Marvell India Private Limited, Bengaluru V. Deputy Commissioner of Income-Tax, Circle-4(1)(1), Bangalore

ITTPA 115/BANG/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 0646 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 03-09-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 15-07-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 22-02-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: MUKESH BUTANI
• Keywords: Transfer pricing; International transaction; Question of law
• Section: 143(3); 22; 13; 92CA; 234B; 144C; 10B; 92C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER IT(TP)A No. 115/Bang/2023 Assessment Year : 2017-18 M/s. Marvell India Pvt. Ltd., Tower D, 10 th & 11 th Floors, Global Technology Park, Marathahalli, Sarjapur Outer Ring Road, Bellandur, Bengaluru – 560 103. PAN: AAECM5559R Vs. The Deputy Commissioner of Income Tax, Circle – 4(1)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Mukesh Butani, CA Revenue by : Shri Vilas V Shinde, CIT-DR Date of Hearing : 16-07-2024 Date of Pronouncement : 04-09-2024 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the assessee challenging the orders of the AO dated 29/12/2022 in respect of the Assessment Year 2017-18. 2. The brief facts of the case are that the assessee is a subsidiary of Marvell Technology Group Ltd. located in Bermuda and is engaged in provision of software development services to its Associated Enterprise (‘AE’) for which it is compensated on a cost plus basis. During the assessment year 2017-18, Page 2 of 15 IT(TP)A No. 115/Bang/2023 the assessee filed its return of income on 30/11/2017. The return of income was took up for scrutiny and during the course of the assessment proceedings, the AO made reference to international transactions entered into by the assessee to the Ld.JCIT (Transfer Pricing) for determining the Arms Length Price u/s. 92CA of the Act. Thereafter the Ld.TPO passed the order determining the TP adjustment of Rs. 13,32,47,187/-. Based on the TPO’s reference, the AO issued a draft assessment order for which the assessee filed their objections before the Dispute Resolution Panel (‘DRP’). The DRP also heard the assessee and considered the submissions made by the assessee but not accepted the objections and confirmed the draft assessment order and directed the AO to pass orders accordingly. Thereafter the AO passed the assessment order on 29/12/2022. Now the assessee is challenging the said assessment order before us and raised several grounds which is as follows: “ANNEXURE 1 to Form 36 Marvell India Pvt Ltd (hereinafter referred to as the 'Appellant' or 'Company)' objects to the final assessment order dated 29.12.2022 passed under section 143(3) read with Section 260 of the Income-tax Act, 1961 (hereafter referred to as the 'Act') by the Deputy Commissioner of Income Tax, Circle 4(1)(1), Bangalore on the basis of the directions dated 28.11.2022 of the Dispute Resolution Panel (hereinafter referred to as the `DRP') and order under section 92CA (3) of the Act passed by the Transfer Pricing Authority dated 28.01.2021 for the aforesaid assessment year on the following, among other grounds: Ground No. 1: Transfer Pricing (TP) adjustment 1.1. The Ld. Assessing Officer has erred in law and on facts in making a TP adjustment of INR 11,55,70,934/- to the returned income of the Appellant and in holding that the international transactions between the Appellant and its AE of provisions of SWD services were not at arm's length. Ground No. 2: Rejection of the TP documentation of the Appellant 2. The Ld. Assessing Officer has erred in law and on facts by rejecting, without cogent reasons, the TP documentation maintained by the Appellant in the manner contemplated under the relevant provisions of Chapter X of the Act, and Rule 10 the Income-tax Rules, 1962 (hereinafter referred to as the 'the Rules') by stating that the documentation is "not reliable or correct" merely because the learned TPO did not agree with the positions and filters adopted by the Appellant, Page 3 of 15 IT(TP)A No. 115/Bang/2023 and instead chose to adopt additional filters / modified filters in selecting the comparable companies and has erred in law and on facts by conducting a fresh search analysis for comparable companies without considering the requirement of Rule 10D (4) of the Rules Ground No. 3: Rejection of the comparability analysis undertaken by the Appellant 3. The Ld. Assessing Officer has erred in law by conducting a fresh search for comparable companies and by rejecting the search process carried out by the Appellant, without giving justifiable reasons. The Ld. Assessing Officer did not consider that the TPO can proceed to determine the ALP for the international transactions of the Appellant on its own only upon satisfaction of the conditions mentioned in Section 92C(3) of the Act which were not satisfied in the impugned case. Further, the learned TPO did not consider the requirement of Rule 10D(4) of the Rules when undertaking a fresh search for comparable companies. Ground No. 4: Non-availability of data for FY 2016-17 4. The Ld. Assessing Officer has erred in not selecting companies only if the data pertaining to FY 2016-17 is available in public database. If the data pertaining to FY 2016-17 is not available, Ld. Assessing Officer has proceeded to not select the company, ignoring that data for FY 2015-16 and FY 2014-15 is available. Ground No. 5: Companies with different financial accounting year end 5. The Ld. Assessing Officer has erred in law and on facts in rejecting certain comparable companies on the basis that their financial year-end dates do not coincide with the Appellant's financial year-end date. The Ld. Assessing Officer has himself selected R Systems International Limited, a company having different FY as compared to the Appellant in the final set of comparable. Ground No. 6: Turnover filter should have an upper limit 6. The Ld. Assessing Officer has erred in law and on facts by incorrectly applying the turnover filter for non-exclusion of comparable having turnover more than Rs. 200 crores despite several rulings of coordinate bench including in appellant's own case: i. Nihilent Ltd ii. Cybage Software Pvt Ltd iii. Mindware Ltd iv. Larsen & Toubro Infotech Ltd v. Infosys Ltd vi. Persistent Systems Ltd( Ground No. 7: Application of filter for ten times of Appellants turnover Page 4 of 15 IT(TP)A No. 115/Bang/2023 7. Without prejudice to Ground no. 5 and in the alternative, the Ld. Assessing Officer have erred in law and on facts by considering comparable companies having turnovers greater than ten times the turnover of the Appellant. Ground No. 8: Application of export earning filter of 75% 8. The Ld. Assessing Officer has erred in applying the export earning filter with a threshold limit of 75% of the total turnover in selecting certain comparable companies. Ground No. 9: Modification of persistent loss filter 9. The Ld. Assessing Officer has erred in law and facts in modifying persistent loss filter applied by the Appellant in its TP documentation and thereby rejecting comparable companies having losses in 2 out of 3 years. Ground No. 10: Methodology applied for the computation of RPT filter. 10. The Ld. Assessing Officer has erred in law and on facts in incorrectly applying the RPT filter by taking only RPT Income/Total Income or RPT Expenditure/Total Expenditure instead of taking the total value of RPT transactions (RPT Income + RPT Expenditure) in the numerator and sales in the denominator. Ground No. 11: Introducing new comparable companies selected by the learned TPO in relation to Software Development Services ("SWD"). 11. The Ld. Assessing Officer has erred in law and on facts in introducing new companies as comparable to the Appellant, despite there being differences in functional comparability, product dissimilarity, intangibles led revenues, availability of complete financial information, incorrect reliance on (unreliable) segmented financials, extra-ordinary events due to business restructuring, abnormal year, judicial pronouncements, or other differences: i. Larsen & Toubro Infotech Ltd ii. Mindtree Ltd iii. Persistent Systems Ltd iv. Tata Elxsi Ltd v. Aptus Software Labs Pvt Ltd vi. Cygnet Infotech Pvt Ltd vii. Infobeans Technologies Ltd viii. Nihilent Ltd ix. Infosys Ltd x. Cybage Software Pvt Ltd xi. Consilient Technologies Pvt Ltd Ground No. 12: Rejection of comparable companies included in Appellant's TP documentation Page 5 of 15 IT(TP)A No. 115/Bang/2023 12. The Ld. Assessing Officer has erred in law and on facts in rejecting the comparable companies selected by the Appellant, based on incorrect reasons: i. Agilisys IT Systems India Pvt Ltd ii. Sasken Communication Technologies Ltd iii. Isummation Technologies Pvt Ltd iv. Evoke Technologies Pvt Ltd v. Minvesta Infotech Ltd Ground No. 13: Rejection of additional comparable companies requested for inclusion by the Appellant during the course of assessment proceedings. 13. The Ld. Assessing Officer has erred in law and on facts in rejecting additional comparable companies requested for inclusion by the Appellant, during the assessment proceedings: i. Synfosys Business Solutions Ltd ii. Maveric Systems Ltd iii. E-Zest Solutions Ltd iv. Batchmaster Software Pvt Ltd v. DCIS DOT COM Solutions India Pvt Ltd vi. Indianic lnfotech Ltd vii. Nintec Systems Ltd viii. Y Media Labs Pvt Ltd ix. Sybrant Technologies Pvt Ltd Ground No. 14: Computation of operating margins 14. The Ld. Assessing Officer has erred in considering provision for bad and doubtful debts for the purpose of computing the operating profit of comparable companies. Ground No. 15: Not granting working capital adjustment. 15. The Ld. Assessing Officer has erred in law and on facts by disregarding the provisions of Section 92C of the Act read with Rule 10B (3) of the Rules, by not granting the working capital adjustment. Ground No. 16: Risk adjustment 16. The Ld. Assessing Officer has erred in not appreciating that the Appellant, being a captive service provider, operates as a lower risk service provider as compared to comparable companies, which carry higher risks and accordingly erred in not granting appropriate risk adjustments. Ground No. 17: Other TP related grounds 17. The Ld. Assessing Officer failed to appreciate the Appellant's commercial wisdom on the application of arm's length principle, being inextricably tied to the business realities. Page 6 of 15 IT(TP)A No. 115/Bang/2023 Ground No. 18: Disallowance made without being proposed in the draft assessment order is in violation of Section 144C of the Income-tax Act. 1971 18. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer erred in making a disallowance of Rs 10,89,81,456 in the final assessment order dated 29 December 2022 even though no such disallowance was proposed in the draft assessment order dated 16 February 2021 passed under section 143(3) read with section 144(C) of the Act. 19. Any adjustment made in the final assessment order, without having been raised in the draft assessment order, is contrary to the scheme of section 144C of the Act and a nullity in law. Therefore, the Appellant prays that the impugned disallowance of Rs. 10,89,81,456 made by the Ld. Assessing Officer in the final assessment order should be deleted. Ground No. 19: Without prejudice to the Ground No 18. additions have been made without any his or information and without taking cognizance of the rectification application filed by the Appellant. 20. On the facts and in the circumstances of the case, the Ld. Assessing Officer erred in passing the final assessment order, by making the following additions, without providing any relevant source/supporting information for making such additions and without taking into consideration the rectification application filed by the Appellant dated 25 May 2021 against the final assessment order passed by the Ld. AO without considering the Appellant's appeal filed before the Hon'ble DRP: a) Addition of Rs. 3,26,32,148 being the difference in the gross value of services as per the final assessment order (Rs. 1,15,24,12,858) and the gross value of services disclosed by the Appellant for AY 2017-18 (Rs. 1,11,97,80,710); b) Addition of a customs duty payment of Rs. 6,04,933; c) Addition of Rs. 5,18,48,973 on account of unexplained imports, whereas total imports done by the Appellant during the year was only Rs. 64,90,685; and d) Addition of Rs. 3,03,86,087 on account of difference in closing WDV of fixed assets for AY 2016-17 and opening WDV of fixed assets for AY 2017-18. The Appellant prays that the impugned additions of Rs. 10,89,81,456 made by the Ld. Assessing Officer in the final assessment order should be deleted. Ground No. 20: The Ld. Assessing Officer has erred in levying interest under Section 234B of the Income-tax Act. 1961 and initiating penalty under Section 270A of the Income-tax Act. 1961. Page 7 of 15 IT(TP)A No. 115/Bang/2023 21. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer erred in levying interest of Rs. 3,37,10,530 under section 234B of the Act. Interest under section 234B of the Act is consequential in nature and needs to be recomputed based on the order of your honours on the above grounds. 22. On the facts and in the circumstances of the case, the Ld. Assessing Officer erred in initiating penalty proceedings under section 270A of the Act for under-reporting and misreporting of income. The Appellant craves leave to add to. amend, alter. modify. forego. or withdraw any the above Grounds of Appeal before the disposal of the Appeal. “ 3. At the time of hearing, the Ld.AR submitted that they are only pressing ground no. 6 and submitted that the other grounds need not be adjudicated by treating the same as withdrawn. The Ld.AR also brought to our notice that ground no. 6 was covered by an order of this Tribunal in assessee’s own case for Assessment Year 2015-16 in IT(TP)A No. 2577/Bang/2019 dated 21/10/2022. 4. The Ld.DR relied on the orders of the DRP as well as the AO in respect of the turnover filter adopted by the authorities and prayed to dismiss the appeal. 5. We have heard the arguments of both the sides and perused the records. 6. As rightly pointed out by the Ld.AR, the turnover filters adopted by the AO was considered by this Tribunal in the assessee’s own case cited supra and gave the following findings:-. “ 14. Ground No.8 relates to application of turnover filter by the TPO. The ld AR submitted that the TPO has applied the lower turnover filter while choosing the fresh comparable companies but failed to apply the upper turnover filter. The ld AR submitted that the turnover of assessee for the year under consideration is Rs.108 crores and that by applying the upper turnover filter Rs. 200 crores, the following companies need to be excluded. In Page 8 of 15 IT(TP)A No. 115/Bang/2023 this regard, the ld. AR presented a table with the turnover details of the comparable companies :- Sl. No. Company name Turnover In INR Crores 1. Tata Elxsi Ltd. 781.85 2. Mindtree Ltd. 3,547.40 3. Persistent Systems Ltd. 1,242.50 4. Nihilent Technologies Ltd. 267.80 5. Aspire Systems (India) Pvt. Ltd. 230.81 6. Infosys Ltd. 47,300 7. Thirdware Solutions Ltd. 230.08 8. Cybage Software Pvt. Ltd. 622.26 9. R S Software (India) Ltd. 345.51 10. Larsen & Toubro Infotech Ltd. 4,744.40 15.The ld. DR submitted that the application of upper turnover filter has been consistently held by the Tribunals and therefore ld DR did not raise any objection in this regard . We have heard the rival submissions and perused the material on record. We notice that the coordinate bench of the Tribunal in the case BORQS Software Solutions Pvt. Ltd., IT(TP)A No. 310/Bang/2021 dated 25.10.2021 has considered the issue of TPO failing to apply upper turnover filter and has excluded the following comparable companies on this ground. The relevant observation of the Hon'ble ITAT is as under: - “8. As far as Ground No. 8.7 is concerned, the relevant provisions of the Act in so far as comparability of international transaction with a transaction of similar nature entered into between unrelated parties, provides as follows: 10B . Determination of arm's length price under section 92C.—(1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction [or a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely :— (a) to (d)........ (e)transactional net margin method, by which,— (i) the net profit margin realised by the enterprise from an international transaction [or a specified domestic transaction] entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base; Page 9 of 15 IT(TP)A No. 115/Bang/2023 (ii) the net profit margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base; (iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realised by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub- clause (iii); (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international transaction [or the specified domestic transaction]; (f) . (2) For the purposes of sub-rule (1), the comparability of an international transaction [or a specified domestic transaction] with an uncontrolled transaction shall be judged with reference to the following, namely:— (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail. Page 10 of 15 IT(TP)A No. 115/Bang/2023 (3) An uncontrolled transaction shall be comparable to an international transaction [or a specified domestic transaction] if— (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences. 9. A reading of rule 10B(1)(e)(iii) of the Rules read with sec.92CA of the Act, would clearly shows that the net profit margin arising in comparable uncontrolled transactions has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market. 10. Chapters I and III of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (hereafter the "TPG") contain extensive guidance on comparability analyses for transfer pricing purposes. Guidance on comparability adjustments is found in paragraphs 3.47-3.54 and in the Annex to Chapter III of the TPG. A revised version of this guidance was approved by the Council of the OECD on 22 July 2010. In paragraph 2 of these guidelines it has been explained as to what is comparability adjustment. The guideline explains that when applying the arm's length principle, the conditions of a controlled transaction (i.e. a transaction between a taxpayer and an associated enterprise) are generally compared to the conditions of comparable uncontrolled transactions. In this context, to be comparable means that:  None of the differences (if any) between the situations being compared could materially affect the condition being examined in the methodology (e.g. price or margin), or  Reasonably accurate adjustments can be made to eliminate the effect of any such differences. These are called "comparability adjustments. 11. As far as comparability of companies listed as (a) to (g) in Grd.No.8.7 raised by the Assessee is concerned, the admitted factual position is that the turnover of these companies is more than Rs. 200 Crores and the Assessee's turnover is only Rs. 24,71,71,242/-. The TPO Page 11 of 15 IT(TP)A No. 115/Bang/2023 excluded from the list of comparable companies chosen by the Assessee in its TP study companies whose turnover was less than Rs. 1 Crore. The contention of the Assessee before the DRP was that while the TPO excluded companies with low turnover, he failed to apply the same yardstick to exclude companies with high turnover compared to the Assessee. The reason for excluding companies with low turnover was that such companies do not reflect the industry trend as their low cost to sales ratio made their results less reliable. The contention of the Assessee was that there would be effect on profitability wherever there is high or low turnover and therefore companies with high turnover should also be excluded from the list of comparable companies. The DRP primarily relied on the decision rendered by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors India (P.) Ltd. v. Dy. CIT [2017] 82 taxmann.com 167 wherein it was held that high turnover ipso facto does not lead to the conclusion that a company which is otherwise comparable on FAR analysis can be excluded and that the effect of such high turnover on the margin should be seen. The DRP therefore held that a company which is otherwise functionally comparable cannot be excluded only on the basis of high turnover. The Assessee has raised Grd.No.4 before the Tribunal challenging the aforesaid view of the DRP. 12. On the issue of application of turnover filter, we have heard the rival submissions. The parties relied on several decisions rendered on the above issue by the various decisions of the ITAT Bangalore Benches in favour of the Assessee and in favour of the Revenue, respectively. The ITAT Bangalore Bench in the case of Dell International Services India (P) Ltd. Vs. DCIT (2018) 89 Taxmann.com 44 (Bang-Trib) order dated 13.10.2017, took note of the decision of the ITAT Bangalore Bench in the case of Sysarris Software Pvt.Ltd. Vs. DCIT (2016) 67 Taxmann.com 243 (Bangalore-Trib) wherein the Tribunal after noticing the decision of the Hon’ble Delhi High Court in the case of Chryscapital (supra) and the decision to the contrary in the case of CIT Vs. Pentair Water India Pvt.Ltd., Tax Appeal No.18 of 2015 dated 16.9.2015 wherein it was held that high turnover is a ground to exclude a company from the list of comparable companies in determining ALP, held that there were contrary views on the issue and hence the view favourable to the Assessee laid down in the case of Pentair Water (supra) should be Page 12 of 15 IT(TP)A No. 115/Bang/2023 adopted. The following were the conclusions of the Tribunal in the case of Dell International (supra): “41. We have given a very careful consideration to the rival submissions. ITAT Bangalore Bench in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT, ITA No.1231/Bang/2010, relying on Dun and Bradstreet’s analysis, held grouping of companies having turnover of Rs. 1 crore to Rs.200 crores as comparable with each other was held to be proper. The following relevant observations were brought to our notice:- “9. Having heard both the parties and having considered the rival contentions and also the judicial precedents on the issue, we find that the TPO himself has rejected the companies which .ire (sic) making losses as comparable companies. This shows that there is a limit for the lower end for identifying the comparable companies. In such a situation, we are unable to understand as to why there should not be an upper limit also. What should be upper limit is another factor to be considered. We agree with the contention of the learned counsel for the assessee that the size matters in business. A big company would be in a position to bargain the price and also attract more customers. It would also have a broad base of skilled employees who are able to give better output. A small company may not have these benefits and therefore, the turnover also would come down reducing profit margin. Thus, as held by the various benches of the Tribunal, when companies which arc loss making are excluded from comparable companies, then the super profit making companies should also be excluded. For the purpose of classification of companies on the basis of net sales or turnover, we find that a reasonable classification has to be made. Dun & Bradstreet & Bradstreet and NASSCOM have given different ranges. Taking the Indian scenario into consideration, we feel that the classification made by Dun & Bradstreet is more suitable and reasonable. In view of the same, we hold that the turnover filter is very important and the companies having a turnover of Rs.1.00 crore to 200 crores have to be taken as a particular range and the assessee being in that range having turnover of 8.15 crores, the companies which also have turnover of 1.00 to 200.00 crores only should be taken into consideration for the purpose of making TP study.” 42. The Assessee’s turnover was around Rs.110 Crores. Therefore the action of the CIT(A) in directing TPO to exclude companies having turnover of more than Rs.200 crores as not comparable with the Assessee was justified. Page 13 of 15 IT(TP)A No. 115/Bang/2023 As rightly pointed out by the learned counsel for the Assessee, there are two views expressed by two Hon’ble High Courts of Bombay and Delhi and both are nonjurisdictional High Courts. The view expressed by the Bombay High Court is in favour of the Assessee and therefore following the said view, the action of the CIT(A) excluding companies with turnover of above Rs.200 crores from the list of comparable companies is held to correct and such action does not call for any interference.” 13. The Tribunal in the case of Autodesk India Pvt.Ltd. Vs. DCIT (2018) 96 Taxmann.com 263 (Bangalore-Tribunal), took note of all the conflicting decision on the issue and rendered its decision and in paragraph 17.7. of the decision held as that high turnover is a ground for excluding companies as not comparable with a company that has low turnover. The following were the relevant observations: 17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt.Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum. Judicial discipline requires that the Tribunal should follow the decision of a non-jurisdiction High Court, even though the said decision is of a non- jurisdictional High Court. We however find that the Hon'ble Bombay High Court in the case of CIT Vs. Pentair Water India Pvt.Ltd. Tax Appeal No.18 of 2015 judgment dated 16.9.2015 has taken the view that turnover is a relevant criterion for choosing companies as comparable companies in determination of ALP in transfer pricing cases. There is no decision of the jurisdictional High Court on this issue. In the circumstances, following the principle that where two views are available on an issue, the view favourable to the Assessee has to be adopted, we respectfully follow the view of the Hon'ble Bombay High Court on the issue. Respectfully following the aforesaid decision, we uphold the order of the DRP excluding 5 companies from the list of comparable companies chosen by the TPO on the basis that the 5 companies turnover was much higher compared to that the Assessee. 17.8. In view of the above conclusion, there may not be any necessity to examine as to whether the decision rendered in Page 14 of 15 IT(TP)A No. 115/Bang/2023 the case of Genisys Integrating (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India Pvt.Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of time. Those decisions follow the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon’ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon’ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra). 14. In view of the aforesaid decision, we hold that companies listed in Sl.No.(a) to (g) of Grd.No.8.7 raised by the Assessee whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies.” 16. We notice that in the above decision the Tribunal has excluded the comparable companies based on the upper turnover filter of Rs.200 crores. In assessee’s case from the Page 15 of 15 IT(TP)A No. 115/Bang/2023 table submitted, it is evident that the turnover all 10 comparable companies is more than Rs.200 crores. Therefore respectfully following the aforesaid decision of the Tribunal, we hold that the companies having more than 200 crores turnover need to be excluded. We accordingly direct the TPO to exclude these companies while recomputing the ALP.” 7. We have perused the above order of the Tribunal and found that the facts are all similar and the companies referred in the order of the AO and in the order of the Tribunal are one and the same and we, therefore, follow the above order of the Tribunal and direct the TPO to exclude these companies while recomputing the ALP. In the result we allow the appeal filed by the assessee in respect of ground no. 6 is concerned. 8. In respect of the other grounds, we have not adjudicated them since the assessee has not pressed the grounds. 9. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 04 th September, 2024. Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member Bangalore, Dated, the 04 th September, 2024. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore