MMODAL GLOBAL SERIVECES P.LTD, NAVI MUMBAI V. ASST CIT 15(2)(2), MUMBAI

ITA 970/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5349 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2012-2013
• Appeal Filed On: 10-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NITIN SHIVRAJ K PATIL JT
• Assessee Lawyers: PUNIT BOTHRA
• Keywords: Depreciation; Transfer pricing; International transaction; Question of law; Unabsorbed depreciation
• Section: 271(1)(c); 143(3); 133(6); 144C; 154

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL K BENCH MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.970/MUM/2017 (ASSESSMENT YEAR 2012-13) M MODAL GLOBAL SERVICES PRIVATE LTD. (FORMERLY KNOWN AS CBAY SYSTEM (INDIA) PVT. LTD.), 3 RD FLOOR, BLDG. NO.3, MINDSPACE AIROLI, PLOT NO.3, KALWA TTC INDUSTRIAL AREA MIDC, THANE BELAPUR ROAD, AIROLI, NAVI MUMBAI- 400708. P AN: AAACC9165F VS. ACIT CIRCLE- 15(2)(2) 480, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDENT APPELLANT BY : MS. KARISHMA R. PHATARPHEKAR WITH SHRI HARSH SHAH & SHRI PUN IT BOTHRA (AR) RESPONDENT BY : SHRI NITIN SHIVRAJ K. PATIL (JT. CIT) DATE OF HEARING : 10.10.2019 DATE OF PRONOUNCEMEN T : 16.10.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ASS ESSMENT ORDER UNDER SECTION 143(3) RWS 144C (13) DATED 12.12.2016, PASS ED IN PURSUANCE OF DIRECTION OF DISPUTE RESOLUTION PANEL-3 (DRP), MUMB AI DATED 30.09.2016 FOR ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AO AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN MAKING A ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 2 TRANSFER PRICING ADDITION OF INR 4,73,88,068/- TO T HE TOTAL INCOME OF THE APPELLANT. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AO AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN SELECTING INFOSYS BPO LIMITED, ZYLOG SYSTEMS LIMITED AND EXCEL INFOWA YS LIMITED AS COMPANIES COMPARABLE TO THE APPELLANT. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AO AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN COMPUTING THE PROFIT LEVEL INDICATOR OF JINDAL INTELLICON LIMITED . 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AO AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN REJECTING THE TRANSFER PRICING DOCUMENTATION OF THE APPELLANT AND RESORTING TO CHERRY PICKING OF COMPARABLES IN ORDER TO ARRIVE AT A SET OF COMPA NIES COMPARABLE TO THE APPELLANT. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AO AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN DISREGARDING THE MULTIPLE YEAR DATA ANALYSIS UNDERTAKEN BY THE APPEL LANT IN ACCORDANCE WITH RULE 10B(4) OF THE INCOME TAX RULES, 1962 ('RULES') FOR COMPUTING THE MARGINS OF COMPARABLE COMPANIES. 6. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AD AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN NOT PROVIDING APPROPRIATE ADJUSTMENTS TO MARGINS OF THE COMPANIES FINALLY SELECTED AS COMPARABLE AS REQUIRED BY RULE 10B(1)(E)(III) OF TH E RULES. 7. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AD AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN NOT GRANTING SET OFF OF BROUGHT FORWARD LOSSES AGAINST THE INCOME OF THE CURRENT YEAR. 8. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AO AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN LEVYING INTEREST UNDER SECTION 2348 AND 234C OF THE ACT. 9. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, T HE LEARNED AO AND THE LEARNED TPO UNDER THE DIRECTIONS OF THE HON'BLE DRP ERRED IN PROPOSING TO INITIATE PENALTY UNDER SECTION 271(1)(C) OF THE ACT . ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 3 THE APPELLANT CLAIMS RELIEF ON THE ABOVE GROUNDS AN D THEREBY DELETING THE ADJUSTMENTS MADE BY THE LEARNED AO IN THE FINAL ASS ESSMENT ORDER. 1. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS A SUBSIDIARY OF MMODOL INC ENGAGED IN THE BUSINESS OF MEDICAL TRANS CRIPTION SERVICES, INFORMATION TECHNOLOGY (IT) SERVICES AND QUALITY A SSURANCE, TECHNOLOGY SUPPORT BACK OFFICE CO-ORDINATION, TRAINING AND CON SULTATION. THE ASSESSEE- COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT Y EAR 2012-13 ON 28.11.2012 DECLARING TOTAL INCOME AT RS. 55,11,390/ -. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED REPORT UNDER FORM 3CEB. THE ASSESSEE SELECTED TRANSACTION NET MARGIN METHOD (TNMM) AS MO ST APPROPRIATE METHOD TO BENCH MARK PROVISION OF INFORMATION TECHN OLOGY & QUALITY ASSURANCE/ SUPPORT SERVICES. THE PROFIT LEVEL INDIC ATOR (PLI) SELECTED WAS OPERATING PROFIT/ TOTAL COST (OP/TC). THE ASSESSEE HAS SHOWN IST MARGIN AT 15.02%. 2. THE ASSESSEE BENCH MARKED ITS ALP UNDER TRANSACTION NET MARGIN METHOD (TNMM),THE ASSESSEE SELECTED 21 COMPANY AS COMPARAB LE AND COMPUTED THE MARGIN ON THE BASIS OF TWO YEARS AND AVERAGE MA RGIN IN THE FOLLOWING MANNER: SR.NO. NAME OF THE COMPANY AVERAGE NPI (%) NPI FOR FY 2011-12 (%) 1 ALLIED DIGITAL SERVICES LTD. (SEG.) 4.24 (6.22) 2 CADENCE DESIGN SYSTEMS (INDIA) PVT. LTD. 16.49 10.82 ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 4 3 CAMEO CORPORATE SERVICES LTD. 10.06 7.57 4 COSMIC GLOBAL LTD. 12.96 40.73 5 E4E HEALTHCARE BUSINESS SERVICES 13.78 13.45 6 E-ZEST SOLUTIONS LTD. 29.15 18.79 7 HELIOS & MATHESON INFORMATION TECHNOLOGY LTD. 16.04 16.96 8 IDBI INTECH LTD. 4.58 2.33 9 IDEAVATA SOLUTIONS PVT. LTD. 31.47 22.96 10 IN HOUSE PRODUCTIONS LTD. (SEG.) 13.27 2.94 11 JINDAL INTELLICOM LTD. 13.12 1.40 12 L G S GLOBAL LTD. 13.58 19.34 13 MELSTAR INFORMATION TECHNOLOGIES LTD. (5.13) 2.36 14 MINDTREE LTD. 16.41 14.39 15 OMEGA HEALTHCARE MGMNT SERVICES PVT LTD. 12.96 13.78 16 PERSISTENT SYSTEMS AND SOLUTION LTD. 16.30 27.09 17 PROTEANS SOFTWARE SOLUTIONS PVT. LTD. 1.90 NA 18 SAVI INFOSERVICES INDIA PVT. LTD. 9.44 1.61 19 SPARSH B P O SERVICES LTD. 1.56 (26.66) 20 SYNETAIROS TECHNOLOGIES LTD. 15.13 17.53 21 VISESH INFOTECNICS LTD. (SEG.) 15.14 36. 02 ARITHMETIC MEAN 12.52 11.86 3. THE MARGIN ON COMPARABLE BASED ON AVERAGE OF WAS 12 .52% AND THE ASSESSEES MARGIN FOR INTERNATIONAL TRANSACTION WAS 15.02%. THUS, THE ASSESSEE CLAIMED ITS TRANSACTION AT THE ARMS LENGTH . THE ASSESSING OFFICER MADE A REFERENCE TO TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA FOR ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 5 COMPUTATION OF ARMS LENGTH PRICE (ALP). DURING THE PROCEEDINGS BEFORE TOP, THE TPO ACCEPTED 4 COMPARABLE AND FURTHER ADDE D 4 ADDITIONAL COMPARABLE. THE TPO CARRIED OUT ITS OWN RESEARCH A ND INCLUDED THE SAID 4 COMPARABLE: 4. THE TPO AFTER INCLUDING 4 COMPARABLE WORKED OUT ARI THMETIC MEAN OF PROFIT LEVEL INDICATOR (PLI) OF 8 COMPARABLE COMPAN Y AND ARRIVED AT MARGIN OF 23.27 % AGAINST PLI OF 15.02% OF THE ASSESSEE A ND WORKED OUT DIFFERENCE BETWEEN ALP OF SALES AND VALUE OF INTERN ATIONAL TRANSACTION AND MADE ADJUSTMENT OF RS. 54297825/- IN THE FOLLOWING MANNER: SR.NO. NAME OF THE COMPANY NCP MARGIN (%) 1 CADENCE DESIGN SYSTEMS INDIA PVT. LTD. 10.82 2 E4E HEALTHCARE BUSINESS SERVICES 14.59 3 JINDAL INTELLICON LTD. 6.08 4 OMEGA HEALTHCARE MGMNT SERVICES PVT LTD. 13.78 5 PERSISTENT SYSTEMS AND SOLUTION LTD. 26.94 6 INFOSYS BPO LTD. 33.92 7 ZYLOG SYSTEMS LIMITED 30.68 8 EXCEL INFOWAYS LTD. 49.38 ARITHMETIC MEAN 23.27 MARGIN OF ASSESSEE 15.02 5. ON RECEIPT OF REPORT OF TPO, THE ASSESSING OFFICER MADE UPWARD ADJUSTMENT/ADDITION OF RS. 5,42,97,825/- IN THE DRA FT ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 144C(1) DATED 23 .03.2016. THE ASSESSEE ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 6 FILED ITS OBJECTIONS BEFORE DRP. THE DRP AFTER CONS IDERING THE OBJECTION OF ASSESSEE REJECTED ONE COMPARABLE COMPANY SELECTED B Y TPO I.E. ZYLOG SYSTEM LTD. AND UPHELD THE ORDER OF DRP ON OTHER CO MPARABLE. THE AVERAGE MARGIN ON THE BASIS OF FINAL SET OF COMPARABLE WAS 22.22% AND ACCORDINGLY AN ADDITION OF RS. 4,73,88,068/- WAS MADE TO THE TO TAL INCOME OF ASSESSEE ON THE FOLLOWING SET OF COMPARABLE: SR.NO. NAME OF THE COMPANY POST DRP 1 CADENCE DESIGN SYSTEMS INDIA PVT. LTD. 10.82 2 E4E HEALTHCARE BUSINESS SERVICES 14.59 3 JINDAL INTELLICON LTD. 6.08 4 OMEGA HEALTHCARE MGMNT SERVICES PVT LTD. 13.78 5 PERSISTENT SYSTEMS AND SOLUTION LTD. 26.94 6 INFOSYS BPO LTD. 33.92 7 EXCEL INFOWAYS LTD. 49.38 ALP MARGIN 22.22 6. FURTHER, AGGRIEVED BY THE DIRECTION OF DRP, THE ASS ESSEE HAS FILED PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) F OR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 8. ON THE VARIOUS GROUNDS OF APPEAL RAISED BY THE ASSE SSEE. THE LD. AR OF THE ASSESSEE SUBMITS THAT GROUND NO. 1 TO 6 RELATES TO TP ADJUSTMENT AND THE LD. AR OF THE ASSESSEE IS PRESSING ONLY THE EXCLUSION O F INFOSYS BPO AND EXCEL ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 7 INFOSYS BPO LTD. IT WAS FURTHER SUBMITTED THAT IN C ASE BOTH THESE COMPARABLE ARE EXCLUDED THE ASSESSEES MARGIN WOULD BE WITHIN TOLERANCE RANGE. FOR EXCLUSION OF INFOSYS BPO LTD., THE LD. A R OF THE ASSESSEE SUBMITS THAT THIS COMPARABLE IS NOT FUNCTIONALLY COMPARABLE DUE TO BRAND VALUE AND HIGH TURNOVER OF RS. 1312.41 CRORE AND EXTRAORDINAR Y EVENTS DURING THE YEAR UNDER CONSIDERATION AS ITS ACQUIRING AN AUSTRALIAN BASED COMPANY NAMELY PORTLAND GROUP PTY. LTD. FUNCTION UNDERTAKEN, ASSET EMPLOYED AND RISK ASSUMED (FAR) OF INFOSYS BPO LTD. IS DIFFERENT FROM THE ASSESSEE, WHO OPERATES ON MINIMUM RISK. INFOSYS BPO LTD. PROVIDES END TO END OUTSOURCING SERVICES AND ENTERPRISE-WISE SERVICES T O CLIENTS ACROSS VARIOUS INDUSTRY SEGMENTS LIKE BANKING, MANUFACTURING, RENT AL AND ENERGY SECTOR. IT ALSO PROVIDES LEGAL PROCESS OUTSOURCING SERVICES (L PO) WHICH IS DIFFERENT FROM ASSESSEE. IT ALSO PROVIDES KNOWLEDGE PROCESSIN G OUTSOURCE (KPO) ACTIVITIES LIKE ANALYTICS, FINANCIAL PLANNING AND A NALYSIS. IT HAS DIVERSIFIED ACTIVITY AND OWNS INTELLECTUAL PROPERTY. IT ENJOYS BRAND VALUE BEING A PART OF INFOSYS GROUP, WHICH MAKE ITS NOT COMPARABLE. IN SU PPORT OF HIS SUBMISSION RELIED UPON THE FOLLOWING DECISION: A. CASES WHEREIN TRIBUNAL REJECTED INFOSYS BPO LTD. FO R A.Y. 2012-13. I. MAERSK GLOBAL SERVICE CENTRE INDIA PVT. LTD. VS. AC IT [ITA NO. 653/MUM/2017], II. INTERNATIONAL SPECIALTY PRODUCTS (INDIA) PVT. LD. V S. ACIT [ITA NO. 1279/MUM/2017]. III. INDEGENE (P.) LTD. VS. ACIT [2017] 85 TAXMANN.COM 6 0 (BANGALORE- TRIB.) IV. E4E BUSINESS SOLUTIONS INDIA PVT. LTD. VS. ITO [IT( TP) A NO. 451/BANG/2017] ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 8 V. XLHEALTH CORPORATION INDIA (P.) LTD. VS. ACIT [2018 ] 91 TAXMANN.COM 310 (BANGALORE TRIB.). VI. EXEVO INDIA PVT. LTD. VS. DCIT [ITA NO. 20/DEL/2017 ] & VII. SUN LIFE INDIA SERVICES CENTRE PVT. LTD. VS. ACIT [ ITA NO. 468/DEL/2017] B. CASES WHEREIN BOMBAY HIGH COURT HELD THAT COMPANIES HAVING HIGH TURNOVER SHOULD BE EXCLUDED. I. CIT VS. PENTAIR WATER INDIA (P.) LTD. [2016] 381 IT R 216 (BOMBAY). II. CIT VS. PRINCIPAL GLOBAL SERVICES (P.) LTD. [2018] 95 TAXMANN.COM 315 (BOMBAY). III. HAPAG-LLOYD GLOBAL SERVICES (P.) LTD. VS. DCIT [201 7] 80 TAXMANN.COM 56 (MUMBAI-TRIB.) AND IV. HINDUJA GLOBAL SOLUTIONS LTD. VS. DCIT [2017] 78 TA XMANN.COM 199 (MUMBAI TRIB.). 9. FOR EXCLUSION OF EXCEL INFOWAYS LTD., THE LD. AR OF THE ASSESSEE SUBMITS THAT IT PROVIDES IT/BPO SERVICES WHEREIN IT RECEIVE S FEES FROM CLIENTS FOR HANDLING THE CLIENTS CUSTOMER, MANAGING THEIR WORK FLOW PROCESS IN ACCORDANCE TO THEIR REQUIREMENT AS PER AGREEMENT AN D UPTO THEIR SATISFACTION AND INFRA ACTIVITIES. SUCH SERVICES CANNOT BE COMPA RED WITH ASSESSEE, WHICH IS IN LOW END IT/BPO SERVICES. THE DIRECTORS OF THI S COMPRABLOE CONSIDERED CLOSING OF ITS IT/BPO SEGMENT AND DIVERSIFY ITS BUS INESS IN NEW AREA OF CONSTRUCTION, DEVELOPMENT OF PROPERTY AND REAL ESTA TE. THE IT/BPO SERVICES OF THIS COMPARABLE ARE EMPLOYEE ORIENTED ACTIVITY A ND THEREFORE INVOLVED HIGH EMPLOYEE COST. AS PER ANNUAL REPORT OF EXCEL I NFOWAYS, THE RATIO OF TOTAL EMPLOYEE COST TO THE TOTAL OPERATING COST IS 15.44%, WHEREAS SUCH RATIO IN CASE OF ASSESSEE IS 17.80%. THIS COMPARABLE COMP ANY HAS TWO BUSINESS SEGMENT I.E. IT/BPO SEGMENT AND INFRA SEGMENT. INFR A SEGMENTS ACCOUNTS FOR 49% OF ITS TOTAL REVENUE. SEGMENTAL DETAILS ARE PROVIDED IN THE ANNUAL REPORT BUT NO BIFURCATION OR BREAKUP OF EMPLOYEE CO ST HAS BEEN PROVIDED. IN ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 9 ABSENCE OF SUCH DETAILS, THE CONTENTION OF DRP THAT BULK OF THE EMPLOYEES COST IS ATTRIBUTABLE TO ITES IS UNRELIABLE. FURTHER , MERELY BECAUSE IT/BPO SEGMENT IS EMPLOYEE ORIENTED, IT DOES NOT MEAN THAT THE INFRA SEGMENT DID NOT INCUR EMPLOYEE COST OR INCUR VERY LESS EMPLOYEE COST. THUS, A COMPANY HAVING LOW EMPLOYEE COST CANNOT BE COMPARABLE TO TH E ASSESSEE. IT CANNOT BE CONSIDERED AS COMPARABLE DUE TO FLUCTUATING MARG IN AND DIMINISHING REVENUE TREND. THE OPERATING MARGIN OF THIS COMPANY HAS SHOWN DRASTIC FLUCTUATION RANGING FROM 247.74% IN F.Y. 2008-09 TO 2% IN A.Y. 2014-15. THE LD. AR FURNISHED THE FLUCTUATING MARGIN OF THIS COMPARABLE FROM F.Y. 2008-09 TO 2014-15. IN SUPPORT OF HER SUBMISSION, T HE LD. AR RELIED ON THE FOLLOWING DECISIONS: A. CASES WHEREIN TRIBUNAL EXCLUDED EXCEL INFOSYS LTD. FOR A.Y. 2012-13. I. CLEAR INFO ANALYTICS PRIVATE LIMITED VS. ACIT [IT(T P)A NO. 2299/MUM/2017]. II. GTS E-SERVICES PRIVATE LTD. V. ITO [ITA NO. 1231/MU M/2017. III. EMERSON COMATE TECHNOLOGIES (INDIA) PVT. LTD. VS. D CIT [ITA NO. 359 & 2847/PUN/2016]. IV. OCWEN FINANCIAL SOLUTIONS PRIVATE LIMITED VS. ACIT [ITA NO. 2669/PUN/2016] V. CUMMINS TURBO TECHNOLOGIES LIMITED VS. DCIT [ITA NO . 388/PUN/2017] VI. BT E-SERV (INDIA) (P.) LTD. VS. ITO [2019] 101 TAXM ANN.COM 275 (DELHI-TRIB.). VII. INTERNATIONAL SPECIALTY PRODUCTS (INDIA) PVT. LTD. VS. ACIT [ITA NO. 6335/MUM/2018] AND VIII. DCIT VS. SWISS RE-SERVICES INDIA (P.) LTD. [2018] 9 8 TAXMANN.COM 180 (MUMBAI-TRIB.). 10. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE RELIE D UPON THE ORDER OF TPO/DRP. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. WE HAVE AL SO DELIBERATED ON VARIOUS ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 10 CASE LAW RELIED BY LD. AR OF THE ASSESSEE. WE HAVE NOTED THAT THE ASSESSEE WHILE BENCHMARKING THE ALP WITH REGARD TO INTERNATI ONAL TRANSACTION OF ASSESSEE, THE ASSESSEE SELECTED 21 COMPARABLES, THE TPO ACCEPTED ONLY 5 COMPARABLE, THE TPO INCLUDED 4 ADDITIONAL COMPARABL E IN THE FINAL SET OF COMPARABLE. HOWEVER, ON FURTHER OBJECTION BEFORE DR P ONE OF THE COMPARABLE I.E. ZYLOG SYSTEM LTD., ADDED BY TPO WAS EXCLUDED. BEFORE US, THE LD. AR OF THE ASSESSEE DISPUTED ONLY THE INCLUS ION OF 2 ADDITIONAL COMPARABLE I.E. INFOSYS BPO LTD. AND EXCEL INFOWAYS LTD. ONLY. 12. BEFORE TPO, THE ASSESSEE OBJECTED TO THE INCLUSION OF INFOSYS BPO LTD. THE TPO CONCLUDED THAT THIS COMPARABLE WHILE ADDING INFOSYS BPO LTD. CONCLUDED THAT THIS COMPANY IS ENGAGED IN SIMILAR S ERVICE TO THOSE RENDERED BY ASSESSEE. THE USE OF BRAND NAME NEITHER SIGNIFIE S ANY BRAND VALUE NOR DOES IT HAVE ANY IMPACT ON ITS FUNCTIONALITY. ACQUI SITION OF COMPANY BY WAY OF INVESTMENT DOES NOT HAVE ANY IMPACT ON THE FUNCT IONALITY OR ITS PROFITABILITY. THE DRP CONFIRMED THE INCLUSION OF T HIS COMPARABLE HOLDING THAT INFOSYS BPO LTD. IS A BPO, FALLS UNDER THE DEF INITION OF ITES PROVIDER AS PER SAFE HARBOUR RULES. TNMM REQUIRES ESTABLISH ING COMPARABILITY AT BROAD FUNCTION LEVEL. TURNOVER OF THIS COMPARABLE F ALLS UNDER FILTER FIXED IN THIS COMPANY IS 25 TIMES AND CANNOT BE REJECTED. ON THE OBJECTION OF BRAND VALUE, DRP CONCLUDED THAT UNLESS THE ASSESSEE DEMO NSTRATE HOW BRAND OR INTANGIBLES HAVE IMPACTED PROFITABILITY AND ALSO QU ANTIFIES THE DIFFERENCE IN PROFITABILITY, THIS COMPARABLE CANNOT BE REJECTED. FOR ACQUISITION OF OTHER ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 11 ENTITY, THE DRP CONCLUDED THAT ACQUISITION WILL IMP ACT ONLY ON THE CONSOLIDATED ACCOUNTS OF THE COMPANY AND ITS SUBSID IARY AND WILL NOT AFFECT THE ACCOUNT ON STANDS ALONE BASIS. THE CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN MAERSK GLOBAL SERVICES VS. ACIT(SUPRA) WHILE CONSIDERING THE COMPARABILITY/EXCLUSION OF INFOSYS BPO LTD. HELD AS UNDER: 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED MATERIALS ON RECORD. FROM THE MATERIAL ON RECORD, IT IS EVIDENT THAT THE ASSESSEE IS NOT ONLY A CAPTIVE SERVICE PROVIDER, BUT THE NATURE OF SERVICE PROVIDE D BY THE ASSESSEE CAN BE CATEGORIZED AS SIMPLE BPO SERVICES. EVEN, THE DRP H AS ALSO ACCEPTED THAT THE NATURE OF SERVICE PROVIDED BY THE ASSESSEE WILL NOT COME WITHIN THE PURVIEW OF HIGH END BPO OR KPO SERVICES. IT IS RELEVANT TO OBS ERVE, THE TRANSFER PRICING OFFICER WHILE EXAMINING THE FUNCTIONAL PROFILE AS W ELL AS SKILL SET EMPLOYED BY THE ASSESSEE HAS OBSERVED THAT 97% OF THE EMPLOYEES ARE SIMPLE GRADUATES. WHEREAS, ONLY THREE PER CENT ARE PROFESSIONALS. THU S, FROM THE AFORESAID FACT, IT APPEARS THAT THE ASSESSEE IS PROVIDING SIMPLE VOICE AND DATA SERVICES TO ITS A.ES. WHEREAS, THE SAME CANNOT BE SAID ABOUT INFOSYS BPO LTD. WHICH APART FROM ITS BRAND VALUE BEING PART OF INFOSYS GROUP, IS NOT COM PARABLE TO THE ASSESSEE IN VARIOUS OTHER ASPECTS ALSO. NOTABLY, WHILE CONSIDER ING THE ISSUE RELATING TO ACCEPTABILITY OF INFOSYS BPO LTD. AS A COMPARABLE I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 201011, THE TRIBUNAL IN ITA NO.108 2/ MUM./2015, DATED 29TH JULY 2016, HAS HELD THAT THIS COMPANY CANNOT BE TRE ATED AS COMPARABLE TO THE ASSESSEE AND ACCORDINGLY, EXCLUDED IT FROM THE LIST OF COMPARABLES. THE SAME VIEW WAS AGAIN EXPRESSED BY THE TRIBUNAL WHILE DECI DING ASSESSEES APPEAL FOR ASSESSMENT YEAR 201112, IN ITA NO.944/MUM./2016, D ATED 19TH APRIL 2018. IT IS VERY MUCH CLEAR, THE TRANSFER PRICING OFFICER HA S INCLUDED THIS COMPANY AS COMPARABLE SIMPLY RELYING UPON HIS DECISION IN ASSE SSMENT YEAR 201011. THEREFORE, RESPECTFULLY FOLLOWING THE CONSISTENT VI EW OF THE TRIBUNAL WITH REGARD TO THIS COMPANY AS EXPRESSED IN ASSESSEES OWN CASE IN THE ORDERS REFERRED TO ABOVE, WE EXCLUDE THIS COMPANY AS A COMPARABLE. 13. FURTHER, THE CO-ORDINATE BENCH OF MUMBAI TRIBUNAL I N INTERNATIONAL SPECIALTY PRODUCTS (INDIA) PVT. LTD. VS. ACIT (SUPR A) WHILE CONSIDERING THE ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 12 TURNOVER FILTER AND EXTRAORDINARY EVENT FOR ACQUISI TION OF FOREIGN ENTITY EXCLUDED INFOSYS BPO LTD. BY HOLDING AS UNDER: 3.6.3 INFOSYS BPO LTD. IT HAS BEEN SUBMITTED THAT THE OPERATING INCOME OF THIS ENTITY IS MORE THAN 138 TIMES THAN THAT OF THE ASSESSEE AND THEREFORE, IT C OULD NOT BE TERMED AS GOOD COMPARABLE IN TERMS OF THE DECISION OF HON'BLE BOMB AY HIGH COURT IN CIT V/S PENTAIR WATER INDIA (P.) LTD. [2016 69 TAXMANN.COM 180] AS FOLLOWED BY MUMBAI TRIBUNAL IN INTEGREON MANAGED SOLUTIONS INDI A PVT. LTD. VS ACIT [2019 101 TAXMANN.COM 289]. FURTHER RELIANCE HAS BE EN PLACED ON THE DECISION OF DELHI TRIBUNAL IN BAXTER INDIA PVT. LTD. V/S ACI T [2017 85 TAXMANN.COM 285]. IT HAS FURTHER BEEN SUBMITTED THAT THERE WAS ON EXTRAORDINARY EVENT IN THIS ENTITY SINCE IT ACQUIRED AN AUSTRALIAN BASED COMPAN Y NAMELY M/S PORTLAND GROUP PTY. LTD. AS NOTED BY BANGALORE TRIBUNAL IN M OBILY INFOTECH INDIA PVT. LTD. VS DCIT [2018 97 TAXMANN.COM 2]. APPLYING THE RATIO OF DECISION OF HON'BLE BOMBAY HI GH COURT IN CIT V/S PENTAIR WATER INDIA (P.) LTD. [SUPRA], IN SIMILAR MANNER, W E DIRECT FOR EXCLUSION OF THIS ENTITY. THIS IS FURTHER FORTIFIED BY THE DECISION O F DELHI TRIBUNAL IN BAXTER INDIA PVT. LTD. V/S ACIT [SUPRA], FOR SAME AY, WHEREIN TH E CO-ORDINATE BENCH DIRECTED FOR EXCLUSION OF THIS ENTITY ON ACCOUNT OF FUNCTIONAL DISSIMILARITY AND EXTRA-ORDINARY EVENTS WHICH TOOK PLACE DURING THE Y EAR. SIMILAR IS THE VIEW OF BANGALORE TRIBUNAL IN MOBILY INFOTECH INDIA PVT. LT D. VS DCIT [SUPRA]. 14. THE HONBLE BOMBAY HIGH COURT IN CIT VS. PRINCIPLE GLOBAL SERVICES (P.) LTD. WHILE CONSIDERING THE QUESTION OF LAW WHETHER TRIBUNAL WAS RIGHT IN EXCLUDING ON TURNOVER BASIS HELD AS UNDER: 8. RE QUESTION (D): ( I ) M/S. INFOSYS BPO LTD., WAS EXCLUDED BY THE TRIBUNAL FROM THE LIST OF COMPARABLE TO DETERMINE ALP IN RESPECT OF INTERNATIONAL TRANSA CTION OF THE RESPONDENT'S ACTIVITY OF RENDERING OF BACK OFFICE SUPPORT SERVIC ES TO ITS AE. ( II ) THE IMPUGNED ORDER OF THE TRIBUNAL NOTED THE FACTS THAT TURNOVER OF THE ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 13 COMPARABLE WAS TO THE TUNE OF R.9028 CRORES WHILE T HE TURNOVER OF THE RESPONDENT-ASSESSEE, AS NOTED BY THE TPO WAS ONLY R S.18 CRORES. ( III ) THE IMPUGNED ORDER FURTHER RECORDS THAT IN VIEW OF THE DIFFERENCE IN TURNOVER BETWEEN M/S. INFOSYS BPO LTD., AND THE ASSESSEE, TH E TWO ARE NOT COMPARABLE. IN FACT, THE IMPUGNED ORDER PLACED RELIANCE UPON THE D ECISION OF THE DELHI HIGH COURT IN CIT V. AGNITY INDIA TECHNOLOGIES (P.) LTD. [2013] 36 TAXMANN.COM 289/219 TAXMAN 26 WHEREIN, IT WAS HELD THAT THE HUGE TURNOVER DIFFER ENCE BETWEEN TH E COMPARABLE IN THAT CASE, M/S. INFOSYS TECHNOLOGIES LTD., WITH THE ASSESSEE THEREIN, COUPLED WITH THE FACT THAT THE ASSESSEE TH EREIN WAS PROVIDING ONLY SERVICES TO ITS AE WHILE M/S. INFOSYS TECHNOLOGIES (P) LTD., PROVIDED SERVICES TO OUT SIDERS, MAKE IT N OT COMPARABLE. THESE FACTS ARE IDENTICAL TO THE PRE SENT FACTS AND WOULD MAKE INFOSYS BPO LTD., NOT COMPARABLE. NO DIFFERENC E IS SHOWN TO US WHICH WOULD WARRANT A DIFFERENT VIEW IN THE PRESENT FACTS . MOREOVER, THIS COURT IN CIT V. PENTAIR WATER INDIA (P.) LTD. [2016] 69 TAXMANN.COM 180/381 ITR 216 HAS TAKEN A VIEW THAT HUGE DIFFERENCE IN TURNOVER B ETWEEN THE TESTED PARTY AND THE COMPARABLE WOULD NECESSARILY REQUIRE THE PR OPOSED COMPARABLE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. ( IV ) WE FIND THAT THE VIEW TAKEN ON THE AFORESAID FINDIN G OF FACT IS A POSSIBLE VIEW. ( V ) THEREFORE, THE QUESTION NO.(D ) AS PROPOSED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED. 15. CONSIDERING THE AFORESAID FACTUAL AND LEGAL DISCUSS ION, THIS COMPARABLE I.E. INFOSYS BPO LTD. DUE TO HIGH TURNOVER AND EXTRAORDI NARY EVENT OF ACQUISITION AS WELL AS BRAND VALUE, IS NOT COMPARAB LE WITH THE ASSESSEE, WHO IS PROVIDING MEDICAL TRANSCRIPTION SERVICES, INFORM ATION TECHNOLOGY QUALITY ASSURANCE IN THE NATURE OF BACK OFFICE SUPPORT SERV ICES TO ITS AE. THEREFORE, WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPARABLE. 16. SO FAR AS EXCLUSION/INCLUSION OF EXCEL INFOWAYS LTD . IS CONCERNED, THE TPO INCLUDED THIS COMPARABLE BY TAKING VIEW THAT ASSESS EE IGNORED THE FACT THAT HE HAS ADOPTED IT SEGMENT OF THIS COMPARABLE. THE A SSESSEE HAS COMPUTED THE EMPLOYEE PERCENTAGE WITHOUT EXCLUDING THE PURCH ASE OF STOCK-IN-TRADE, WHICH IS FOR ITS INFRA SEGMENT AND NOT IT SEGMENT. THE ASSESSEE HAS NOT DEMONSTRATED HOW DIFFERENCE IN ASSET PROFILE OF THE ASSESSEE AND THE ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 14 COMPARABLE IMPACT ON COMPARABILITY. THE DRP REJECTE D THE OBJECTION OF ASSESSEE BY TAKING VIEW THAT THIS COMPANY IS COMPAR ABLE WITH ASSESSEE AS IT IS ENGAGED IN THE BUSINESS OF BPO AND/OR AND ITES P ROVIDER AND DEVELOPMENT OF INFRASTRUCTURE FACILITY. ON THE EMPL OYEE COST FILTER, THE DRP CONCLUDED THAT OUT OF TOTAL SALARY COST OF RS. 2.02 CRORE, BULK OF THIS WILL BE ATTRIBUTABLE TO ITES/BPO AS IT IS UNIVERSALLY ACKNO WLEDGED THAT ITES/BPO IS MORE WORK FORCE INTENSIVE AS COMPARE TO INFRA ACTIV ITY. THEREFORE, ALLOCATION OF MANPOWER EXPENSES ON THE BASIS OF ITES/BPO SEGME NT AND INFRA SEGMENT IS NOT CORRECT. ON ASSET TURNOVER RATIO, THE DRP CO NCLUDED THAT ONCE COMPANY IS FUNCTIONALLY COMPARABLE, IS CANNOT BE RE JECTED ON THE GROUND OF DIFFERENCE OF FIXED ASSET TO OPERATING INCOME, LOW EMPLOYEE COST, UNLESS THE ASSESSEE DEMONSTRATE HOW THESE FACTORS HAVE IMPACTE D PROFITABILITY AND ALSO QUANTIFY THE DIFFERENCE IN PROFITABILITY. THE LD. A R OF THE ASSESSEE VEHEMENTLY SUBMITTED THAT THIS COMPARABLE CANNOT BE COMPARABLE AS ITS DIRECTOR WERE CONSIDERING CLOSING OF ITS ITES/BPO S EGMENT AND DIVERSIFY IN NEW AREA OF CONSTRUCTION, DEVELOPMENT OF PROPERTY A ND REAL ESTATE. THE LD. AR ALSO DEMONSTRATED THAT THE FLUCTUATING MARGIN OF THIS COMPARABLE IN DIFFERENT FINANCIAL YEAR IN THE FOLLOWING MANNER: FINANCIAL YEAR OP/TC (%) REVENUE (RS.) 2008-09 247.74% 1,86,040.74 2009-10 267.31% 2,04,161.34 2010-11 238.71% 2,03,526.40 2011-12 41.48% 79,096.95 ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 15 2012-13 75.70% 76,098.54 20013-14 30% 52,972.12 2014-15 2% 22,994.38 17. THE LD. AR FOR THE ASSESSEE STRONGLY RELIED ON THE DECISION OF CO-ORDINATE BENCH IN CLEAR INFO ANALYTICS PRIVATE LTD. VS. ACIT (SUPRA) WHEREIN THIS COMPARABLE WAS HELD TO BE NOT COMPARABLE WITH CAPTI VE SERVICE PROVIDER HOLDING AS UNDER: 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICED THAT THE PUNE BENCH OF THE TRIBUNAL EXAMINED THE COMPARABLE COMPANY, M/S. EXCEL INFOWAYS LTD., IN THE CASE OF M/S. OCWEN FINANCIAL SOLUTIONS PRIVATE LIMITED VS. ACIT IN ITA NO. 2669/PUN/2016, DT. 21-01-2019. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT DISCUSSI ONS MADE BY THE PUNE BENCH OF THE TRIBUNAL IN THE ABOVE SAID CASE: 12. WITH REGARD TO EXCEL INFOWAYS LIMITED, WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF EMERSON CLIMAT E TECHNOLOGIES (INDIA) PVT. LTD. VS. DCIT (SUPRA.) HAS DECIDED WHETHER EXC EL INFOWAYS LIMITED CAN BE COMPARABLE COMPANY OR NOT BY OBSERVING AS UN DER: '18. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E RECORD. THE LIMITED ISSUE WHICH ARISES IS AGAINST BENCHMARKING OF ALP O F THE IT(TP)A NO. 2299/MUM/2017 INTERNATIONAL TRANSACTIONS ON ACCOUNT OF PROVISIONS OF ORACLE SUPPORT SERVICES (JT-ENABLES SERVICES) BY AS SESSEE TO ITS ASSOCIATED ENTERPRISE AND FOR BENCHMARKING OF ALP OF THE INTER NATIONAL TRANSACTIONS TO THE SAID CONCERN IE. EXCEL INFOWAYS LTD. WHICH HAS BEEN FINALLY SELECTED BY THE DRP, IS TO BE EXCLUDED SINCE IT IS SHOWING FLUC TUATING MARGINS. IT IS FURTHER OBSERVED THAT THE OPERATING MARGIN OF THE C OMPANY HAD SHOWN DRASTIC FLUCTUATIONS RANGING FROM 247.74% IN F.Y. 2 008-09 TO 2% IN FY 2014-15. THE ASSESSEE HAS POINTED OUT THE MARGINS S HOWN BY THE SAID CONCERN WERE AS UNDER: FINANCIAL YEAR OP/TC MARGIN 2008-09 247. 74% 2009-10 267. 31% 2010-11 238 .71%. 2011-12 41.4 8% 2012-13 75.7 0% 2013-14 30% 2014-15 2% ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 16 19. WE FIND THAT THE TRIBUNAL IN ASSESSEE'S OWN CAS E IN ASSESSMENT YEARS 2011-12 & 2012-13 VIDE PARA 16 & 17 OF THE ORDER OF TRIBUNAL HAS EXCLUDED EXCEL INFOWAYS LTD., BECAUSE OF ITS FLUCTUATING MAR GINS SHOWN BY THE SAID CONCERN. THE TRIBUNAL HELD THAT THE SAID CONCERN I. E. EXCEL INFOWAYS LIMITED WHICH IS IN THE PROCESS OF CLOSING DOWN ITS ITES SEGMENT AND ALSO BECAUSE OF THE FACTUM OF FLUCTUATING MARGINS, COULD NOT BE SELECTED AS FUNCTIONALLY COMPARABLE TO THE ASSESSEE. FOLLOWING THE SAME PARITY OF THE REASONS, WE HOLD THAT THE SAID CONCERN I.E. EXCEL I NFOWAYS LIMITED, BECAUSE OF DIFFERENT FACTORS AND ALSO FLUCTUATING TO BE EXC LUDED FROM FINAL SET OF COMPARABLES. ACCORDINGLY, WE H LD THE ASSESSING OFF ICER IS DIRECTED TO RECOMPUTE MEAN MARGIN OF THE COMPARABLES AND DETERM INE ALP OF THE INTERNATIONAL TRANSACTIONS OF PROVISION OF ORACLE S UPPORT SERVICES (ITES) BY THE ASSESSEE TO ITS AES AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROUND NO. 3 RAISED IN APPEAL B Y ASSESSEE IS ALLOWED.' IN THE CASE OF EXCEL INFOWAYS LIMITED, A CHART PROV IDED BEFORE US WHEREIN WE HAVE SEEN THAT THERE IS FLUCTUATING PROFIT MARGI NS AND IT(TP)A NO. 2299/MUM/2017 FOLLOWING THE SAME PARITY OF REASONIN G, EXCEL INFOWAYS LIMITED BECAUSE OF FLUCTUATING PROFIT MARGIN, IS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. 13. FURTHER, THE TPO HAS APPLIED DIMINISHING REVENU E FILTER TO EXCLUDE THE COMPANIES FROM THE COMPARABLE SET WHEREAS, THE REVE NUE OF EXCEL INFOWAYS LIMITED ALSO CLEARLY DEMONSTRATED DIMINISHING REVEN UE TREND. IN SUCH SITUATION, WE REFER TO THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL, DELHI IN THE CASE OF BAXTER INDIA PVT. LTD. VS. ACI T (SUPRA.) WHERE THE TRIBUNAL HAS HELD AS FOLLOWS: '24. SO FAR AS EXCLUS ION OF EXCEL INFOWAYS LTD. IS CONCERNED, WE ALSO FIND MERIT IN THE SUBMIS SIONS OF THE ID. COUNSEL FOR THE ASSESSEE THAT THE ABOVE COMPANY SHOULD BE E XCLUDED FROM THE LIST OF COMPARABLES. THIS COMPANY FAILS TPO'S OWN FILTER OF DIMINISHING REVENUE AND ABNORMAL VOLATILITY IN REVENUE AND MARGINS. WE FIND FROM THE ORDER OF THE TPO AT PARA 7.5 (PAGE 24 - 25 OF THE TPO ORDER) WHERE THE TPO HAS OBSERVED THAT THE DEPARTMENT HAS APPLIED CONSISTENT DIMINISHING REVENUE/ LOSS MAKING FILTER WHEREIN THE COMPANIES WITH LOSSE S/ DIMINISHING REVENUE FOR THE LAST THREE YEARS UPTO AND INCLUDING THE FIN ANCIAL YEAR 2010-11 WERE REJECTED AS COMPARABLES. THE DEPARTMENT HAS EXCLUDE D SUCH COMPANIES WITH CONSISTENT LOSSES/ DIMINISHING REVENUE IN AN ENVIRO NMENT WHERE INDIAN ECONOMY IS GROWING AT CONSISTENT RATE. HAVING HELD SO, THE ASSESSING OFFICER INCLUDED EXCEL INFOWAYS LTD. AS A COMPARABL E WITHOUT CONSIDERING THE FACT THAT THE SAID COMPANY DOES NOT PASS THE DI MINISHING ITA NO.6158/DEL/2016 REVENUE FILTER. FROM THE SUBMISSIO NS OF THE ASSESSEE BEFORE THE TPO (AT PAGE 232 OF VOLUME -1 OF THE PAP ER BOOK) WE FIND THE DETAILS OF THE OPERATING MARGIN OF THE COMPANY FROM FINANCIAL YEARS 2009-10 TO 2014-15 ARE AS UNDER:- .. . 25. FROM THE ABOVE, IT IS CLEAR THAT ABOVE COMPANY DOES NOT PASS THE DIMINISHING REVENUE FILTER AS ADOPTED BY THE TPO HI MSELF SINCE ITS REVENUE HAS DECREASED CONSISTENTLY FROM FINANCIAL Y EARS 2009-10 ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 17 TO IT(TP)A NO. 2299/MUM/2017 2011-12 IE. INCLUDING THE YEAR UNDER CONSIDERATION. FURTHER, THE ABOVE COMPANY HAS SUPER NORMAL PROFITS. WE FURTHER FIND THE SUBMISSIONS OF THE ASSESSEE THAT E XCEL INFOWAYS LTD. HAS SUPER NORMAL PROFITS DURING THE CURRENT YEAR HAS NO T BEEN CONTROVERTED BY THE REVENUE. WE FIND THE MUMBAI BENCH OF THE TRIBUN AL THE CASE OF DCIT VS. WILLIS PROCESSING SERVICES (INDIA) PVT. LT D . VIDE ITA NO.2152/MUM/2014 HAS UPHELD THE ORDER OF THE DRP RE JECTING EXCEL INFOWAYS LTD. AS COMPARABLE COMPANY ON THE GROUND T HAT THE COMPANY HAS A SUPER NORMAL PROFIT OF 203.80% AND LOW EMPLOY EE COST 10.02%. WE, THEREFORE, FIND MERIT IN THE SUBMISSIONS OF THE ID. COUNSEL FOR THE ASSESSEE THAT EXCEL INFOWAYS LTD. SHOULD BE EXCLUDE D FROM THE LIST OF COMPARABLE ON ACCOUNT OF SUPER NORMAL PROFIT OF THE SAID COMPANY IN THE PRECEDING YEAR. 25.1 FURTHER, FROM THE ORDER OF THE TPO WE FIND HE HAS OBTAINED THE EMPLOYEE COST AND THE SALE FOR THE 1TES SEGMENT BY EXERCISE OF HIS POWERS U/S. 133(6), WHEREIN THE SAID COMPANY HAS AL LOCATED ENTIRE EMPLOYEE COST TO IT - BPO SEGMENT WITH NO ALLOCATIO N TO INFRA ACTIVITY SEGMENT WHICH ACCOUNTS TO 49% OF EXCELS TOTAL REVEN UE. IN OUR OPINION, IT IS HIGHLY IMPRACTICAL THAT NO EMPLOYEE HAS BEEN HIRED BY EXCEL FOR INFRA ACTIVITY SEGMENT. WE, THEREFORE, FIND MERIT I N THE ARGUMENT OF THE ID. COUNSEL FOR THE ASSESSEE THAT THE INFORMATION P ROVIDED AS PER SECTION 133(6) BY EXCEL INFOWAYS LTD. IS UNRELIABLE AND SHOULD NO T BE USED TO COMPUTE EMPLOYEE COST FOR ITES SEGMENT THE DELHI BE NCH OF THE TRIBUNAL IN THE CASE OF MOTOROLA SOLUTIONS INDIA PR IVATE LIMITED VIDE ITA NO.5637/DEL/2011 HAS HELD THAT A COMPANY SHOULD BE REJECTED AS COMPARABLE IN CASE THERE IS CONTRADICTION IN THE FA CTS OR DATA SOURCED FROM ANNUAL REPORT AND AS PER THE INFORMATION GATHE RED U/S. 133(6). IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT EXCEL INFOWA YS LTD. CANNOT BE CONSIDERED AS COMPARABLE AND SHOULD BE EXCLUDED FRO M THE LIST OF COMPARABLES. WE HOLD AND DIRECT ACCORDINGLY.' THEREFORE, IT IS EXAMINED THAT BOTH, UNIVERSAL PRIN T SYSTEMS LIMITED AND EXCEL INFOWAYS LIMITED CANNOT BE CONSIDERED AS COMP ARABLE COMPANIES WITH THAT OF THE ASSESSEE COMPANY. HENCE, GROUND NO . 4 IS, THUS, ALLOWED'. 7. WE NOTICE THAT M/S EXCEL INFOWAYS LTD WAS NOT CO NSIDERED AS A COMPARABLE COMPANY FOR THE REASON THAT THE PROFITS OF THE COMP ANY WAS DECLINING AND IT WAS HAVING SUPER NORMAL PROFITS. THE YEAR-WISE PROFIT P ERCENTAGE WOULD SHOW IT(TP)A NO. 2299/MUM/2017 THAT THE SAME WAS CO NSISTENTLY DECLINING FROM 364.14% IN FY 2009-10 TO 0.43% IN FY 2014-15. IN VIEW OF THE FLUCTUATING PROFIT, I.E., DIMINISHING PROFIT, THE A BOVE SAID COMPANY WAS NOT TAKEN AS A COMPARABLE. EVEN THOUGH THE LD D.R CONTENDED T HAT THE DECISION IN THE CASE OF EMERSON CLIMATE TECHNOLOGIES (INDIA) PVT. LTD, W HICH WAS FOLLOWED BY THE PUNE BENCH OF TRIBUNAL IN THE CASE OF OCWEN FINANCI AL SOLUTIONS P LTD (SUPRA) WAS RELATED TO DIFFERENT ASSESSMENT YEAR AND FURTHE R THE FUNCTIONS OF M/S EMERSON CLIMATE TECHNOLOGIES (INDIA) PVT. LTD. WERE DIFFERENT, YET WE ARE OF THE VIEW THAT THE PRINCIPLE LAID DOWN IN THE ABOVE SAID CASE WITH REGARD TO DIMINISHING REVENUE AND FLUCTUATING PROFIT CAN BE A DOPTED IN THE INSTANT CASE. FURTHER THE LD A.R HAS POINTED OUT THAT THERE IS DI FFERENCE IN THE FUNCTIONS ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 18 PERFORMED BETWEEN THE ASSESSEE COMPANY AND M/S EXCE L INFOWAYS LTD. IN VIEW OF THE ABOVE, WE AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT M/S EXCEL INFOWAYS LTD CANNOT BE CONSIDERED AS A COMPARABLE C OMPANY IN THE HANDS OF THE ASSESSEE. 18. THE CO-ORDINATE BENCH OF DELHI TRIBUNAL IN BT E-SER VICES (INDIA) (P.) LTD. VS. ITO (SUPRA) WHILE CONSIDERING THIS COMPARABLE W ITH THE ASSESSEE- COMPANY WHO IS PROVIDING IT, ITES, BACK OFFICE SUPP ORT AND OTHER RELATED SERVICES TO ITS GROUP ENTITY EXCLUDED THIS COMPARAB LE HOLDING AS UNDER: 5.3 EXCEL INFOWAYS LIMITED WITH RESPECT TO THIS COM PANY, IT HAS BEEN SUBMITTED THAT THIS COMPANY WAS ALSO FUNCTIONALLY DISSIMILAR AS IT WAS ENGAGED IN IT ENABLED BPO SERVICES AND DEVELOPMENT OF INFRASTRUCT URE FACILITY. IT HAS ALSO BEEN SUBMITTED THAT THIS COMPANY FAILS THE EMPLOYEE COST FILTER AS WELL AS THE DIMINISHING REVENUE FILTER. WE FIND THAT EXCEL INFO WAYS LTD WAS DIRECTED TO BE EXCLUDED BY ITAT DELHI BENCH IN THE CASE OF BAXTER INDIA PVT. LTD VS. ACIT IN ITA ITA 6690/DEL/2016 ASSESSMENT YEAR 2012-13 6158/ DEL/2016 WHICH ALSO PROVIDED CAPTIVE IT ENABLED SERVICES TO ITS AE. THE YEAR UNDER CONSIDERATION BEFORE THE ITAT IN THE CASE OF BAXTER INDIA (P) LTD WAS ALSO AY 2012-13. THE RELEVANT OBSERVATIONS ARE CONTAINED IN PARA 24 AND 25 OF THE SAID ORDER AND ARE BEING REPRODUCED FOR A READY REFERENCE: '24. SO FAR AS EXCLUSION OF EXCEL INFOWAYS LTD. IS CONCERNED, WE ALSO FIND MERIT IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ABOVE COMPANY SHOULD BE EXCLUDED FROM THE LIST OF COMPARA BLES. THIS COMPANY FAILS TPO'S OWN FILTER OF DIMINISHING REVENUE AND A BNORMAL VOLATILITY IN REVENUE AND MARGINS. WE FIND FROM THE ORDER OF THE TPO AT PARA 7.5 (PAGE 24 - 25 OF THE TPO ORDER) WHERE THE TPO HAS OBSERVE D THAT THE DEPARTMENT HAS APPLIED CONSISTENT DIMINISHING REVENUE/LOSS MAK ING FILTER WHEREIN THE COMPANIES WITH LOSSES/DIMINISHING REVENUE FOR THE L AST THREE YEARS UPTO AND INCLUDING THE FINANCIAL YEAR 2010-11 WERE REJECTED AS COMPARABLES. THE DEPARTMENT HAS EXCLUDED SUCH COMPANIES WITH CONSIST ENT LOSSES/DIMINISHING REVENUE IN AN ENVIRONMENT WHERE INDIAN ECONOMY IS G ROWING AT CONSISTENT RATE. HAVING HELD SO, THE ASSESSING OFFICER INCLUDE D EXCEL INFOWAYS LTD. AS A COMPARABLE WITHOUT CONSIDERING THE FACT THAT THE SAID COMPANY DOES NOT PASS THE DIMINISHING REVENUE FILTER. FROM THE SUBMI SSIONS OF THE ASSESSEE BEFORE THE TPO (AT PAGE 232 OF VOLUME - 1 OF THE PA PER BOOK) WE FIND THE DETAILS OF THE OPERATING MARGIN OF THE COMPANY FROM FINANCIAL YEARS 2009-10 TO 201-15 ARE AS UNDER :- 25. FROM THE ABOVE, IT IS CLEAR THAT ABOVE COMPANY DOES NOT PASS THE DIMINISHING REVENUE FILTER AS ADOPTED BY THE TPO HI MSELF SINCE ITS REVENUE ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 19 HAS DECREASED CONSISTENTLY FROM FINANCIAL YEARS 200 9-10 TO 2011-12 I.E. INCLUDING THE YEAR UNDER CONSIDERATION. FURTHER, TH E ABOVE COMPANY HAS SUPER NORMAL PROFITS. WE FURTHER FIND THE SUBMISSIO NS OF THE ASSESSEE THAT EXCEL INFOWAYS LTD. HAS SUPER NORMAL PROFITS DURING THE CURRENT YEAR HAS NOT BEEN CONTROVERTED BY THE REVENUE. WE FIND THE MUMBA I BENCH OF THE TRIBUNAL THE CASE OF WILLIS PROCESSING SERVICES (IN DIA) PVT. LTD. (SUPRA) HAS UPHELD THE ORDER OF THE DRP REJECTING EXCEL INFOWAY S LTD. AS COMPARABLE COMPANY ON THE GROUND THAT THE COMPANY HAS A SUPER NORMAL PROFIT OF 203.80% AND LOW EMPLOYEE COST 10.02%. WE, THEREFORE , FIND MERIT IN THE SUBMISSIONS OF THE ID. COUNSEL FOR THE ASSESSEE THA T EXCEL INFOWAYS LTD. SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE ON A CCOUNT OF SUPER NORMAL PROFIT OF THE SAID COMPANY IN THE PRECEDING YEAR.' 5.4.1 RESPECTFULLY FOLLOWING THE ORDER OF THE CO-OR DINATE BENCH, ON IDENTICAL FACTS, WE DIRECT THE AO/TPO TO EXCLUDE EXCEL INFOWA YS LTD FROM THE FINAL SET OF COMPARABLES. 19. IN VIEW OF THE AFORESAID DISCUSSION AND FOLLOWING T HE DECISIONS OF CO- ORDINATE BENCH ON SIMILAR SET OF FACT, WE DIRECT TH E AO/TPO TO EXCLUDE EXCEL INFOWAY LTD. FROM THE FINAL SET OF COMPARABLE . CONSIDERING THE FACT THAT WE HAVE DIRECTED TO EXCLUDE THE INFOSYS BPO LT D. AND EXCEL INFOWAYS LTD., THEREFORE, THE AO/TPO IS DIRECTED TO RECOMPUT E THE ALP OF IT SUPPORT SERVICES WITH ITS AE AS PER DIRECTION/ OBSERVATION HEREINABOVE. IN THE RESULT, GROUND NOS.1 TO 6 ARE ALLOWED. 20. GROUND NO.7 RELATES TO NOT GRANTING SET OFF OF BROU GHT FORWARD LOSSES AND UNABSORBED DEPRECIATION AGAINST THE INCOME OF CURRE NT YEARS. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS FILED AN APPLICATION UNDER SECTION 154 BEFORE THE ASSESSING OFFICER, HOWEVER, THE ASSE SSEE ASSESSING OFFICER HAS NOT DISPOSED OFF THE APPLICATION. THE LD. AR OF THE ASSESSEE PRAYED FOR APPROPRIATE DIRECTION BE GIVEN TO THE ASSESSING OFF ICER TO DECIDE THE APPLICATION UNDER SECTION 154. THE LD. AR FURTHER S UBMITS THAT THE ASSESSING ITA NO. 970 MUM 2017-M MODAL GLOBAL SERVICES PRIVATE LTD. 20 OFFICER MUST GRANT THE SET OFF OF BUSINESS LOSS AND UNABSORBED DEPRECIATION EXCEPT THE YEARS, QUA WHICH THE A.Y. IS IN DISPUTE. 21. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDERS OF LOWER AUTHORITIES. 22. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND CONSIDERING THE SUBMISSION OF LD. AR OF THE ASSESSEE, THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE APPLICATION OF ASSESSEE FILED UNDER SECT ION 154 IN SEEKING THE SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UNABSORBED DEPREDATION IN ACCORDANCE WITH LAW. NEEDLESS TO ORDER THAT BEFORE PASSING THE ORDER, THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY TO THE AS SESSEE. IN THE RESULT, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE . 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON 16/10/2019. SD/- SD/ - SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER JUDICIA L MEMBER MUMBAI, DATE:16.10.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR K BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI