CA SE OF THE ASSESSEE FOR A.Y. 2008 - 09, 2009 - 10 AND 2010 - 11 AND THE A.O WAS DIRECTED TO DECIDE THE SAME AS PER THE DIRECTIONS GIVEN BY THE ITAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2004 - 05. THE DRP REFERRING TO THE DIRECTIONS GIVEN TO THE AO IN THE CASE OF TH E ASSESSEE FOR A.Y. 2008 - 09 THEREIN RELIED ON THE ORDER OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF : M/S GEM PLUS JEWELLERY LTD. (ITA NO. 2426 OF 2009) , WHEREIN THE HONBLE HIGH COURT HAD OBSERVED THAT IN CASE OF EXCLUSION OF SOME ITEMS FROM THE E XPORT TURNOVER, THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SEC. 10A. THE DRP THUS F OLLOWING THE DIRECTION OF THE DRP AND ITAT IN THE CASE OF THE ASSESSEE FOR THE PRECEDING YEAR, AND GOING BY THE PRINCIPL E LAID DOWN BY THE HONBLE HIGH C O URT IN THE CASE OF : GEM PLUS JEWELLERY (SUPRA) , THEREIN DIRECTED THE A.O TO EXCLUDE THE AMOUNT OF FOREIGN CURRENCY EXPENSES FROM THE TOTAL TURNOVER. (II). THAT AS REGARDS THE DISALLOWANCE OF FOREIGN EXCHANGE GAIN OF RS. 24,51,796/ - BY THE A.O FOR THE REASON THAT THE SAME WERE NOT DERIVED FROM THE EXPORT ACTIVITIES OF THE ASSESSEE AND WERE THEREFORE NOT ELIGIBLE FOR COMPUTATION OF DEDUCTION U/S 10A, IT WAS OBSERVED BY THE DRP THAT THE ISSUE HAD BEEN DECIDED BY THE I TAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2008 - 09 , WHEREIN THE A.O WAS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION U/S 10A ON THE PROFIT OF THE ASSESSEE AS MODIFIED BY THE DISALLOWANCE MADE ON ACCOUNT OF P AGE | 13 FOREIGN EXCHANGE LOSS IN VIEW OF TH E JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY I N THE CASE OF : GEM PLUS JEWELLERY (SUPRA) . THE DRP THUS FOLLOWING THE AFORESAID ORDER OF ITAT IN THE ASSESSES CASE FOR A.Y. 2008 - 09, THEREIN DIRECTED THE A.O TO FOLLOW THE SAME AND APPLY THE JUDGMENT OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY (SUPRA). 9 . THE DRP FURTHER DECLINED TO GIVE ANY DIRECTION IN RESPECT OF THE OBJECTION S RAISED BY THE ASSESSEE , BOTH AS REGARDS THE CHARGING OF INTEREST U/S 234B AND INITIATION OF PENALT Y U/S 271(1)(C) BY THE A.O, FOR THE REASON THAT THE SAME WERE NOT RELATED TO ANY VARIATION IN INCOME OF THE ASSESSEE , AND HENC E BEYOND THE POWERS OF THE DRP FOR GIVING ANY DIRECTION. BEFORE THE A.O : 10 . THE A.O AFTER RECEIVING THE ORDER OF THE DRP , WHE REIN THE LATTER AFTER CONSIDERING THE OBJECTIONS RAISED BY THE ASSESSEE AS REGARDS THE ADJUSTMENT OF RS. 10,82,06,652/ - SUGGESTED BY THE TPO IN RESPECT OF THE ALP OF THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE WITH ITS AES, THEREIN VIDE ITS ORDER DATED. 16.12.2015 REVISED THE TP ADJUSTMENT TO R S . 10,49,16,556/ - . THE A.O FURTHER GIVING EFFECT TO THE DIRECTIONS OF THE DRP AS REGARDS EXCLUSION OF THE FOREIGN CURRENCY EXPENSES OF RS. 13,59,86,441/ - FROM THE TOTAL TURNOVER , THEREIN TOOK BOTH TH E TOTAL TURNOVER AND THE EXPORT TURNOVER AT R S . 84,86,37,343/ - . THE A.O G OING BY THE DIRECTIONS OF THE DRP, FOLLOWED THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF GEM PLUS JEWELLERY (SUPRA) THEREIN HELD THAT THE FOREIGN EXCHANGE GAIN OF RS. 24,51,796/ - WAS ENTITLED FOR CLAIM OF DEDUCTION U/S 10A P AGE | 14 OF THE ACT . THE A.O THUS GIVING EFFECT TO THE DIRECTIONS OF THE DRP, RECASTED THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION U/S 10A AT RS. 13,03,30,713/ - . THE A.O AFTER DELIBERATING ON THE AF ORESAID ISSUES, THEREIN ASSESSED THE INCOME OF THE ASSESSEE AT RS. 11,75,13,487/ - AS PER THE NORMAL PROVISIONS, WHILE FOR COMPUTED THE BOOK PROFIT U/S 115JB AT RS. 11,04,22,963/ - AND COMPUTED THE TAX LIABILITY ON THE SAME AT RS. 1,98,76,133/ - . THAT AS T HE TAX LIABILITY OF THE ASSESSEE UNDER THE NORMAL PROVISIONS WAS MORE THAN THAT AS PER SEC. 115JB, THEREFORE THE A.O COMPUTED THE TAX LIABILITY OF THE ASSESSEE IN ACCORDANCE WITH THE NORMAL PROVISIONS OF THE ACT. 11 . THE ASSESSEE BEING AGGRIEVED WITH T HE ADDITION OF RS. 10,49,16,556/ - (SUPRA) MADE BY THE A.O IN PURSUANCE TO THE DIRECTIONS OF THE DRP AS REGARDS THE ALP OF THE INTERNATIONAL TRANSACTIONS CARRIED OUT WITH ITS AES, HAD THUS CA RRIED THE MATTER IN APPEAL BEFORE US. THAT THE ASSESSEE THOUGH HA D ASSAILED THE UPWARD ADJUSTMENT OF RS. 10,49,16,556/ - (SUPRA) BEFORE US BY RAISING MULTIPLE GROUNDS, HOWEVER DURING THE COURSE OF HEARING OF THE APPEAL THE LD. AUTHORIZED HAD THEREIN PRESSED FOR THE EXCLUSION OF ONLY TWO COMPANIES WHICH HAD BEEN SELECTED BY THE TPO AS COMPARABLE, VIZ. TCS E - SERVE LIMITED (TCS) AND WIPRO TECHNOLOGIES LIMITED . IT WAS SUBMITTED BY THE LD. A.R THAT THE EXCLUSION OF THE AFORE SAID TWO COMPANIES FROM THE FINAL LIST OF COMPARABLES WOULD BRING THE ALP OF THE ASSESSEE FROM 25.28% TO 18.68%, WHICH THUS BEING WITHIN THE RANGE OF +/ - 5% ADJUSTMENT WOULD THUS NOT WARRANT ANY ADDITION TOWARDS TP ADJUSTMENT IN THE HANDS OF THE ASSESSEE. THE LD. A.R IN THE BACKDROP OF H ER AFORESAID CONTENTION THEREIN RESTRICTED HER SUBMISSIONS AS REGARDS THE EXCLUSION OF THE AFORESAID TWO COMPANIES, VIZ. TCS E - SERVE LIMITED (TCS) AND WIPRO TECHNOLOGIES LIMITED AS P AGE | 15 COMPARABLES . WE HEREIN TAKE UP THE CONTENTIONS OF THE LD. A.R IN RESPECT OF THE AFORESAID TWO COMPANIES, AND RECORD OUR OBSERVATIONS AS REGARDS THE SAME, AS UNDER: - (A). M/S TCS E - SERVE LIMITED : 1 2 . THE LD. A.R ADVERTING TO HER CONTENTION AS REGARDS INCLUSION OF THE AFORESAID COMPANY, VIZ. M/S TCS E - SERVE LIMITED AS A COMPARABLE BY THE AO/TPO, THEREIN SUBMITTED THAT THE SAID COMPANY WAS FUNCTIO NALLY DIFFERENT AS IN COMPARISON TO THE ASSESSEE COMPANY, AND ON THE SAID COUNT ITSELF COULD NOT HAVE BEEN SELECTED AS A COMPARABLE. THE LD. A.R TOOK US THROUGH THE OBSERVATIONS OF THE TPO AND THE DRP, ON THE BASIS OF WHICH THE RESPECTIVE AUTHORITIES HAD J USTIFIED THE INCLUSION OF THE AFORESAID COMPA NY , VIZ. TCS E - SERVE LIMITED IN THE FINAL LIST OF COMPARABLES. THE LD. A.R IN ORDER TO FORTIFY HER CONTENTION THAT THE AFORESAID COMPANY WAS FUNCTIONALLY DIFFERENT AND HAD WRONGLY BEEN SELECTED BY THE TPO AS A COMPARABLE , WHICH THEREAFTER HAD BEEN UPHELD BY THE DRP, THEREIN DREW OUR ATTENTION TO THE COMPANY OVERVIEW AT PAGE 168 OF HER PAPER BOOK (APB) , WHICH REVEAL ED THAT THE SAID COMPANY, VIZ. TCS E - SERVE LIMITED UNLIKE THE ASSESSEE WAS ONE OF THE PIONEERS IN THE ITES - BPO INDUSTRY IN INDIA AND WAS IN THE BUSINESS OF PROVIDING BUSINESS PROCESS MANAGEMENT SERVICES IN THE BANKI N G AND FINANCIAL SERVICES (BESI) TO HELP ITS CUSTOMERS ACHIEVE THE BUSINESS OBJECTIVES BY PROVIDING INNOVATIVE BEST IN CLASS SERVICE, A ND WAS PROVIDING SERVICES RANGING FROM IT SERVICES TO BPO SERVICES. THE LD. A . R DREW OUR ATTENTION TO THE BIFURCATED DETAILS OF THE NATURE OF THE SERVICES WHICH WERE RENDERED BY THE AFORESAID COMPARABLE, WHICH INCLUDED (I) FINANCIAL INFORMATION PROCESSING (DATA PROCESSING); (II). CUSTOMER CONTACT (VOICE BASED); (III). P AGE | 16 BUSINESS PROCESS MANAGEMENT AND (IV).ANALYTICS. THAT IN THE BACKDROP OF THE AFORESAID FUNCTIONAL PROFILE OF THE AFORESAID COMPA NY , VIZ. TCS E - SERVE LIMITED, IT WAS SUBMITTED BY THE LD. A.R THA T UNLIKE THE AFORESAID COMPA NY , THE ASSESSEE WAS N OT INTO CALL CENTRE SERVICES, ANALYTICS OR INTERACTION WITH CUSTOMERS, AND AS SUCH WAS CLEARLY FUNCTIONALLY DIFFERENT AS AGAINST THE AFORE SAID COMPARABLE. THE LD. A.R IN SUPPORT OF HER AFORESAID CONTENTION RELIED ON THE ORDER PASSED BY THE ITAT DELHI BENCH I IN THE CASE OF : ORANGE BUSINESS SERVICES INDIA SOLUTIONS (P) LTD. VS. DCIT, CIRCLE - 3, GUJARAT.(2016) 71 TAXMANN.COM 206 (DELH - TRIB) . THE LD. A.R FURTHER RELYING ON THE ORDER OF TH E ITAT DELHI BENCH I IN THE CASE OF : AMERIPRISE INDIA (P) LTD. VS. DCIT, CIRCLE 1(1), NEW DELHI (2016) 66 TAXMANN. COM 246 (DELHI - TRIB) THEREIN SUBMITTED THAT AS OBSERVED BY THE TRIBUNAL IN THE SAID CASE, IN THE ABSENCE OF AVAILABILITY OF ANY SEGREGATION OF THE TOTAL REV ENUE OF THE AFORESAID COMPANY, VIZ. TCS E - SERVE LIMITED (SUPRA), IT WAS NOT POSSIBLE TO SEPARATELY CONSIDER ITS PROFITABILITY FROM RENDERING OF TRANSACTION PROCESSING SERVICES, AS A RESULT WHEREOF THE ENTITY LEVEL FIGURES RENDERED THE SAID COMPANY AS UNF IT FOR COMPARISON. THE LD. A.R FURTHER DREW OUR ATTENTION TO PAGE 238 OF THE APB WHICH IS A SCHEDULE O NOTES FORMING PART OF THE FINANCIAL STATEMENTS AND REVEALS TATA BRAND EQUITY CONTRIBUTION. THAT IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX , IT WAS AVERRED BY THE LD. A.R THAT THE AFORESAID COMPARABLE, VIZ. TCS E - SERVE LIMITED (SUPRA) UNLIKE THE ASSESSEE COMPANY WAS BENEFITING FROM USE OF TATA BRAND, AND AS SUCH ON THE SAID COUNT TOO COULD NOT BE SELECTED AS A COMPARABLE AS AGAINST THE ASSESSEE. THE LD. A.R FURTHER SUBMITTED THAT THE TURNOVER OF THE AFORESAID COMPANY, VIZ. TCS E - SERVE LIMITED (SUPRA) WAS FOURTEEN TIMES THE TURNOVER OF THE ASSESSEE COMPANY, AND IN THE P AGE | 17 BACKDROP OF THE SAID MATERIAL FACT ITSELF THE SAID COMPANY COULD NOT HAVE BEEN S ELECTED AS A COMPARABLE. THE LD. A.R IN SUPPORT OF HER AFORESAID CONTENTION RELIED ON THE JUDGMENT OF T HE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF : CIT VS. PENTAIR WATER INDIA (P) LTD. (2016) 69 TAXMANN.COM 180 (BOMBAY) . PER CONTRA, THE LD. D.R HEA VILY RELIED ON THE ORDER OF THE AO/TPO AND THE DRP, AND THEREIN SUBMITTED THAT THE AFORESAID COMPANY, VIZ. TCS E - SERVE LIMITED WAS ONLY AFTER THOROUGH VERIFICATION AND VETTING OF THE FUNCTIONAL PROFILE SELECTED AS A COMPARABLE BY THE TPO, AND THE SAME CAN NOT BE HELD TO BE FUNCTIONALLY INCOMPARABLE. 1 3 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACT S OF THE CASE AND ARE PERSUADED TO BE IN AGREEMENT WITH THE LD. A.R THAT THE AFORESAID COMPANY, VIZ. TCS E - SERVE LIMITED (SUPRA), IN THE BACKDROP OF THE CRUCIAL FACTORS, VIZ. BEING FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY , BENEFITING FROM USE OF TA TA BRAND UNLIKE THE ASSESSEE AND ABSENCE OF AVAILABILITY OF ANY SEGREGATION OF ITS TOTAL REVENUE , COULD THUS SAFELY BE CONCLUDED TO HAVE WRONGLY BEEN SELECTED AS A COMPARABLE BY THE TPO . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND FIND OURSELVES TO BE IN AGREEMENT WITH OBSERVATIONS OF THE C OORDINATE BENCH OF THE ITAT, DELHI IN THE CASE OF ORANGE BUSINESS SERVICES INDIA SOLUTIONS (P) LTD. VS. DCIT, CIRCLE - 3, GUJARAT.(2016) 71 TAXMANN.COM 206 (DELH - TRIB) , WHEREIN THE TRIBUNAL TAKING COGNIZANCE OF THE FUNCTIONAL PROFILE OF THE AFORE SAID COMPANY , VIZ. TCS E - SERVE LIMITED(SUPRA), AS WELL AS THE FACT THAT USE OF TATA BRAND HAD DEFINITELY BENEFITED IT, HAD THEREIN WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR A.Y. 2011 - 12 P AGE | 18 HAD DIRECTED THE EXCLUSION OF THE AFORESAID COMPANY, VIZ. TCS E - SERVE LIMITED(SUPRA) FROM THE FINAL LIST OF COMPARABLES , BY OBSERVING AS UNDER: - 4.7 LD. A.R SUBMITTED THAT THE TRIBUNAL IN ASSESSES OWN CASE FOR THE ASSESSMENT YEAR 2010 - 11 (SUPRA) REJECTED THE INCLUS ION OF THIS COMPANY AS COMPARABLE ON THE GROUND THAT THIS COMPARABLE PROVIDES HIGH END TECHNOLOGY SERVICES SUCH AS SOFTWARE TESTING, VERIFICATION AND VALIDATION OF THE SOFTWARE. THE COORDINATE BENCH OF THIS TRIBUNAL HAS REJECTED THIS COMPARABLE BY HOLDING AS UNDER: - WE HAVE ALSO CONSIDERED THE RIVAL CONTENTION FOR EXCLUSION OF TCS E - SERVICE LTD. IT IS MAINLY INVOLVED IN TRANSACTION PROCESSING AND TECHNOLOGY SERVICES. IT CARRIES ON BUSINESS OF PROVIDING TECHNOLOGY SERVICE SUCH AS SOFTWARE TESTING, VERIFICA TION AND VALIDATION. IT IS ALSO DEVELOPED A SOFTWARE SUCH AS TRANSPORT MANAGEMENT SOFTWARE THEREFORE FUNCTIONALLY THIS COMPANY IS DISSIMILAR TO THE ASSESSEE COMPANY. IT ALSO OWNS HUGE INTANGIBLE AND USE OF TATA BRAND, WHICH HAS DEFINITELY BENEFITED THIS COMPARABLE, IT IS DIRECTED TO BE EXCLUDED . 4.8 ON THE CONTRARY, THE LD. D.R SUPPORTED THE ORDER OF THE DRP AND LD. TPO, HE THUS PRAYED FOR INCLUSION OF THIS COMPANY AS A COMPARABLE. 4.9 WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE S UBMISSIONS MADE BY BOTH THE PARTIES. WE HAVE ALSO PERUSED THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2010 - 11 (SUPRA) IN ASSESSES OWN CASE. IT IS OBSERVED THAT THERE IS NO DIFFERENCE IN THE FUNCTIONAL PROFILE OF THE P AGE | 19 ASSESSEE FOR THE YEAR UNDER CONSIDER ATION WITH THAT OF THE ASSESSEE FOR ASSESSMENT YEAR 2010 - 11. A S RIGHTLY CONTENDED BY THE LD. A.R, THIS COMPANY HAS BEEN EXCLUDED FROM THE LIST OF COMPARABLES BY THIS TRIBUNAL FOR ASSESSMENT YEAR 2010 - 11 FOR THE REASONS REPRODUCED HEREINABOVE. RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE, FOR THE ASSESSMENT YEAR 2010 - 11 (SUPRA), WE ARE INCLINED TO EXCLUDE THIS COMPANY FROM THE FINAL LIST OF COMPARABLE. 1 5 . THE LD. A.R FURTHER TO SUPPORT HER CONTENTION THAT THE AFORESAID COMP ANY, VIZ. TCS E - SERVE LIMITED WAS FUNCTIONALLY DIFFERENT AS AGAINST THE ASSESSEE, THEREIN RELIED ON FOLLOWING CASE LAWS WHEREIN THE SAME HAD BEEN REJECTED BY THE COORDINATE BENCHES OF THE TRIBUNAL WHILE DISPOSING OF THE APPEALS FOR A.Y. 2011 - 12 OF SIMILARL Y PLACED ASSESSES, ON THE COUNT OF FUNCTIONAL VARIANCE: - (I). S & P CAPITAL IQ (INDIA) PVT. LTD. VS. DCIT (ITA NO. 200/HYD/2016). (II). ACTIS GLOBAL SERVICES PVT. LTD. VS. ITO (ITA NO. 6175/DEL/2015). (III). EXEVO INDIA PVT. LTD. VS. ITO (ITA NO. 907/DEL/2016). WE THUS IN LIGHT OF OUR AFORESAID OBSERVATIONS AND FINDING OURSELVES AS BEING IN AGREEMENT WITH THE AFORESAID ORDERS OF THE COORDINATE BENCHES OF THE TRIBUNALS, ARE THUS PERSUADED TO ACCEPT TH E CONTENTION OF TH E LD. A.R THAT THE AFORESAID COMPANY, VIZ. TCS E - SERVE LIMITED (SUPRA) HAD WRONGLY BEEN INCLUDED BY THE TPO AS A COMPARABLE , AND P AGE | 20 THUS DIRECT THE AO/TPO TO EXCLUDE THE SAME FROM THE FINAL LIST OF COMPARABLES. (A). M/S WIPRO TECHNOLOG Y SE RVICES LTD : 1 6 . THAT THE TPO DURING THE COURSE OF PROCEEDINGS HOLDING THAT THE ACTIVITIES OF THE AFORESAID COMPANY, VIZ. M/S WIPRO TECHNOLOG Y SERVICES LTD . COMPRISED OF SOFTWARE RELATED SUPPORT SERVICES, PRIMARILY INFORMATION TECHNOLOGY SOFTWARE SOLUTIONS /MAINTENANCE AND TECHNOLOGY INFRASTRUCTURE SUPPORT SERVICES, THEREIN BEING OF THE VIEW THAT ITS ACTIVITIES WERE SIMILAR TO THAT OF THE ASSESSEE, AND FURTHER GOING THROUGH THE FINANCIAL S OF THE SAID COMPANY FOR THE YEAR UNDER CONSIDERATION OBSERVED THAT IT HAD EARNED EXPORT INCOME WHICH IS 94% OF ITS SERVICE INCOME, AS UNDER: - COMPANY NAME SALES SERVICE INCOME SERVICES % EXPORT EXPORT % RPT% WIPRO TECHNOLOGY SERVICES LTD 3,468,696,062 3,468,696,062 100% 3,249,223,497 94% 2% THE A.O THUS IN THE BACKD ROP OF HIS AFORESAID OBSERVATIONS SELECTED THE COMPANY , VIZ. M/S WIPRO TECHNOLOGY SERVICES LTD. A S A COMPARABLE. THE ASSESSEE OBJECTED TO THE INCLUSION OF THE AFORESAID COMPANY, VIZ. M/S WIPRO TECHNOLOGY SERVICES LTD. AS A COMPARABLE, FOR THE REASON THAT T HE SAME WAS FUNCTIONALLY DIFFERENT AS IN COMPARISON TO THE ASSESSEE, HOWEVER THE CONTENTIONS OF THE ASSESSEE DID NOT FIND FAVOR WITH THE TPO. P AGE | 21 1 7 . THAT DURING THE COURSE OF HEARING OF THE APPEAL IT WAS AVERRED BY THE LD. A.R THAT THE AFORESAID COMPANY, VI Z M/S WIPRO TECHNOLOGY SERVICES LTD. WAS FUNCTIONALLY INCOMPARABLE AND HAD WRONGLY BEEN INCLUDED IN THE FINAL LIST OF THE COMPARABLES. THE LD. A.R IN SUPPORT OF HER AFORESAID CONTENTION RELIED ON THE ORDER S OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES: - (I). SAXO INDIA (P) LTD. VS. ACIT (2016) 176 TTJ 540 (DEL - TRIB) (II). ORANGE BUSINESS SERVICE INDIA SOLUTIONS (P) LTD. VS. DCIT (2016) 71 TAXMANN.COM 206 (DEL). PER CONTRA, THE LD. D.R STRONGLY RELIED ON THE ORDER S OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE AFORESAID COMPARABLE HAD RIGHTLY BEEN INCLUDED AS A COMPARABLE AND COULD NOT BE HELD TO BE FUNCTIONALLY INCOMPARABLE. 1 8 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDE RS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND FIND THAT THE ASSESSEE HAD OBJECTED TO THE INCLUSION OF THE AFORESAID COMPANY, VIZ M/S WIPRO TECHNOLOGY SERVICES LTD. AS A COMPARABLE BEFORE THE TPO ON THE GROUND THAT THE SAME WAS FUNCTIONALLY INCOMPARA BLE WITH THE ASSESSEE, BUT THE TPO DID NOT FIND FAVOR WITH CONTENTION OF THE ASSESSEE AND INCLUDED THE SAME IN THE LIST OF THE COMPARABLES. WE FIND THAT THE ASSESSEE IN ITS OBJECTIONS TO THE DRAFT ORDER OF THE A.O BEFORE THE DRP HAD SPECIFICALLY OBJECTED TO THE SUGGESTIONS OF THE TPO AS REGARDS INCLUSION OF THE AFORESAID COMPANY, VIZ M/S WIPRO TECHNOLOGY P AGE | 22 SERVICES LTD. AS A COMPARABLE ( PAGE 121 OF APB), BUT IT IS OBSERVED BY US THAT THOUGH THE DRP VIDE ITS DIRECTIONS PASSED U/S 144C(5) , DATED. 16.12.2015 HAD DEALT WITH THE OBJECTIONS RAISED BY THE ASSESSEE AS REGARDS INCLUSIONS OF CERTAIN OTHER COMP ANIES AS COMPARABLES, BUT DESPITE SPECIFIC OBJECTIONS RAISED BY THE ASSESSEE IN CONTEXT OF INCLUSION OF THE AFORESAID VIZ M/S WIPRO TECHNOLOGY SERVICES LTD., NO DIRECTIONS HAD BEEN ISSUED BY THE DRP. WE HAVE PERUSED THE OBJECTIONS RAISED BY THE ASSESSEE BEFORE THE DRP, AND THEREIN DEAL WITH THE SAME AS UNDER: - (I). FUNCTIONALLY N OT COMPARABLE : WE FIND THAT THE AFORESAID COMPANY, VIZ M/S WIPRO TECHNOLOGY SERVICES LTD. , WHICH IS PRIMARILY ENGAGED IN PROVIDING INFORMATION TECHNOLOGY SOFTWARE SOLUTIONS, THEREIN PROVIDES DIVERSIFIED SERVICES COMPRISING SOFTWARE RELATED SUPPORT SERVICES , PRIMARILY INFORMATION TECHNOLOGY SOFTWARE SOLUTIONS/MAINTENANCE AND TECHNOLOGY SUPPORT SERVICES, UNLIKE THE ASSESSEE WHICH IS ENGAGED IN INFORMATION TECHNOLOGY SERVICES ONLY. (II). NON - AVAILABILITY OF SEGMENTAL ACCOUNTS : WE FIND FROM A PERUSAL OF THE ANNUAL REPORT ( PAGE 128 OF APB) THAT NO SEGMENTAL INFORMATION IS AVAILABLE AS REGARDS THE IT SOFTWARE SOLUTIONS/MAINTENANCE AND TECHNOLOGY INFRASTRUCTURE SUPPORT SERVICES PROVIDED BY THE AFORESAID COMPANY, VIZ M/S WIPRO TECHNOLOGY SERVICES LTD. WE FIND THAT THE AFORE SAID COMPANY, VIZ M/S WIPRO TECHNOLOGY SERVICES LTD., AS STANDS GATHERED FROM ITS ANNUAL REPORT WAS ENGAGED DURING THE YEAR UNDER CONSIDERATION IN PROVIDING SOFTWARE RELATED SUPPORT SERVICES, P RIMARILY INFORMATION TECHNOLOGY SOFTWARE SOLUT IONS/MAINTENANCE AND TECHNOLOGY SUPPORT SERVICES TO CITIGROUP ENTITIES, WHICH IS CONSIDERED AS ONE SEGMENT, AND THEREFORE NO REPORTABLE SEGMENTS ARE AVAILABLE. P AGE | 23 (III). SIGNIFICANT RELATED PART Y TRANSACTIONS : WE FIND THAT A COORDINATE BENCH OF THE TRIBUN AL IN THE CASE OF SAXO INDIA (P) LTD. VS. ACIT (2016) 176 TTJ 540 (DEL - TRIB) WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE BEFORE IT FOR A.Y. 2011 - 12, HAD THEREIN EXCLUDED THE AFORESAID COMPANY, VIZ. WIPRO TECHNOLOGY SERVICES LTD. AS A COMPARABLE ON THE GROUND THAT THE LATTER HAD SIGNIFICANT RELATED PARTY TRANSACTIONS PURSUANT TO ITS MASTER SERVICES AGREEMENT WITH THE CITIGROUP INC. THE TRIBUNAL OBSERVED THAT THE HOLDING COMPANY, I.E WIPRO LTD. HAD ACQUIRED ALL THE INTERESTS HELD BY CITIGROUP INC. IN CITI TECHNOLOGY SERVICES LTD. ( S UBSEQUENTLY RENAMED AS WIPRO TECHNOLOGY SERVICES LTD) WITH EFFECT FROM 21.01.2009. THAT THEREAFTER WIPRO LTD. (SUPRA) HAD ENTERED INTO A MA S TER SERVICE AGREEMENT WITH CITIGROUP INC. FOR PROVIDING TECHNOLOGY INFRASTRUCTUR E SERVICES AND APPLICATION DEVELOPMENT SERVICES FOR A PERIOD OF SIX YEARS. THUS IN THE BACKDROP OF THE AFORESAID FACTUAL MATRIX, IT WAS OBSERVED BY THE TRIBUNAL THAT INCOME FROM SOFTWARE DEVELOPMENT SUPPORT AND MAINTENANCE SERVICES WERE EARNED BY WIPRO TEC HNOLOGY SERVICES LTD., FROM CITI GROUP INC., BY M E ANS OF MATER SERVICE AGREEMENT ENTERED INTO BETWEEN WIPRO LTD., AND CITI GROUP INC., A THIRD PERSON. IT WAS FURTHER OBSERVED BY THE TRIBUNAL THAT WIPRO TECHNOLOGY WAS ENGAGED IN PROVIDING IT SOFTWARE SOLUTI ONS/MAINTENANCE AND TECHNOLOGY INFRASTRUCTURE SUPPORT SERVICES TO CITI GROUP ENTITIES GLOBALLY , AND AS THE SERVICES RENDERED BY WIPRO TECHNOLOGY TO CITI GROUP WAS DETERMINED BY WIPRO LIMITED AND CITIGROUP INC., THEREFORE THE ENTITIES TO WHOM SERVICES WERE RENDERED BEC A ME DEEMED ASSOCIATE ENTERPRISES , AND ACCORDINGLY THE TRANSACTIONS OF RENDERING OF SERVICES WERE TO BE CONSTRUED AS DEEMED INTERNATIONAL TRANSACTIONS AS PER SEC. 92B(2), AND THUS THE CITI GROUP WAS TO BE CONSTRUED AS AN ASSOCIATED ENTERPRISE OF WIPRO TECHNOLOGY . P AGE | 24 WE THUS IN THE BACKDROP OF THE AFORESAID FACTS ARE PERSUADED TO BE IN AGREEMENT WITH THE TRIBUNAL AS REGARDS SUBSTANTIAL RELATED PARTY TRANSACTIONS IN THE CASE OF THE AFORESAID COMPANY, VIZ. WIPRO TECHNOLOGY SERVICES LTD., AS A FALL OUT OF WHICH THE SAME COULD NOT HAVE BEEN TAKEN AS A COMPARABLE AS AGAINST THE ASSESSEE. 1 9 . WE THUS IN LIGHT OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE AFORESAID COMPANY, VIZ M/S WIPRO TECHNOLOGY SERVICES LTD. IS FUNCTIONAL LY NOT COMPARABLE WITH THE ASSESSEE COMPANY; THE SEGMENTAL DETAILS ARE NOT AVAILABLE , AND HAS SUBSTANTIAL RELATED PARTY TRANSACTIONS, THEREFORE IN THE BACKDROP OF THE AFORESAID FACTORS IT CAN SAFELY BE CONCLUDED THAT THE SAID COMPANY, VIZ M/S WIPRO TECHNOL OGY SERVICES LTD. (SUPRA) HAD WRONGLY BEEN INCLUDED BY THE TPO AS A COMPARABLE . WE FIND OUR AFORESAID VIEW STANDS FORTIFIED BY THE ORDERS OF THE COORDINATE BENCHES OF THE TRIBUNAL IN THE FOLLOWING CASES: - (I). ORANGE BUSINESS SERVICE INDIA SOLUTIONS (P) L TD. VS. DCIT (2016) 71 TAXMANN.COM 206 (DEL). (II). SAXO INDIA (P) LTD. VS. ACIT (2016) 176 TTJ 540 (DEL - TRIB) , AND THUS DIRECT THE AO/TPO TO EXCLUDE THE AFORESAID COMPANY, VIZ. WIPRO TECHNOLOGY SERVICES LTD. FROM THE FINAL LIS T OF COMPARABLES. 20 . WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS THEREIN DIRECT THE AO/TPO TO EXCLUDE THE AFORESAID COMPANIES, VIZ TCS E - SERVE LIMITED(SUPRA) AND M/S WIPRO TECHNOLOGY SERVICES LTD.(SUPRA) FROM THE FINAL LIST OF COMPARABLES. WE FIND THAT THE EXCLUSION OF THE AFORESAID TWO COMPANIES FROM THE FINAL LIST OF COMPARABLES, AS P AGE | 25 SUBMITTED BY THE LD. A.R ON THE BASIS OF A CHART FILED BEFORE US, MARKED AS PERMUTATION OF MARGIN OF COMPARABLE COMPANIES, THEREIN BRING S THE ALP OF THE ASSESSE E FROM 25.28% TO 18.68%, AND AS SUCH WITHIN THE RANGE OF +/ - 5% ADJUSTMENT, AS A RESULT WHEREOF NO TP ADJUSTMENT WOULD BE CALLED FOR IN THE HANDS OF THE ASSESSEE. THE GROUND S OF APPEAL NO. 1 TO 4 ARE THUS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. THAT AS IN THE BACKDROP OF THE CONTENTIONS RAISED BY THE LD. A.R BEFORE US, WE HAD DIRECTED THE EXCLUSION OF THE AFORESAID TWO COMPANIES, VIZ TCS E - SERVE LIMITED(SUPRA) AND M/S WIPRO TECHNOLOGY SERVICES LTD.(SUPRA) FROM THE FINAL LIST OF THE COMPARABLES, THERE FORE WE REFRAIN FROM ADJUDICATING THE GROUNDS OF APPEAL NO. 5 & 6 , WHICH ARE LEFT OPEN. THE GROUNDS OF APPEAL NO. 7 TO 12 BEING CONSEQUENTIAL IN NATURE, ARE THUS BEING DISPOSED OF IN TERMS OF OUR AFORESAID OBSERVATIONS RENDERED IN CONTEXT OF GROUND OF AP PEAL NO. 1 TO 4. 21 . THE APPEAL OF THE ASSESSEE IS THUS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. (B). IT(TP)A NO. 1600/M/16 : 22 . WE NOW ADVERT TO THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE A.O U/S 143(3) R.W.S 144C(1 3). THE REVENUE ASSAILING THE AFORESAID ORDER PASSED BY THE A.O, HAD THEREIN RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DISPUTE RESOLUTION PANEL WAS JUSTIFIED IN DIRECTING TO EXCLUDE EXPENSES OF RS. 13,59,86,441/ - INCURRED IN FOREIGN CURRENCY FROM THE P AGE | 26 TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION U/S 10A ACCORDING TO THE PRINCIPLES LAID DOWN BY THE HIGH COURT IN GEMS PLUS JEWELLERY CASE. 2. ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, THE LD. DISPUTE RESOLUTION PANEL WAS JUSTIFIED IN ALLOWING THE FOREIGN EXCHANGE GAIN OF RS. 24,51,796/ - FOR COMPUTATION OF DEDUCTION U/S 10A BY PLACING RELIANCE ON THE JUDGEMENT OF HIGH COURT IN THE GEMS PLUS JEWELLERY CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DISPUTE RESOLUTION PANEL WAS RIGHT IN DIRECTING TO EXCLUDE EXPENSES INCURRED IN FOREIGN CURRENCY FROM TOTAL TURNOVER AND ALLOWING THE FOREIGN EXCHANGE GAIN FOR COMPUTATION OF DEDUCTION U /S 10A WITHOUT APPRECIATING THE FACT THAT THE SAID DECISION HAS BEEN CONTESTED BY THE REVENUE BEFORE THE HONBLE APEX COURT. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 5. THE APPELLANT PRAYS TH AT THE DIRECTION OF THE DRP, MUMBAI ON THE ABOVE DIRECTIONS BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 3 . THAT THE REVENUE HAD ASSAILED THE DIRECTIONS OF THE DRP RENDERED IN CONTEXT OF RECASTING OF THE ASSESSES CLAIM TOWARDS DEDUCTI ON U/S 10A OF THE ACT. THE DRP DEALING WITH THE OBJECTION OF THE ASSESSEE AS REGARDS EXCLUSION OF THE FOREIGN CURRENCY EXPENSES INCURRED BY THE ASSESSEE FROM THE EXPORT TURNOVER, WITHOUT CARRYING OUT A SIMILAR EXCLUSION FROM THE TOTAL TURNOVER OF THE ASSESSEE, HAD THEREIN OBSERVED THAT THE SAID ISSUE WAS DISCUSSED BY THE DRP IN THE P AGE | 27 CASE OF THE ASSESSEE FOR A.Y. 2008 - 09, 2009 - 10 AND 2010 - 11, AND THE A.O WAS DIRECTED TO DECIDE THE ISSUE AS PER THE DIRECTIONS GIVEN BY THE ITAT IN THE CASE OF THE ASSESSE E FOR A.Y. 2004 - 05. WE FIND THAT DRP REFERRING TO THE DIRECTIONS GIVEN TO THE AO IN THE CASE OF THE ASSESSEE FOR A.Y. 2008 - 09, HAD THEREIN RELIED ON THE ORDER OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF : CIT VS. GEM PLUS JEWELLERY INDIA LTD. (2011) 330 ITR 0175 (BOM) , BEING OF THE VIEW THAT IN CASE SOME ITEMS ARE EXCLUDED FROM THE EXPORT TURNOVER, THE N THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER WHILE DECIDING THE ASSESSES CLAIM OF DEDUCTION UNDER SEC. 10A , HAD THEREIN HELD AS UNDER: - THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE IS THAT WHILE FREIGHT AND INSURANCE CHARGES ARE LIABLE TO BE EXCLUDED IN COMPUTING EXPORT TURNOVER, A SIMILAR EXCLUSION HAS NOT BEEN PROVIDED IN REGARD TO TOTAL TURNOVER. THE SUBMISSION OF T HE REVENUE, HOWEVER, MISSES THE POINT THAT THE EXPRESSION 'TOTAL TURNOVER' HAS NOT BEEN DEFINED AT ALL BY PARLIAMENT FOR THE PURPOSES OF S. 10A. HOWEVER, THE EXPRESSION 'EXPORT TURNOVER' HAS BEEN DEFINED. THE DEFINITION OF 'EXPORT TURNOVER' EXCLUDES FREIGH T AND INSURANCE. SINCE EXPORT TURNOVER HAS BEEN DEFINED BY PARLIAMENT AND THERE IS A SPECIFIC EXCLUSION OF FREIGHT AND INSURANCE, THE EXPRESSION 'EXPORT TURNOVER' CANNOT HAVE A DIFFERENT MEANING WHEN IT FORMS A CONSTITUENT PART OF THE TOTAL TURNOVER FOR TH E PURPOSES OF THE APPLICATION OF THE FORMULA. UNDOUBTEDLY, IT WAS OPEN TO PARLIAMENT TO MAKE A PROVISION TO THE CONTRARY. HOWEVER, NO SUCH PROVISION HAVING BEEN MADE, THE PRINCIPLE WHICH HAS BEEN ENUNCIATED EARLIER MUST PREVAIL AS A MATTER OF CORRECT STATU TORY INTERPRETATION. ANY OTHER INTERPRETATION WOULD LEAD TO AN ABSURDITY. IF THE CONTENTION OF THE REVENUE WERE TO BE ACCEPTED, THE SAME EXPRESSION VIZ. 'EXPORT TURNOVER' WOULD HAVE A DIFFERENT CONNOTATION IN THE APPLICATION OF THE SAME FORMULA. THE P AGE | 28 SUBMIS SION OF THE REVENUE WOULD LEAD TO A SITUATION WHERE FREIGHT AND INSURANCE, THOUGH IT HAS BEEN SPECIFICALLY EXCLUDED FROM 'EXPORT TURNOVER' FOR THE PURPOSES OF THE NUMERATOR WOULD BE BROUGHT IN AS PART OF THE 'EXPORT TURNOVER' WHEN IT FORMS AN ELEMENT OF TH E TOTAL TURNOVER AS A DENOMINATOR IN THE FORMULA. A CONSTRUCTION OF A STATUTORY PROVISION WHICH WOULD LEAD TO AN ABSURDITY MUST BE AVOIDED. 2 4 . WE FIND THAT THE DRP FOLLOWING THE DIRECTION OF THE DRP AND ITAT IN THE CASE OF THE ASSESSEE FOR THE PRECEDIN G YEAR, AND GOING BY THE PRINCIPLE LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF : GEM PLUS JEWELLERY (SUPRA) , HAD THEREIN RIGHTLY DIRECTED THE A.O TO EXCLUDE THE AMOUNT OF FOREIGN CURRENCY EXPENSES FROM THE TOTAL TURNOVER. WE ARE OF THE CONSIDERED VIEW THAT THE DRP GOING BY THE PRINCIPLE LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF : GEM PLUS (SUPRA) , HAD THEREIN RIGHTLY DIRECTED THE A.O TO COMPUTE THE ASSESSES CLAIM TOWARDS DEDUCTION U/S 10A AFTER EXCLUDING THE FOREIGN CURRENCY EXPENSES FRO M THE TOTAL TURNOVER. WE THUS NOT FINDING ANY INFIRMITY IN THE ORDER OF THE DRP, THEREIN UPHOLD THE SAME. THE GROUND OF APPEAL NO. 1 SO RAISED BY THE REVENUE BEFORE US IS THUS DISMISSED. 2 5 . THAT THE REVENUE HAD ASSAILED THE SETTING ASIDE BY THE D RP OF THE EXCLUSION OF THE FOREIGN EXCHANGE GAIN OF RS. 24,51,796/ - FROM THE PROFITS ELIGIBLE FOR COMPUTATION OF DEDUCTION U/S 10A ON THE FOOTING THAT THE SAME AS PER THE A.O WERE NOT DERIVED FROM THE EXPORT ACTIVITIES OF THE ASSESSEE , AND THEREFORE WERE N OT ELIGIBLE FOR COMPUTATION OF DEDUCTION U/S 10A . P AGE | 29 2 6 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PRODUCED BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISS UE UNDER CONSIDERATION AND FIND THAT THE DRP WHILE DISLODGING THE OBSERVATIONS OF THE A.O, HAD THEREIN OBSERVED THAT THE ISSUE HAD BEEN DECIDED BY THE ITAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2008 - 09 , WHEREIN THE A.O WAS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION U/S 10A AS REGARDS THE PROFIT OF THE ASSESSEE AS MODIFIED BY THE DISALLOWANCE MADE ON ACCOUNT OF FOREIGN EXCHANGE LOSS IN VIEW OF THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY I N THE CASE OF : GEM PLUS JEWELLERY (SUPRA) , WHER EIN THE HONBLE HIGH COURT HAD OBSERVED AS UNDER: - FOR THE PURPOSES OF THE APPEAL IT HAS NOT BEEN DISPUTED ON BEHALF OF THE REVENUE THAT THE FOREIGN EXCHANGE WAS REALIZED BY THE ASSESSEE WITHIN THE PERIOD STIPULATED IN LAW. THE ASSESSEE REALIZED A LARGE R AMOUNT BECAUSE OF A FOREIGN EXCHANGE FLUCTUATION. THE FACT THAT THIS FORMS PART OF THE SALE PROCEEDS WOULD HAVE TO BE ACCEPTED IN VIEW OF THE JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN CIT VS. AMBER EXPORT (INDIA) (IT APPEAL 1249 OF 2007 DECIDED ON 18TH FEB., 2009). THE JUDGMENT OF THIS COURT IN TURN FOLLOWED THE DECISION OF THE GUJARAT HIGH COURT IN CIT VS. AMBA IMPEX (2006) 201 CTR (GUJ) 409 : (2006) 282 ITR 144 (GUJ) . THE SOLE GROUND WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE IN SUPPORT OF THE APPEAL ON THIS ISSUE IS BASED ON THE JUDGMENT OF A DIVISION BENCH OF THIS COURT IN CIT VS. SHAH ORIGINALS (IT APPEAL NO. 431 OF 2008 DECIDED ON 22ND APRIL, 2010) [REPORTED AT (2010) 39 DTR (BOM) 145 : (2010) 232 CTR (BOM) 228 ED.] . WE THUS FIND THAT THE DRP HAD GONE BY THE AFORESAID OBSERVATIONS OF THE HONBLE HIGH COURT AND HAD DIRECTED THAT THE FOREIGN EXCHANGE P AGE | 30 GAIN OF RS. 24,51,796/ - IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WOULD FORM PART OF THE PROFITS ELIGIBLE FOR COMPUTATION O F DEDUCTION U/S 10A. WE ARE PERSUADED TO BE IN AGREEMENT WITH THE OBSERVATIONS OF THE DRP, WHOM WE FIND GOING BY THE PRINCIPLE LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT HAD DIRECTED THE A.O TO INCLUDE THE FOREIGN EXCHANGE GAIN OF RS. 24,51,796/ - AS PART OF THE PROFIT ELIGIBLE FOR COMPUTATION OF DEDUCTION U/S 10A OF THE ACT. WE THUS FINDING NO INFIRMITY IN THE AFORESAID OBSERVATIONS OF THE DRP IN RESPECT OF THE ISSUE UNDER CONSIDERATION, THEREFORE UPHOLD THE SAME. THE GROUND S OF APPEAL NO. 2 & 3 SO RAISED BY THE REVENUE BEFORE US ARE THUS DISMISSED. THE GROUNDS OF APPEAL NO. 4 & 5 ARE GENERAL AND ARE DISMISSED AS NOT PRESSED. 2 7 . THE APPEAL FILED BY THE REVENUE BEFORE US IS DISMISSED. 2 8 . THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND TH E APPEAL FILED BY THE REVENUE BEFORE US IS DISMISSED, IN TERMS OF OUR AFORESAID OBSERVATIONS. ORD ER PRONOUNCED IN THE OPEN COURT ON 17 /05/2017 SD/ - SD/ - ( G.S. PANNU ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : DATED : . 17 .05 . 201 7 P AGE | 31 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F I L E BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI