DCIT 7(2), MUMBAI V. STREAM INTERNATIONAL SERVICES P.LTD, MUMBAI

ITA 958/MUM/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8897 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Transfer pricing; International transaction
• Section: 201; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (V I RTUAL COURT DB - II), K BENCH MUMBAI BEFORE SHRI M. BALAGANESH, AM & SHRI RAVISH SOOD,JM ITA NO. 958 /MUM/ 201 4 ( ASSESSMENT YEAR : 2009 - 10 ) DCIT, CIRCLE - 1 THANE, ROOM NO.22 B - WING, 6 TH FLOOR A SHAR IT PARK WAGLE INDUSTRIAL ESTATE THANE(W) - 400604 VS. M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.) ( WHICH WAS FORMERLY KNOWN AS STREAM INTERNATIONAL SERVICES PVT. LTD.,), 7 TH , 11 TH , 14 TH & 15 TH FLOOR, G CORP TECH PA RK KASARVADAVLI, GHODBUNDER ROAD, THANE (W) - 400607 PAN/GIR NO. AAECS8569F (APPELLANT ) .. (RESPONDENT ) CO NO.79/MUM/2015 (ARISING OUT OF ITA NO. 958 /MUM/ 2014) ( ASSESSMENT YEAR : 2009 - 10 ) M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STR EAM PVT. LTD.) ( WHICH WAS FORMERLY KNOWN AS STREAM INTERNATIONAL SERVICES PVT. LTD.,), 7 TH , 11 TH , 14 TH & 15 TH FLOOR, G CORP TECH PARK KASARVADAVLI, GHODBUNDER ROAD, THANE (W) - 400607 VS. DCIT, CIRCLE - 1 THANE, ROOM NO.22 B - WING, 6 TH FLOOR ASHAR IT PARK WAGL E INDUSTRIAL ESTATE THANE(W) - 400604 PAN/GIR NO. AAECS8569F (APPELLANT ) .. (RESPONDENT ) ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 2 REVENUE BY SHRI AKHTAR H ANSARI ASSESSEE BY SHRI DHANESH BAFNA & MS. CHANDNI SHAH DATE OF HEARING 2 8 / 07 /2020 DATE OF PRONOUNCEMENT 29 / 07 /202 0 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 958/MUM/2014 & CO NO.79/MUM/2015 FOR A.Y. 2009 - 10 PREFERRED AGAINST THE FINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER DATED 18/12/2013 U/S.143(3) R.W.S . 144C(13) OF THE INCOME TAX ACT 1961, ( HEREINAFTER REFERRED TO AS THE ACT ) , PURSUANT TO THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL ( LD. DRP IN SHORT) U/S.144C(5) OF THE ACT DATED 30/10/2013 FOR THE A.Y.2009 - 10. 2. AT THE OUTSET, WE FIND THAT THE LD. AR SUBMITTED THAT THE LD. DRP HAD EXCLUDED ONE OF THE COMPARABLES I.E. M/S. EXCEL INFOWAYS LTD., FROM THE LIST OF COMPARABLES WHILE BENCHMARKING THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSESSEE. HE SUBMITTED THAT AGAINST THIS DIRECTION OF LD. DRP FOR EXCLUSION, TH E REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL VIDE GROUND NO.IV. LD. AR FURTHER SUBMITTED THAT IF THIS GROUND IS DECIDED IN FAVOUR OF ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 3 THE ASSESSEE BY ACCEPTING TO THE ORDER OF THE LD. DRP IN RESPECT OF EXCLUSION OF EXCEL INFOWAYS LTD., THE MARGINS OF THE ASS ESSEE WOULD BE AT ARMS LENGTH WARRANTING NO ADJUSTMENT THEREON. HE HAS ALSO FILED A CHART IN THIS REGARD IN E - MAIL BEFORE THIS TRIBUNAL. HENCE, WITH THE CONSENT OF BOTH THE PARTIES, WE PROCEED TO ADJUDICATE THE ISSUE AS TO WHETHER THE LD. DRP WAS JUSTIFIE D IN EXCLUDING M/S. EXCEL INFOWAYS LTD., FROM THE LIST OF COMPARABLES IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS ENGAGED IN PROVIDING I NFORMATION T ECHNOLOGY E NABLED B ACK OFFICE S ERVICES ( ITES) SUCH AS POST SALES CUSTOMER CARE SERVICES LIKE TECHNICAL SUPPORT, INFORMATION, QUERIES, ISSUES WITH NEW PRODUCTS, TECHNICAL TROUBLE SHOOTING THROUGH E - MAIL AND VOICE PLATFORMS TO ITS ASSOCIATED ENTE RPRISES. WE FIND THAT ASSESSEE HAD BENCHMARKED ITS INTERNATIONAL TRANSACTIONS USING TRANSACTION NET MARGIN METHOD (TNMM) AS THE M OST A PPROPRIATE M ETHOD (MAM) TO DETERMINE THE A RMS L ENGTH P RICE (ALP) FOR ITS INTERNATIONAL TRANSACTION. THE PROFIT LEVEL INDI CATOR (PLI) OF THE ASSESSEE IS 15%. WE FIND THAT THE LD. TRANSFER PRICING OFFICER ( TPO ) HAD SELECTED 25 COMPARABLES LISTED OUT IN PAGE S 3 & 4 OF THE ORDER OF THE LD. DRP DATED 30/10/2013 AND HAD ARRIVED AT THE AVERAGE MARGIN OF THE COMPARABLES AT 29.55%. W E FIND THAT THE LD. TPO HAD ACCORDINGLY MADE ALP ADJUSTMENT IN THE SUM OF RS.8,05,90,345/ - IN HIS ORDER PASSED U/S.92CA(3) OF THE ACT ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 4 DATED 26/12/2012. ON THE OBJECTIONS FILED BY THE ASSESSEE BEFORE THE LD. DRP, THE LD. DRP DIRECTED THE LD. TPO TO EXCLUDE THE FOLLOWING SEVEN COMPARABLES: - A ) ACCENTIA TECHNOLOGIES B ) MAPLE E - SOLUTIONS C ) MOLD - TEK TECHNOLOGIES D ) ONE TWO THREE GREETINGS E ) HDO TECHNOLOGIES F ) CROSS DOMAIN SOLUTIONS G ) EXCEL INFOWAYS LTD., 3.1. WE FIND THAT WE ARE NOW CONCERNED ONLY WITH THE EXCLUSION OF EXCEL I NFOWAYS LTD AS STATED ABOVE. THE AVERAGE MARGIN OF COMPARABLES AFTER THE DIRECTION OF THE LD. DRP WORKED OUT TO 18.93% AND CONSEQUENTIALLY, NO ADJUSTMENT WAS MADE TO ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION CARRIED OUT BY THE ASSESSEE. WE FIND T HAT ASSESSEE IN ITS E - MAIL HAD FILED A CHART WITH REGARD TO REVENUE APPEAL AND CROSS OBJECTION FILED BY THE ASSESSEE BY STATING THAT (A) AFTER EXCLUSION OF EXCEL INFOWAYS LTD., (B) AFTER INCLUSION OF HDO TECHNOLOGIES LTD., AND CROSS DOMAIN SOLUTIONS LTD., (THOUGH NOT ADMITTING THE SAME) AND (C) AFTER INCLUSION OF BNR UDYOG LTD, CORAL HUB LTD, COSMIC GLOBAL LTD, E - CLERX SERVICES LTD, INFORMED TECHNOLOGIES LTD., AND INFOSYS BPO LTD., (COMPARABLES THAT ARE CONTESTED BY THE ASSESSEE IN ITS CROSS OBJECTIONS) , T H E ARMS LENGTH MARGIN OF ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 5 COMPARABLES WOULD BE 19.21% WHICH WOULD BE WITHIN THE +/ - 5% RANGE WHEN COMPARED WITH ASSESSEES MARGIN OF 15%. HENCE, THERE WOULD BE NO REQUIREMENT TO MAKE ARMS LENGTH ADJUSTMENT TO THE INTERNATIONAL TRANSACTION CARRIED OUT BY THE ASSESSEE. 3.2. FROM THE ABOVE, IT COULD BE SEEN THAT ASSESSEE ON A CONSERVATIVE BASIS HAD SOUGHT TO ARGUE THE EXCLUSION OF EXCEL INFOWAYS LTD ALONE FROM THE LIST OF COMPARABLES. WE FIND THAT THE MARGIN OF EXCEL INFOWAYS LTD CONSIDERED BY THE LD. TPO WAS 243.69%. WE FIND THAT THIS TRIBUNAL IN THE CASE OF ZENTA PVT. LTD., IN ITA NO.16 2 3/MUM/2014 DATED 04/09/2019 FOR A.Y.2009 - 10 UNDER SIMILAR FACTS AND CIRCUMSTANCES HELD THAT EXCEL INFOWAYS LTD IS TO BE EXCLUDED FROM THE LIST OF COMPARABLES. THE RELEVANT OPE RATIVE PORTION OF THE SAID ORDER IS REPRODUCED HEREIN FOR THE SAKE OF CONVENIENCE : - 3.1. AT THE TIME OF HEARING, BOTH THE PARTIES BEFORE US MUTUALLY AGREED AND STATED THAT IF ONE OF THE COMPARABLES NAMELY EXCEL INFOWAYS LTD., WHICH HAS BEEN DIRECTED TO BE EXCLUDED BY THE LD. DRP FROM THE LIST OF TOTAL COMPARABLES CHOSEN BY THE LD. TPO IS HELD IN ASSESSEES FAVOUR, THEN THE ADJUDICATION OF THE OTHER COMPARABLES WOULD BECOME ACADEMIC IN NATURE AS THE ASSESSEE WOULD FALL WITHIN +/ - 5% RANGE. ACCORDINGLY, AS DECIDED BY BOTH THE PARTIES BEFORE US THE BENCH DECIDED TO ADJUDICATE THE EXCLUSION OF COMPARABLE I.E. M/S. EXCEL INFOWAYS LTD., THE MARGIN OF THIS COMPARABLE FOR THE YEAR UNDER CONSIDERATION WAS 243.69%. THE CRUX OF THE ARGUMENTS OF THE LD. AR WITH REGARD TO THE EXCLUSION OF THIS COMPARABLE ARE AS UNDER: - I) THIS COMPARABLE HAS GOT EMPLOYEE COST OF 8.82% WHEREAS THE EMPLOYEE COST OF ASSESSEE WORKS OUT TO 54.55%. SINCE THE ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 6 EMPLOYEE COST OF THE COMPARABLE IS LESS THAN 25% OF THE TOTAL COST, THE SAME IS TO BE EXCLUDED FROM THE LIST OF COMPARABLES. II) THE SAID COMPARABLE M/S. EXCEL INFOWAYS LTD., AS PER ITS DIRECTORS REPORT FOR THE YEAR ENDING 31/03/2009 HAS MENTIONED THAT IT IS IN IT ENABLED SERVICES INDUSTRY PROVIDING EFFECTIVE BUSINESS SOLUTIONS TO THE GLOBAL AND INDIAN COMPANIES WITH EXCELLENCE IN TECHNOLOGY AND ROBUST PROCESSES. THE SAID COMPARABLE HAD CONTINUED TO WIN NEW ASSIGNMENTS AS WELL AS ACHIEVED GROWTH IN TRADITIONAL AREA OF BPO / IT ENABLED SERVICES WHICH HAS SIGNIFICANT GROWN POTENTIAL IN T HE YEARS TO COME. THE SAID DIRECTORS REPORT ALSO MENTIONED THAT THE SAID COMPARABLES IS AN ISO CERTIFIED COMPANY AND IS A CUSTOMER CONTACT CENTER BASED IN INDIA, OFFERING A RANGE OF CUSTOMER CARE SERVICES INCLUDING TELECOM FULFILLMENT CENTRE, PROVIDING TEC HNICAL SERVICES, FINANCIAL SERVICES, HEALTHCARE, OUTBOUND SALES AND MARKETING, VOICE, EMAIL RESPONSE, REAL TIME CHAT, KNOWLEDGE MANAGEMENT, ECRM ARCHITECTURE AND OTHER VALUE ADDED SERVICES, WHERE EACH COMPONENT OF SERVICES DELIVERY IS CRITICAL. HOWEVER, FR OM THE PERUSAL OF THE ANNUAL REPORT OF THIS COMPARABLE IN THE PROFIT AND LOSS ACCOUNT, THE TOTAL RECEIPTS FROM BPO / IT ENABLED SERVICES WAS REFLECTED AT RS.18,60,40,738/ - . III) THE LD. AR ARGUED THAT THERE IS NO BREAK - UP OF THIS REVENUE OF RS.18.60 CROR ES PROFIT IN THE ANNUAL REPORT OF THE SAID COMPARABLE. HENCE, IN THE ABSENCE OF SEGMENTAL DATA OF THE REVENUE, THE SAME IS TO BE EXCLUDED. THE LD. AR ALSO DREW OUR ATTENTION TO THE BALANCE SHEET EXTRACT AND THE CONTENTS CONTAINED IN GENERAL BUSINESS PROFI LE REFLECTED IN PART - IV OF THE COMPANIES ACT, 1956 ENCLOSED IN PAGE 334 OF THE PAPER BOOK WHEREIN UNDER THE HEAD GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF THE COMPANY, THE SAID COMPARABLE HAD MENTIONED THAT THEY ARE ENGAGED IN PROVIDING FOLLO WING SERVICES: - A. BUSINESS AUXILIARY SERVICES B. INFORMATION TECHNOLOGY ENABLED SERVICES ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 7 IV) LD. AR ALSO RELIED ON PAGE 339 OF THE PAPER BOOK CONTAINING DETAILS OF ACTIVITIES CARRIED OUT BY M/S. EXCEL INFOWAYS LTD., DOWNLOADED FROM THE WEBSITE ON 11/ 11/2013 WHEREIN IT IS ENGAGED IN RENDERING FOLLOWING SERVICES: - FUNDS MANAGEMENT OVERSEAS PROPERTY COLLECTIONS BUSINESS, FINANCIAL E - MEDIA TRANSCRIPTION INBOUND SALES OUTBOUND SALES ENQUIRIES & APPLICATION CREDIT INSPECTION OF UNDERWRITING & FUNDING OU T COLLECTIONS INBOUND SALES OUTBOUND SALES EXHIBITION ENQUIRIES INSPECTIONS TRIPS AFTER SALES CUSTOMER SUPPORT THIRD PARTY COLLECTION EARLY OUT COLLECTION PRIMARY COLLECTION SECONDARY AND LATER STAGE COLLECTION PRE - LEGAL COLLECTION SKIP TRACING FINANCIAL B RIEF NEWS RECORDING TRANSCRIPTED IN LITERATURE IN TAT Q & A SESSIONS EXCEL INFOWAYS IS A LEADING COMPANY IN PROVIDING COLLECTIONS & CUSTOMER RELATIONS SERVICE TO VARIOUS CLIENTS SINCE 2003. V) BASED ON THIS, THE LD. AR ARGUED THAT THE AFORESAID SERVICES ARE NOT IT SERVICES AND HENCE, THE SAME ARE NOT FUNCTIONALLY COMPARABLE WITH THAT OF THE ASSESSEE. VI) THE LD. AR ARGUED THAT THE LD. TPO HIMSELF HAS REMOVED M/S. EXCEL INFOWAYS LTD., FROM THE LIST OF COMPARABLES AS FUNCTIONALLY NOT COMPARABLE IN THE A. Y.2010 - 11. VII) THE SAID COMPARABLE HAS GOT FLUCTUATING MARGINS. 3.2. IN RESPONSE, THE LD. DR ARGUED THAT THE SAID COMPARABLE HAVING HIGH EMPLOYEE COST RATIO IS NOT RELEVANT FOR THE YEAR UNDER CONSIDERATION IN AS MUCH AS THE SAME WAS NOT CONSIDERED AS FILTER BY THE LD. TPO. THE LD. DR VEHEMENTLY ARGUED THAT NO FRESH FILTERS COULD BE APPLIED AT THE STAGE OF APPEAL BEFORE ITAT. THE LD. DR ALSO ARGUED THAT THE ACTIVITIES OF M/S. EXCEL INFOWAYS LTD., ARE FUNCTIONALLY SIMILAR TO THAT OF THE ASSESSEE AND THE HIGHLIGHTED PORTION IN PAGE 379 OF THE ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 8 PAPER BOOK ONLY REPRESENTS VARIOUS OTHER SERVICES THAT ARE RELEVANT FOR THE PURPOSE OF ISO CERTIFICATION ONLY AND NOT OTHERWISE. THE ENTIRE RECEIPTS ARE FROM BPO/ITES AND HENCE THE SAME ARE FUNCTIONALLY COMPARABLE AND NO SEGMENTAL DATA IS WARRANTED THEREON. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND WE FIND THAT CERTAIN BASIC CLARIFICATIONS ARE REQUIRED FROM THE LD. TPO WHICH WOULD CLINCH THE ENTIRE DISPUTE BEFORE US. ACCORDINGLY, WE DEEM IT FIT TO SEEK A REMAND REPORT F ROM THE LD. TPO TO PROVIDE SPECIFIC CLARIFICATIONS ON THE FOLLOWING ISSUES: - I ) TO OBTAIN DETAILS OF BREAK - UP OF THE REVENUE FROM M/S. EXCEL INFORWAYS LTD., IN THE MANNER KNOWN TO LAW. II) TO SEEK CLARIFICATION FROM M/S. EXCEL INFOWAYS LTD., AS TO WHETHER ANY REVENUE WAS EARNED DURING THE YEAR I.E., A.Y.2009 - 10 FROM SERVICES OTHER THAN ITES. III) TO OBTAIN CLARIFICATION AS TO WHETHER THE SAID COMPARABLE IS ENGAGED IN OUTSOURCING ACTIVITY. IV) TO OBTAIN SPECIFIC CLARIFICATION FROM THE SAID COMPARABLE WIT H REGARD TO DETAILED BIFURCATION OF ITES SERVICES RENDERED BY M/S. EXCEL INFOWAYS LTD., 4.1. THE LD. TPO FURNISHED THE REMAND REPORT THROUGH THE LD. DR IN REFERENCE NO. MUM/DCIT(TP) - 1(1)(1)/REMAND REPORT / ASPL - 09 - 10/2019 - 20 DATED 08/07/2019. THE LD. TP O HAD ISSUED NOTICE U/S.133(6) TO M/S. EXCEL INFOWAYS LTD.(NOW KNOWN AS M/S. EXCEL REALTY N INFRA LTD) WHEREIN THE QUESTION RAISED BY THE LD. TPO AND THE REPLY GIVEN BY THE SAID PARTY ARE REPRODUCED HEREIN: - I. PLEASE PROVIDE THE DETAILS OF BREAK - UP OF SERVICES RENDERED BY YOUR COMPANY WITH RESPECT TO BPO/ITES REPLY OF EIL: IN REFERENCE TO DETAILS OF BREAKUP OF SERVICES RENDERED, KINDLY NOTE THAT WE PROVIDED BPO/ITES ENABLED SERVICES TO OUR CLIENT OUTSIDE INDIA ONLY. ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 9 II. PLEASE PROVIDE THE DETAILS WH ETHER ANY REVENUE HAS BEEN OBTAINED FROM THE SERVICES OTHER THAN BPO/ITES BY YOUR COMPANY. REPLY OF EIL: KINDLY NOTE THAT OUR REVENUE WAS FROM BPO/1TES ENABLED SERVICES ONLY, DID NOT HAVE ANY OTHER INCOME. III. PLEASE PROVIDE DETAILED BREAK - UP OF ALL TH E ACTIVITIES INCLUDED UNDER BPO/1TES OF YOUR COMPANY. REPLY OF E1L: KINDLY NOTE THAT WE WERE PROVIDING TELECOM FULFILLMENT SOLUTION SERVICES AS WELL AS FINANCIAL SERVICES TO OUR CLIENTS. IV. PLEASE PROVIDE THE DETAILS WHETHER YOUR COMPANY IS ENGAGED IN ACTIVITIES WHICH REQUIRE OUTSOURCING. REPLY OF EIL: KINDLY NOTE WE HAD OUR OWN EMPLOYEES, WE WERE PROVIDING BPO/ITES ENABLED SERVICES TO OUR CLIENTS OUTSIDE INDIA ONLY. 4.2. WE FIND THAT THE LD. TPO IN HIS FINAL REMARKS IN THE REMAND REPORT HAD STATED THAT M/S. EXCEL INFOWAYS LTD. AND THE ASSESSEE COMPANY ARE ENGAGED IN THE BUSINESS OF PROVIDING BPO/IT ENABLED SERVICES AND HENCE ARE FUNCTIONALLY COMPARABLE. THE LD. TPO ALSO REMARKED THAT M/S. EXCEL INFOWAYS LTD. HAS RECEIVED RS.18,60,40,738/ - AND RS.23 ,09,11,000/ - FROM BPO / IT ENABLED SERVICES FOR F.YS 2008 - 09 AND 2007 - 08 RESPECTIVELY. WE FIND THAT THESE FIGURES ARE NOTHING BUT THE TOTAL REVENUE FROM OPERATIONS OF M/S. EXCEL INFOWAYS LTD. REFLECTED IN THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31/03/2009 BUT WE FIND FROM THE DIRECTORS REPORT OF M/S. EXCEL INFOWAYS LTD. THAT THE SAID COMPANY IS ENGAGED IN VARIOUS ACTIVITIES AND HAD CLASSIFIED EVERY ACTIVITY UNDER BPO/IT ENABLED SERVICES. THE LIST OF VARIOUS ACTIVITIES LISTED OUT IN THE DIRECTOR S REPORT HAVE ALREADY BEEN INCORPORATED BY US IN PARA 4 ABOVE WHILE ADDRESSING THE ARGUMENTS OF THE LD. AR. WE ALSO FIND FROM THE ANNUAL REPORT OF M/S. EXCEL INFOWAYS LTD. THAT 31/03/2009, UNDER PART IV BALANCE SHEET ABSTRACT AND COMPANIES ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 10 GENERAL BUSINE SS PROFILE UNDER THE COLUMN GENERIC NAMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF COMPANY , THE SAID COMPANY I.E., M/S. EXCEL INFOWAYS LTD. HAD REPORTED THE FOLLOWING TWO ACTIVITIES AS PRINCIPAL ACTIVITIES: - (I) BUSINESS AUXILIARY SERVICES (II)INFORMA TION TECHNOLOGY ENABLED SERVICES 4.3. MOREOVER, WE FIND FROM PAGE 399 OF THE PAPER BOOK CONTAINING DETAILS OF ACTIVITIES CARRIED OUT BY M/S. EXCEL INFOWAYS LTD. WHICH IS DOWNLOADED FROM THE WEBSITE ON 11/11/2013, THAT THE SAID COMPANY WAS STATED TO BE EN GAGED IN PROVIDING COLLECTIONS AND CUSTOMER RELATION SERVICES TO VARIOUS CLIENTS SINCE 2003, APART FROM VARIOUS OTHER SERVICES AS LISTED IN PARA 3.1. (IV) ABOVE. THIS GOES TO PROVE BEYOND DOUBT THAT M/S. EXCEL INFOWAYS LTD. WAS ALSO ENGAGED IN PROVIDING FI NANCIAL SERVICES WHICH HAD BEEN CLASSIFIED AS BUSINESS AUXILIARY SERVICES BY M/S. EXCEL INFOWAYS LTD. UNDER THE GENERIC NAMES OF PRINCIPAL SERVICES RENDERED BY IT SUPRA. OUR OBSERVATION IN THIS REGARD IS FURTHER STRENGTHENED BY THE REPLY GIVEN BY M/S. EX CEL INFOWAYS LTD. BEFORE THE LD. TPO IN RESPECT TO QUESTION NO.III RAISED BY THE LD. TPO U/S.133(6) OF THE ACT WHICH HAS ALREADY BEEN REPRODUCED HEREINABOVE. HENCE, THE TOTAL REVENUE OF RS.18.60 CRORES CREDITED IN THE P & L ACCOUNT DOES NOT BELONG PRIMARIL Y TO IT ENABLED SERVICES SIMPLICITOR AND THAT SOME PART OF SUCH REVENUE SHOULD ALSO PERTAIN TO FINANCIAL SERVICES RENDERED BY THAT COMPARABLE. ADMITTEDLY NO SEGMENTAL BREAK - UP OF REVENUE AND SEGMENTAL RESULTS ARE AVAILABLE FOR VARIOUS ACTIVITIES CARRIED OU T BY M/S. EXCEL INFOWAYS LTD. 4.4. THE LD. DR ON THE CONTRARY ARGUED THAT ALL THE SERVICES RENDERED BY M/S. EXCEL INFOWAYS LTD. ARE ONLY SUPPORT SERVICES TO THE MAIN ACTIVITY OF IT ENABLED SERVES AND HENCE, ARE TO BE CONSTRUED ON A BUNDLED MANNER AND 100 % FUNCTIONAL SIMILARITY WITH THAT OF THE ASSESSEE COMPANY CANNOT BE EXPECTED FOR THE PURPOSE OF COMPARABILITY. WE ARE NOT INCLINED TO ACCEPT TO THESE ARGUMENTS OF THE LD. DR FOR THE SIMPLE REASON THAT BUSINESS AUXILIARY SERVICES ARE COMPLETELY DIFFERENT FO RM IT ENABLED SERVICES. FROM THE VARIOUS SERVICES RENDERED BY M/S. EXCEL INFOWAYS LTD. SINCE 2003 ONWARDS AS DETAILED HEREINABOVE, IT COULD BE SAFELY CONCLUDED THAT THE SAID ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 11 COMPANY WAS ALSO PREDOMINANTLY RENDERING FINANCIAL SERVICES WHICH HAD BEEN CATEGOR IZED BY THEM AS IT ENABLED SERVICES, WHEREAS IN THE ASSESSEES CASE, IT IS RENDERING ROUTINE IT ENABLED SERVICES WHICH ARE LISTED IN PARAGRAPH 2.1 OF OUR ORDER HEREINABOVE. 4.5. WE ALSO FIND LOT OF FORCE IN THE ARGUMENT MADE BY THE LD. AR WHEREIN HE SUBM ITTED THAT IN THE TRANSFER PRICING ASSESSMENT PROCEEDINGS FOR A.Y.2010 - 11, THE VERY SAME COMPARABLE I.E. M/S. EXCEL INFOWAYS LTD. WAS SOUGHT TO BE INCLUDED BY THE LD. TPO AS A VALID COMPARABLE. THE ASSESSEE HAD THERE PLEADED IT IS NOT FUNCTIONALLY COMPARAB LE APART FROM OTHER DIFFERENCES. THE LD TPO AFTER EXAMINING THE VARIOUS DETAILS AND EVIDENCES SUBMITTED BY THE ASSESSEE FOR EXCLUSION OF THE SAME, FINALLY EXCLUDED THE SAID COMPARABLE FROM THE LIST OF COMPARABLES WHILE COMPLETING THE TP ASSESSMENT FOR THE A.Y.2010 - 11. IN THIS REGARD, THE LD. AR PLACED ON RECORD THE LETTER DATED 08/01/2011 ADDRESSED BEFORE THE LD. TPO DURING TP ASSESSMENT PROCEEDINGS FOR A.Y.2010 - 11 AND THE COPY OF THE TPO ORDER FOR A.Y.2010 - 11 DATED 17/01/2014 WHEREIN M/S. EXCEL INFOWAYS LT D. WAS EXCLUDED. 4.6. APART FROM THE AFORESAID OBSERVATIONS, WE ALSO FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL UNDER SIMILAR CIRCUMSTANCES HAD EXCLUDED M/S. EXCEL INFOWAYS LTD. ON FUNCTIONAL DISSIMILARITIES AMONG OTHERS IN THE FOLLOWING CASES: - 1.W ILLIS PROCESSING SERVICES (INDIA) PRIVATE LIMITED - ITA NO 2152/MUM/2014 [AY 2009 - 10] 2. GOLDMAN SACHS SERVICES (P.) LTD. - ITA NO. 1315(MUM.) 2014 [AY 2009 - 10] 3. SWISS RE - SERVICES INDIA (P.) LTD. - ITA NO. 1465 & 1493/MUM/2014 [AY 2009 - 10] 4.7. THE LD. AR HAD FURNISHED A CHART ON A VERY CONSERVATIVE BASIS BY EXCLUDING M/S. EXCEL INFOWAYS LTD.; BY INCLUDING ACCENTIA TECHNOLOGIES PVT. LTD. WHICH WAS ACTUALLY EXCLUDED BY THE LD. TPO WHILE GIVING EFFECT TO THE ORDER OF THE LD. DRP AND BY EXCLUDING LOSS MAKIN G COMPARABLE [TRITON CORP LTD] WHICH WAS SOUGHT TO BE INCLUDED BY THE LD. DRP AND STATED THAT THE ASSESSEE WOULD BE THROUGH IF M/S. EXCEL INFOWAYS LTD. ALONE HAD BEEN EXCLUDED FROM THE LIST OF COMPARABLES. WE FIND LOT OF FORCE IN THE SAID ARGUMENT OF THE L D. AR AND CHART PLACED ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 12 BY HIM DOES NOT REQUIRE ANY VERIFICATION AS THE SAME HAS BEEN PREPARED ON A CONSERVATIVE MANNER BY HIM AND HE HAS ALSO EXPLAINED THE COMPUTATION OF COMPARABLE MARGIN THEREON BEFORE US AT THE TIME OF HEARING WHICH HAVE BEEN VERIFIED B Y US. FOR THE SAKE OF CONVENIENCE, THE SAID CHART IS REPRODUCED BELOW: - SR NO NAME OF THE COMPANY COMPARABLE SET AS PER TP ORDER COMPARABLE SET POST DRP DIRECTIONS SCENARIO - DEPARTMENT APPEAL IS DISMISSED ONLY ON EXCEL INFOWAYS ASSESSEE'S COMPARABLES 1 BNR UDYOG LTD (SEG) 40.10% 40.10% 40.10% 2 CAMEO CORPORATE SERVICES LTD 14.42% 14.42% 14.42% 3 COSMIC GLOBAL LTD 40.68% 40.61% 40.61% 4 OPTIMUS GLOBAL SERVICES - 3.52% - 3.85% - 3.52% 5 PROXIMUS KNOWLEDGE & TECHNOLOGY SERVICES PVT LTD 28.80% 28 .80% 6 SPARSH BPO SERVICES LTD 3.98% 3.98% 3.98% 7 TRITON CORP LTD - 22.17% ADDITIONAL COMPARABLES INTRODUCED BY THE TPO 8 AOK IN HOUSE BPO SERVICES LTD 12.48% 12.48% 12.48% 9 AXA BUSINESS SERVICES PVT LTD 14.40% 14.40% 14.40% ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 13 1 10 ACCENTIA TECHN OLOGIES LTD 43.44% 43.44% 11 ADITYA BIRLA MINACS WORLDWIDE 23.88% 23.88% 23.88% 12 CORAL HUB (VISHAL INFORMATION TECHNOLOGIES LTD) 36.90% 36.93% 36.93% CROSSDOMAIN SOLUTIONS LTD 29.40% 29.40% 14 DATAMATICS FINANCIAL SERVICES LTD 3.07% 3.07% 3.07% 1 5 ECLERX SERVICES LTD 46.92% 46.98% 46.98% 16 EXCEL INFOWAYS LTD 243.69% 17 FIRSTSOURCE SOLUTIONS LTD 6.58% 6.58% 6.58% 18 HDO TECHNOLOGIES LTD 13.94% 13.94% 13.94% 19 INFORMED TECHNOLOGIES LTD 23.13% 23.13% 23.13% 20 KARVY DATA MANAGEMENT SERVICES LTD 4.97% 4.97% 4.97% 21 MAPLE ESOLUTIONS LTD 4.90% 4.90% 4.90% 22 MOLD TEK TECHNOLOGIES LTD 60.92% 60.92% 23 MPHASIS FINSOURCE LTD 20.56% 20.56% 20.56% 24 NUCLEUS CIS AND ITES LTD 18.78% 18.78% 1 8.78% ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 14 25 ONE TWO THREE GREETINGS INDIA PVT LTD 1 .77% 1 .77% 1 .77% 26 SUNDARAM BUSINESS SERVICES LTD 2.45% 2.45% 2.45% 27 SUREVIN INTERNET SERVICES LTD., 3.14% 3.14% 3.14% ARITHMETIC MEAN 28.45% 14.15% 19.84% ZPL'S MARGIN 14.63% 14.63% 14.63% UPPER RANGE OF 5% 20.36% 20.36% 20.36% WHETHER AT ALP NOT ALP ALP ALP 4 . 8 . IN VIEW OF THE ABOVE OBSERVATIONS AND BY RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT M/S. EXCEL INFOWAYS LTD. IS FUNCTIONALLY NOT COMPARABLE WITH THAT OF THE ASSESSEE COMPANY. 4.9 . APART FROM THIS, WE FIND THAT M/S. EXCEL INFOWAYS LTD. HAD EARNED SUPER NORMAL PROFIT OF 243.69% ON WHICH GROUND ALSO, THIS COMPARABLE DESERVES TO BE EXCLUDED FROM THE LIST OF COMPARABLES WITH THAT OF THE ASSESSEE COMPANY. 4.10. IN VIEW OF THE AFORESAID OBSERVATIONS, THE GROUND NO.1 OF REVENUE APPEAL IN ITA NO.1623/MUM/2014 IS DISMISSED AND GROUND NOS.1 - 18 OF CROSS OBJECTIONS OF THE ASSESSEE IN CO NO.222/MUM/2014 FOR A.Y.2009 - 10 ARE ALLOWED. ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 15 3.3. FOR THE SAKE OF CONVENIENCE, THE CHART SUBMITTED BY THE ASSESSEE BEFORE THIS TRIBUNAL THROUGH E - MAIL IS ALSO ENCLOSED HEREWITH: - SR. NO. NAME OF COMPARABLE COMPANY ALP AS PER TP ORDER SET OF COMPARABLES ALP AS PER DRP DIRECTIONS/FINAL AO ORDER SET OF COMPARABLES SCENARIO IF DEPARTMENT APPEAL IS DISMISSED ONLY ON EXCLUSION OF EXCEL INFOWAYS (GR.NO. IV) REMARKS [1] [2] [3] [4] [5] [6] 1. SPARSH BPO SERVICES LTD. 3.98 3.98 3.98 NOT IN DISPUTE 2. A O K IN-HOUSE BPO SERVICES LTD. 12.48 12.48 12.48 ----DO---- 3. A X A BUSINESS SERVICES PVT. LTD. 14.40 14.40 14.40 ----DO---- 4. ADITYA BIRLA MINACS WORLDWIDE LTD. 23.88 23.88 23.88 ----DO---- 5. CAMEO CORPORATE SERVICES LTD. 14.42 14.42 14.42 ----DO---- 6. DATAMATICS FINANCIAL SERVICES LTD. 3.07 3.07 3.07 ----DO---- 7. FIRSTSOURCE SOLUTIONS LTD. 6.58 6.58 6.58 ----DO---- 8. KARVY DATA MANAGEMENT SERVICES LTD. 4.97 4.97 4.97 ----DO---- 9. MPHASIS FINSOURCE LTD. 20.56 20.56 20.56 ----DO---- 10. NUCLEUS GIS & ITES LTD. 18.78 18.78 18.78 ----DO---- ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 16 11. SUNDARAM BUSINESS SERVICES LTD. 2.45 2.45 2.45 ----DO---- 12. SUREVIN INTERNET SERVICES LTD. 3.14 3.14 3.14 ----DO---- 13. ACCENTIA TECHNOLOGIES LTD. 43.44 - - ----DO---- 14. MAPLE ESOLUTIONS LTD. 4.90 - - ----DO---- 15. MOLD-TEK TECHNOLOGIES LTD. 60.92 - - ----DO---- 16. ONE TWO THREE GREETINGS (INDIA) PVT. LTD. 1.77 - - ----DO---- 17. COSMIC GLOBAL LTD. 40.61 40.61 40.61 18. B N R UDYOG LTD. (SEG) 40.10 40.10 40.10 19. CORAL HUB LTD. (VISHAL INFORMATION TECHNOLOGIES LTD.) 36.93 36.93 36.93 20. ECLERX SERVICES LTD. 46.98 46.98 46.98 21. INFORMED TECHNOLOGIES 23.13 23.13 23.13 22. INFOSYS BPO LTD. 24.31 24.31 24.31 23. CROSS DOMAIN SOLUTIONS LTD. 29.40 - 29.40 24. HDO TECHNOLOGIES LTD. 13.94 - 13.94 THE RESPONDENT HAS FILED CROSS OBJECTIONS AGAINST INCLUSION OF THESE COMPANIES IN THE FINAL SET BY THE LD. DRP. THOUGH THE COMPANIES AT SR. NO. 20 & 22 HAVE BEEN HELD AS INCOMPARABLE TO THE RESPONDENT BY THE HONBLE MUMBAI TRIBUNALS ORDERS IN ITS OWN CASES FOR AYS 2007-08 & 2008-09; AND COMPANIES AT SR.NO. 17, 19, 20 & 22 HAVE BEEN HELD AS INCOMPARABLE TO AN ITES PROVIDER BY THE HONBLE BOMBAY HIGH COURT IN VARIOUS DECISIONS, THE CROSS OBJECTIONS BECOME ACADEMIC AS PER SCENARIO IN COL. 4 AND HENCE DO NOT REQUIRE ADJUDICATION. THE RESPONDENT PRAYS THAT THIS SHOULD NOT BE CONSTRUED AS RESPONDENTS ACCEPTANCE OF THESE COMPANIES. INCLUDED IN THE SET ON A CONSERVATIVE BASIS AS PER SCENARIO IN COL. [5] ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 17 ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 18 3.4 RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THIS TRIBUNAL, WE HOLD THAT EXCEL INFOWAYS LTD., IS TO BE EXCLUDED FROM THE LIST OF COM PARABLES AND ACCORDINGLY, NO ADJUSTMENT OF ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION NEED TO BE MADE IN THE INSTANT CASE AS IS EVIDENT FROM THE CHART S UBMITTED BY THE ASSESSEE HEREINABOVE. ACCORDINGLY, PART OF THE GROUND NO.IV RAISED BY THE REVEN UE WITH REGARD TO EXCLUSION OF EXCEL INFORWAYS LTD., CONTESTED BY THE REVENUE IS DISMISSED. 3.5. IN VIEW OF THE AFORESAID DECISION WITH REGARD TO EXCLUSION OF EXCEL INFOWAYS LTD., THE ADJUDICATION OF CROSS OBJECTION OF THE ASSESSEE AND OTHER GROUNDS RAIS ED BY THE REVENUE BECOME ACADEMIC IN NATURE. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 29 / 07 /2020 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( RAVISH S OOD ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 29 / 07 / 2020 KARUNA , SR.PS ITA NO . 958/MUM/2014 & CO.NO.79/MUM/2015 M/S. CONVERGYS INDIA SERVICE PVT. LTD., (SUCCESSOR TO CONVERGYS STREAM PVT. LTD.,) 19 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A ), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//