M/s Pearson India Support Services Private Limited , Tamilnadu V. Deputy Commissioner of Income Tax Circle-3(1)(2), Bangalore

ITTPA 3171/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0261 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 27-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Question of law
• Section: 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKA RAN , ACCOUNTANT MEMBER ITA NO. 3171/BANG/ 2018 ASSESSMENT YEAR : 2014 - 15 PEARSON INDIA SUPPORT SERVICES PVT. LTD., (FORMERLY KNOWN AS GLOBAL ENGLISH INDIA PVT. LTD.), 7 TH FLOOR, SDB2, ODC 7, 8 & 9, SURVERY NO.602/3, PLOT NO.1, ELCOT IT/ITES SEZ, SHOLINGANALLUR, CHENNAI 600 019. TAMIL NADU. PAN: AACCG 96 13L VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2), BANGALORE. APPELLANT RESPONDENT APP E LLANT B Y : SHRI K.R. GIRISH, CA RESP ONDENT BY : SHRI ARUN KUMAR, CIT DATE OF HEARING : 13 .0 6 .2019 DATE OF PRONOUNCEMENT : 28 . 0 6 . 2 0 1 9 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT ITA NO.3171/BANG/2018 IS AN APPEAL BY THE ASSESSEE AGAINST THE FINAL ORDER OF ASSESSMENT DATED 28.9.2018 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2) , BANGAL ORE U/S 143(3) R.W.S 144C(13) OF THE INCOME-TAX ACT 1961 (THE ACT) FOR T HE ASST. YEAR 2014-15. ITA NO.3171/BANG/2018 PAGE 2 OF 16 2. THE ONLY ISSUE THAT ARISES FOR IN THE APPEAL BY THE ASSESSEE IS WITH REGARD TO DETERMINATION OF ARMS LENGTH PRICE (ALP) IN RESPECT OF AN INTERNATIONAL TRANSACTION OF RENDERING SOFTWARE DEV ELOPMENT SERVICES (SWD SERVICES) BY THE ASSESSEE TO ITS ASSOCIATED EN TERPRISE (AE). IT IS NOT IN DISPUTE THAT THE TRANSACTION OF RENDERING OF SOFTWARE DEVELOPMENT SERVICES BY THE ASSESSEE TO ITS AE WAS AN INTERNATI ONAL TRANSACTION AND IN VIEW OF THE PROVISIONS OF SEC. 92 OF THE INCOME TAX ACT, 1961 (ACT), INCOME ARISING FROM SUCH INTERNATIONAL TRANSACTION HAS TO BE DETERMINED HAVING REGARD TO ARMS LENGTH PRICE (ALP). 3. AS REGARDS THE INTERNATIONAL TRANSACTION OF PROV ISION OF SOFTWARE DEVELOPMENT (SWD) SERVICES TO ITS AES, THE ASSESSEE RECEIVED CONSIDERATION OF RS.15,70,68,882/- FOR RENDERING SO FTWARE DEVELOPMENT SERVICES FROM ITS AE. IN SUPPORT OF ITS CLAIM THAT THE PRICE CHARGED BY IT IN THE INTERNATIONAL TRANSACTION IS AT ARMS LENGTH, T HE ASSESSEE FILED A TRANSFER PRICING STUDY (TP STUDY) IN WHICH THE ASSE SSEE ADOPTED TRANSACTION NET MARGIN METHOD (TNMM) AS THE MOST AP PROPRIATE METHOD (MAM) FOR DETERMINATION OF ALP. THE PROFIT LEVEL I NDICATOR (PLI) CHOSEN FOR THE PURPOSE OF COMPARISON OF PROFIT MARGIN OF COMPA RABLE COMPANIES WAS OPERATING PROFIT TO OPERATING COST (OP/OC). THE PRICE CHARGED IN THE INTERNATIONAL TRANSACTION BY THE ASSESSEE FROM ITS AE WAS RS.15,70,68,882. THE OPERATING COST OF THE ASSESSEE WAS RS.13,65,81, 636/-. THE OPERATING PROFIT WAS THUS RS.2,04,87,246 AND THUS OP/OC WAS 1 5%. THE ASSESSEE IN ITS TP STUDY HAD CHOSEN 42 COMPANIES AS COMPARAB LE COMPANIES. THE AVERAGE ARITHMETIC MEAN OF THE PROFIT MARGIN OF THE COMPANIES SO SELECTED BY THE ASSESSEE WAS WITHIN THE PERMITTED R ANGE OF THE ASSESSEE AND THEREFORE THE ASSESSEE CLAIMED THAT THE PRICE C HARGED IN THE ITA NO.3171/BANG/2018 PAGE 3 OF 16 INTERNATIONAL TRANSACTION WAS AT ARMS LENGTH AND T HEREFORE NO ADDITION BY WAY OF ADJUSTMENT TO ALP SHOULD BE MADE. 4. THE ASSESSING OFFICER (AO) REFERRED THE QUESTION OF DETERMINATION OF ALP TO THE TRANSFER PRICING OFFICER (TPO) AS IS REQ UIRED BY THE PROVISIONS OF SEC.92CA OF THE ACT. OUT OF THE ABOVE 42 COMPARABL ES, THE TPO ACCEPTED ONLY TWO COMPARABLE COMPANIES VIZ., CIGINITI TECHNO LOGIES LTD., AND R.S. SOFTWARE (INDIA) LIMITED AND ON HIS OWN CHOSE 6 OTH ER COMPANIES AND ARRIVED AT A SET OF 8 COMPARABLE COMPANIES. THE AV ERAGE ARITHMETIC PROFIT MARGIN OF THE 8 COMPARABLE COMPANIES CHOSEN BY THE TPO WAS AS FOLLOWS:- SL NO. NAME OF TAX PAYER OR/SALES OC OP OP/OC (IN %) 1 INFOSYS LTD. 46,91,700 32,77,700 11,84200 36.13% 2 LARSEN & TOUBRO INFOTECH 4,54,36 0 3,64,619 89,741 24.61 % 3 MINDTREE LTD. 2,99,010 2,48,290 5 , 072 20.43% 4 P ERSISTENT SYSTEMS LTD. 1,18,412 87,649 3 , 07,625 35.10% 5 R S SOFTWARE (INDIA) LTD. 35,188 28,321 6,867 24.25% 6 CIGNITI TECHNOLOGIES LTD. 5,5 63 4,359 1 , 204 27.62% 7 S Q S INDI A B F S 20,061 19,883 16,394 3,667 22.37% 8 THIRDWARE SOLUTION LTD. 13,742 6,140 44.68% AVERAGE 29.40% 5. THE TPO COMPUTED THE ADDITION TO BE MADE TO THE TOTAL INCOME ON ACCOUNT OF DETERMINATION OF ALP AT RS. 1,96,67,755 ADOPTING PROFIT MARGIN OF 29.40% AND COMPUTED ALP AS FOLLOWS:- 20.4. COMPUTATION OF ARM'S LENGTH PRICE: 20.4.1 THE ARITHMETIC MEAN OF THE PROFIT LEVEL INDI CATORS IS TAKEN AS THE ARM'S LENGTH MARGIN. PLEASE SEE ANNEXURE A & B FO R DETAILS OF ITA NO.3171/BANG/2018 PAGE 4 OF 16 COMPUTATION OF PLI OF THE COMPARABLE. BASED ON THIS , THE ARM'S LENGTH PRICE OF THE SERVICES RENDERED BY THE TAXPAYER TO I TS AE(S) IS COMPUTED AS UNDER: SWD SEGMENT ARM'S LENGTH MEAN MARGIN ON COST 29.40% OPERATING COST 136581636 ARM'S LENGTH PRICE(ALP) 176,736,637 129.40% OF OPERATING COS T) PRICE RECEIVED 157,068,882 VARIATION IN PRICE 19,667,755 3% OF PRICE RECEIVED 4,712,066 SHORTFALL BEING ADJUSTMENT 19,667,755 6. THE ADDITION SUGGESTED BY THE TPO WAS ADDED TO T HE TOTAL INCOME OF THE ASSESSEE BY THE AO IN THE DRAFT ORDER OF ASSESS MENT. AGAINST THE DRAFT ORDER OF ASSESSMENT, THE ASSESSEE PREFERRED OBJECTI ONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP) U/S.144C OF THE ACT. 7. BEFORE DRP, THE ASSESSEE RAISED A SPECIFIC OBJEC TION WHEREIN, THE ASSESSEE CONTENDED THAT THE TPO HAS EXCLUDED COMPAN IES WHOSE TURNOVER WAS LESS THAN RS.1 CRORE. THE TPO BY THE SAME LOGIC SHOULD HAVE EXCLUDED TURNOVER OF COMPANIES WHOSE TURNOVER WAS HUGE (ABOVE RS.200 CRORES) COMPARED TO THE TURNOVER OF THE ASSE SSEE WHICH WAS ONLY RS.15.71 CRORES. THE DRP DID NOT AGREE WITH THE A BOVE SUBMISSION OF THE ASSESSEE ON THE GROUND THAT WHEN A COMPANY IS FUNCT IONALLY COMPARABLE, LARGE TURNOVER WOULD NOT BE A CRITERIA TO SAY THAT THE COMPANY IS NOT COMPARABLE. 8. FINALLY THE DRP GAVE SOME DIRECTIONS TO THE TPO IN ITS DIRECTIONS DATED 27.8.2018. CONSEQUENT TO THE DRPS DIRECTION THE TPO DETERMINED ITA NO.3171/BANG/2018 PAGE 5 OF 16 THE ADDITION TO THE MADE TO THE TOTAL INCOME ON ACC OUNT OF ADJUSTMENT IN ALP AT A SUM OF RS.1,51,19,586/- BY HIS ORDER DATED 4.9.2018. 9. AGGRIEVED BY THE ORDER OF THE DRP IN NOT EXCLUDI NG THE FOLLOWING SIX COMPANIES INFOSYS LTD., LARSEN & TOUBRO INFOTECH LT D., MINDTREE LTD., PERSISTENT SYSTEMS LTD., AND THIRDWARE SOLUTIONS LI MITED, BY APPLYING TURNOVER FILTER, THE ASSESSEE HAS PREFERRED THE PRE SENT APPEAL BEFORE THE TRIBUNAL. IT IS UNDISPUTED THAT THE TURNOVER OF TH ESE 6 COMPANIES ARE ABOVE RS.200 CRORES. 10. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO APPLIED LOWER TURNOVER FILTER OF RS.1 CRORE AND REJECTED CO MPANIES WITH TURNOVER OF LESS THAN RS.1 CRORE FROM THE LIST OF COMPARABLE CO MPANIES AND BY THE SAME LOGIC HE OUGHT TO HAVE EXCLUDED COMPANIES WITH HIGH TURNOVER FROM THE LIST OF COMPARABLE COMPANIES (I.E., COMPANIES H AVING TURNOVER OF RS.200 CRORES AND ABOVE). 11. AS FAR AS THE APPLICATION OF TURNOVER FILTER IS CONCERNED, THE FIRST OBJECTION OF THE LD. DR WAS THAT TURNOVER CANNOT BE A RELEVANT CRITERION IN CHOOSING COMPARABLE COMPANIES AND IN THIS REGARD PL ACED RELIANCE ON THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CHRYS CAPITAL LTD.,82 TAXMANN.COM 167(DEL). THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER POINTED OUT THAT SIMILAR OBJECTION WAS RAISED BY TH E REVENUE IN ONE OF THE CASE DECIDED BY THIS TRIBUNAL IN AUTODESK INDIA PVT.LTD. VS. DCIT (2018) 96 TAXMANN.COM 263(BANGALORE-TRIB.) AND RELIED ON THE SAID DECISION. 12. WE FIND THAT VARIOUS ASPECTS OF APPLICATION OF TURNOVER FILTER, WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF AUTODESK INDIA PVT.LTD. (SUPRA) AND IT WAS HELD THAT TURNOVER IS A RELEVANT CRITERI A FOR DECIDING COMPARABILITY ITA NO.3171/BANG/2018 PAGE 6 OF 16 OF COMPANIES AND THAT A COMPANY WITH HUGE TURNOVER CANNOT BE COMPARED WITH A COMPANY WITH SMALL TURNOVER. THE TURNOVER C RITERIA WAS BASED ON CLASSIFICATION OF COMPANIES WITH TURNOVER UPTO RS.2 00 CRORES FALLING WITHIN ONE CATEGORY AND COMPANIES WITH TURNOVER OF RS.200 CRORES TO RS.500 CRORES FALLING IN ANOTHER CATEGORY AND SO ON. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS:- 17. THE FIRST ISSUE TO BE DECIDED IN REVENUES AP PEAL IS THE APPLICATION OF TURNOVER FILTER FOR EXCLUSION OF COM PANIES THAT ARE OTHERWISE FOUND TO BE FUNCTIONALLY COMPARABLE. THE GRIEVANCE OF THE REVENUE IN THIS REGARD IS PROJECTED IN GR.NO.2 OF THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITS APPEAL. THE BA SIC FACTS TO BE NOTICED WITH REGARD APPLICATION OF TURNOVER FILTER ARE THAT THE ASSESSEES TURNOVER FOR THE RELEVANT PREVIOUS YEAR WAS RS.10.65 CRORES. THE TPO EXCLUDED FROM THE LIST OF COMPARAB LE COMPANIES CHOSEN BY THE ASSESSEE IN ITS TP STUDY COMPANIES WH OSE TURNOVER WAS LESS THAN RS.1 CRORE. THE CONTENTION OF THE AS SESSEE BEFORE THE CIT(A) WAS THAT WHILE THE TPO EXCLUDED COMPANIE S WITH LOW TURNOVER, HE FAILED TO APPLY THE SAME YARDSTICK TO EXCLUDE COMPANIES WITH HIGH TURNOVER COMPARED TO THE ASSESS EE. THE REASON FOR EXCLUDING COMPANIES WITH LOW TURNOVER WA S THAT SUCH COMPANIES DO NOT REFLECT THE INDUSTRY TREND AS THEI R LOW COST TO SALES RATIO MADE THEIR RESULTS LESS RELIABLE. THE CONTENTION OF THE ASSESSEE WAS THAT THERE WOULD BE EFFECT ON PROFITAB ILITY WHEREVER THERE IS HIGH OR LOW TURNOVER AND THEREFORE COMPANI ES WITH HIGH TURNOVER SHOULD ALSO BE EXCLUDED FROM THE LIST OF C OMPARABLE COMPANIES. THE CIT(A) AGREED WITH THE SUBMISSION OF THE ASSESSEE AND HE EXCLUDED THE FOLLOWING 5 COMPANIES WHOSE TURNOVER WAS ABOVE RS.200 CRORES FROM THE LIST OF C OMPARABLE COMPANIES, VIZ., (I) FLEXTRONICS LTD., (II) L & T I NFOTECH LTD., (III) M/S. INFOSYS TECHNOLOGIES LTD., (IV) SATYAM COMPUTE R SERVICES LTD., (V) IGATE GLOBAL SOLUTIONS LTD. THE CIT(A) IN COMING TO THE ABOVE CONCLUSION PLACED RELIANCE ON THE DECISION OF THE ITAT BANGALORE IN THE CASE OF GENISYS INTEGRATING SYSTEM S (INDIA) (P) LTD. VS. DCIT (2012) 53 SOT 159 (BANG.) WHEREIN IT WAS HELD WHEN THERE IS A LIMIT FOR THE LOWER END FOR IDENTIF YING THE COMPARABLE COMPANIES, THERE IS NO REASON WHY THERE SHOULD NOT BE AN UPPER LIMIT ALSO, AS SIZE MATTERS IN BUSINESS. ITA NO.3171/BANG/2018 PAGE 7 OF 16 17.1. THE LEARNED DR SUBMITTED THAT HIGH TURNOVER IS NOT A RELEVANT CRITERION TO REGARD A COMPANY AS NOT COMPA RABLE, SO LONG AS THE TWO COMPANIES ARE FUNCTIONALLY COMPARABLE. IF FUNCTIONS BY TWO COMPANIES ARE IDENTICAL THEN THEY HAVE TO BE RE GARDED AS COMPARABLE. ACCORDING TO HIM THEREFORE THE CIT(A) WAS NOT JUSTIFIED IN EXCLUDING 5 COMPANIES ON THE GROUND TH AT THEIR TURNOVER WAS ABOVE RS.200 CRORES AND CANNOT BE COMP ARED WITH THE ASSESSEE WHOSE TURNOVER WAS AROUND RS.10.65 CRO RES. IN SUPPORT OF HIS CONTENTION THE LEARNED DR PLACED REL IANCE ON THE FOLLOWING DECISIONS: SL. NO. NAME OF THE CASE CITATION RELEVANT PARAGRAPH 1. M/S.NTT DATA GLOBAL DELIVERY SERVICES LTD. VS. ACIT IT(TP)A NO. 1487/BANG/2013 AY 2005-06 ORDER DATED 6.4.2016 23 & 24 2. LSI TECHNOLOGIES INDIA PVT. LTD. VS. THE ITO IT(TP)A.NOS. 1380 & 1381/BANG/2010, AY 2006-07 ORDER DATED 13.5.2016 14.3 3. M/S. SOCIETE GENERALE GLOBAL SOLUTION CENTRE PVT.LTD. VS. DCIT IT(TP) A.NO.1188/BANG/2011 FOR AY 2007-08 ORDER DATED 22.4.2016 10 5. WILLIS PROCESSING SERVICES (I) (P)LTD. VS. DCIT (2013)30 TAMANN.COM 350 (MUMBAI-TRIBUNAL) FOR AY 2007-08 ORDER DATED 1.3.2013 47 6. CAPGEMINI INDIA PVT. LTD. VS. ACIT ITA NO.7861/MUM/2011 FOR AY 2007-08 ORDER DATED 28.2.2013 4.3 17.2. THE LEARNED DR ALSO FILED BEFORE US A NOTE CONTENDING THAT IN SOFTWARE INDUSTRY, SIZE HAS NO INFLUENCE ON THE MARGINS EARNED BY AN ENTITY. ACCORDING TO HIM ECONOMIES OF SCALE ARE RELEVANT ONLY IN CAPITAL INTENSIVE COMPANIES WHICH HAVE SUBS TANTIAL FIXED ASSETS IN THE FORM OF PLANT AND MACHINERY. ACCORDI NG TO HIM, IN SOFTWARE INDUSTRY, SIZE DOES NOT MATTER, WHAT MATTE RS IS THE HUMAN CAPITAL. ACCORDING TO HIM APPLICATION OF THE FILTE R OF TURNOVER MIGHT BE JUSTIFIED FOR EXCLUDING COMPANIES WITH LOW TURNOVER OF SAY RS.1 CRORE OR LESS BECAUSE THE MARGIN EARNED BY THESE COMPANIES MIGHT WIDELY FLUCTUATE DUE TO NARROW CAPI TAL BASE AND ITA NO.3171/BANG/2018 PAGE 8 OF 16 LACK OF COMPETITIVE STRENGTH, LACK OF OPERATIONAL E FFICIENCIES AND ALSO LACK OF HUMAN RESOURCES. THEY ALSO ESCAPE THE EYES OF REGULATORS. HE DREW OUR ATTENTION TO THE TURNOVER AND PROFIT MARGINS OF COMPANY INFOSYS TECHNOLOGIES LTD. FOR FY 1997 TO 2010 AND SUBMITTED THAT IN FY 1997 THE COMPANY HAD TURNOVER OF RS.139 CRORES AND ITS PROFIT MARGIN WAS 34.95% WHER EAS IN FY 2010 ITS TURNOVER WAS RS.21140 CRORES BUT ITS PROFI T MARGIN WAS ONLY 44.91%. ACCORDING TO HIM THEREFORE THE PROFIT MARGINS HOVER BETWEEN 35% AND 40% OVER THE PERIOD OF 15 YEARS AND THEREFORE HIGH TURNOVER DOES NOT NECESSARILY MEAN HIGH PROFIT MARGINS. HE ALSO GAVE A CHART SHOWING TURNOVER AND MARGIN OF 20 COMPANIES IN THE IT-BPO INDUSTRY FOR THREE YEARS. ACCORDING TO HIM THE CHART WOULD SHOW THAT FOR THE SAME RANGE OF TURNOVER COMP ANIES EARNED DIFFERENT PROFIT MARGINS. THEREFORE ACCORDING TO H IM THERE IS NO RELATION BETWEEN THE MARGINS EARNED AND THE TURNOVE R OF A COMPANY. ACCORDING TO HIM SOFTWARE INDUSTRIES OPER ATE ON THE BASIS OF COST PLUS MARGIN OF PROFITS AND THEREFORE TURNOVER WOULD BE IRRELEVANT AND HAVE NO IMPACT OF THE PROFIT MARG INS. HIS FURTHER SUBMISSION WAS THAT UNDER RULE 10B(3) OF THE INCOME TAX RULES, 1962 (RULES) IT IS ONLY FUNCTIONS PERFORMED, ASSETS EMPLOYED AND THE RISKS ASSUMED THAT ARE RELEVANT CRITERIA FOR CO MPARISON AND TURNOVER IS NOT A PRESCRIBED CRITERION FOR THE PURP OSE OR COMPARISON. HE FAIRLY ADMITTED THAT THERE ARE DIFFE RENCES OF OPINION AMONGST VARIOUS BENCHES OF THE TRIBUNAL ON THE APPLICATION OF TURNOVER FILTER AND THAT SOME BENCHE S HAVE HELD THAT HIGH TURNOVER WAS RELEVANT CRITERIA FOR EXCLUDING C OMPARABLE COMPANIES. HIS PRAYER IN THE ALTERNATIVE WAS FOR C ONSTITUTION OF A SPECIAL BENCH TO RESOLVE THE CONFLICT. 17.3. PER CONTRA THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT ITAT BANGALORE BENCH IN THE CASE OF DELL INTER NATIONAL SERVICES INDIA (P) LTD. VS. DCIT (2018) 89 TAXMANN. COM 44 (BANG-TRIB) ORDER DATED 13.10.2017, CONSIDERED THE VARIOUS ASPECTS OF APPLICATION OF TURNOVER FILTER FOR EXCLUDING COM PANIES AND HAS NOTED THAT THE FIRST DECISION RENDERED ON APPLICATI ON OF THIS FILTER WAS IN THE CASE OF GENISYS INTEGRATING SYSTEMS (I)( P) LTD. VS. DCIT (2010) 20 TAXMANN.COM 715 RENDERED ON 5.8.2011 . IN THE CASE OF DELL INTERNATIONAL (SUPRA), THE TRIBUNAL TO OK NOTE OF A DIVERGENT VIEW EXPRESSED BY ITAT BANGALORE BENCH IN THE CASE OF ROBERT BOSCH ENGINEERING AND BUSINESS SOLUTIONS LTD . VS. DCIT ITA NO.3171/BANG/2018 PAGE 9 OF 16 ITA NO.1519/BANG/2013 ORDER DATED 13.9.2017 AFTER CONSIDERING THE DECISION RENDERED BY THE HONBLE DELHI HIGH COU RT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS INDIA PVT.LTD V S. DCIT 82 TAXMANN.COM 167(DEL), 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 TRIBUNA L IN THE CASE OF DELL INTERNATIONAL (SUPRA) ALSO TOOK NOTE OF THE DE CISION OF THE ITAT BANGALORE BENCH IN THE CASE OF SYSARRIS SOFTWA RE 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 D ECISION TO THE CONTRARY IN THE CASE OF CIT VS. PENTAIR WATER INDI A 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 FAVO URABLE TO THE ASSESSEE LAID DOWN IN THE CASE OF PENTAIR WATER (SU PRA) SHOULD BE 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 TURNOVE R OF RS. 1 CRORE TO RS.200 CRORES AS COMPARABLE WITH EAC H OTHER WAS HELD TO BE PROPER. THE FOLLOWING RELEVAN T OBSERVATIONS WERE BROUGHT TO OUR NOTICE:- 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THE RIVAL CONTENTIONS AND ALSO THE JUDIC IAL PRECEDENTS ON THE ISSUE, WE FIND THAT THE TPO HIMSELF HAS REJECTED THE COMPANIES WHICH .IRE (SIC) MAKING LOSSES AS COMPARABLES. THIS SHOWS THAT THERE IS A LIMIT FOR THE LOWER END FOR IDENTIFYING THE COMPARABLES. 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 ITA NO.3171/BANG/2018 PAGE 10 OF 16 THAT THE SIZE MATTERS IN BUSINESS. A BIG COMPANY WOULD BE IN A POSITION TO BARGAIN THE PRICE AND ALS O ATTRACT MORE CUSTOMERS. IT WOULD ALSO HAVE A BROAD BASE OF SKILLED EMPLOYEES WHO ARE ABLE TO GIVE BETT ER 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 COMPARABLES, 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 CONSIDERATI ON, 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 VE RY 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 RAN GE 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 ASSESSEES TURNOVER WAS AROUND RS.110 CRORES. THEREFORE THE ACTION OF THE CIT(A) IN DIRE CTING TPO TO EXCLUDE COMPANIES HAVING TURNOVER OF MORE TH AN RS.200 CRORES AS NOT COMPARABLE WITH THE ASSESSEE WA S JUSTIFIED. AS RIGHTLY POINTED OUT BY THE LEARNED CO UNSEL FOR THE ASSESSEE, THERE ARE TWO VIEWS EXPRESSED BY TWO HONBLE HIGH COURTS OF BOMBAY AND DELHI AND BOTH AR E NON-JURISDICTIONAL HIGH COURTS. THE VIEW EXPRESSED BY THE BOMBAY HIGH COURT IS IN FAVOUR OF THE ASSESSEE A ND THEREFORE FOLLOWING THE SAID VIEW, THE ACTION OF TH E CIT(A) EXCLUDING COMPANIES WITH TURNOVER OF ABOVE RS.200 CRORES FROM THE LIST OF COMPARABLE COMPANIES IS HEL D TO CORRECT AND SUCH ACTION DOES NOT CALL FOR ANY INTER FERENCE. ITA NO.3171/BANG/2018 PAGE 11 OF 16 17.4. HIS SUBMISSION WAS THAT THE DECISION RENDERE D BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHRYSCAPITA L (SUPRA) WAS NOT ON THE APPLICATION OF TURNOVER FILTER. HE BROU GHT TO OUR NOTICE THAT THE RELEVANT SUBSTANTIAL QUESTION OF LAW IN TH E CASE OF CHRYSCAPITAL DECIDED BY THE HONBLE DELHI HIGH COUR T WAS (I) WHETHER COMPARABLES CAN BE REJECTED ON THE GROUND T HAT THEY HAVE EXCEPTIONALLY HIGH PROFIT MARGINS AS COMPARED TO TH E ASSESSEE IN TRANSFER PRICING ANALYSIS.(II) WHETHER FACTORS LIKE DIFFERENTIAL FUNCTIONAL AND RISK PROFILE COUPLED WITH HIGH DEGRE E OF VOLATILITY IN OPERATING PROFIT MARGINS IS SUFFICIENT GROUND TO RE JECT COMPARABLES FOR TRANSFER PRICING ANALYSIS. IN ANSWERING THE AB OVE QUESTION, THE HONBLE COURT HOWEVER AT PAGE 218 OF THE REPORT (TH E SAID DECISION IS REPORTED AS 376 ITR 183 (DEL)) OBSERVED THAT THE MERE CIRCUMSTANCE THAT A COMPANY-OTHERWISE CONFIRMING TO THE STIPULATIONS IN RULE 10B(2) OF THE RULES IN ALL DET AILS, PRESENTING A PECULIAR FEATURE- SUCH AS A HUGE PROFIT OR A HUGE T URNOVER, IPSO FACTO DOES NOT LEAD TO ITS EXCLUSION. THE COURT FU RTHER OBSERVED THAT THE TRANSFER PRICING OFFICER, FIRST, HAS TO BE SATISFIED THAT SUCH DIFFERENCES DO NOT MATERIALLY AFFECT THE PRICE . OR COST. SECONDLY, AN ATTEMPT TO MAKE REASONABLE ADJ USTMENT TO ELIMINATE THE MATERIAL EFFECT OF SUCH DIFFERENCES H AS TO BE MADE. ACCORDING TO HIM THEREFORE THE OBSERVATIONS OF THE HONBLE DELHI HIGH COURT IN SO FAR AS IT RELATES TO APPLICATION O F TURNOVER FILTER ARE OBITER DICTUM. OBITER DICTUM THOUGH IS ENTITLED TO A WEIGHT CANNOT BE EQUATED WITH RATIO DECIDENDI OF A CASE. IN SUPPO RT OF HIS CONTENTION AS ABOVE, HE RELIED ON THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF DIRECTOR OF SETTLEMENT S A.P. AND OTHERS VS. M.R. APPARAO AND ANOTHER (2002) 4 SCC 63 8. COUNTERING THE SUBMISSION OF THE LEARNED DR THAT TH E DECISION OF THE HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF PENTAIR (SUPRA) IS NOT RATIO DECIDENDI AS IT WAS MERELY DIS MISSAL OF APPEAL U/S.260A OF THE ACT ON THE GROUND THAT NO SUBSTANTI AL QUESTION OF LAW AROSE FOR CONSIDERATION, LEARNED COUNSEL DREW O UR ATTENTION TO THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF PENTAIR (SUPRA) PARAGRAPH 9, WHEREIN THE HONBLE BOMBAY HIG H COURT AFTER REFERRING TO A DECISION OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. AGNITY INDIA TECHNO LOGIES (P) LTD. (2013) 36 TAXMANN.COM 289 (DELHI), CLEARLY OBSERVE D THAT TURNOVER IS OBVIOUSLY A RELEVANT FACT TO CONSIDER T HE COMPARABILITY. OUR ATTENTION WAS ALSO DRAWN TO PARAGRAPH-3 OF THE DECISION ITA NO.3171/BANG/2018 PAGE 12 OF 16 RENDERED IN THE CASE OF PENTAIR (SUPRA) WHEREIN THE DEPARTMENT SPECIFICALLY CONTENDED THAT THE TRIBUNAL ERRED IN H OLDING THAT SIZE AND TURNOVER OF A COMPANY ARE DECIDING FACTORS FOR TREATING A COMPANY AS COMPARABLE. ACCORDING TO HIM THEREFORE IT WAS NOT A CASE OF MERELY DISMISSAL OF APPEAL U/S.260A OF THE ACT AS UNADMITTED ON THE GROUND THAT NO SUBSTANTIAL QUESTI ON OF LAW AROSE FOR CONSIDERATION BUT WAS PRECEDENT IN SO FAR AS TH E HONBLE COURT HAS EXPRESSED A CLEAR OPINION ON THE ISSUE. 17.5. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DR EW OUR ATTENTION TO A DECISION OF THE HONBLE DELHI HIGH COURT RENDE RED IN THE CASE OF PCIT VS. NEW RIVER SOFTWARE SERVICES (P) LTD. IN ITA NO.924/2016 ORDER DATED 22.8.2017 WHEREIN THE HONB LE DELHI HIGH COURT FOLLOWED THE DECISION OF THE HONBLE BOM BAY HIGH COURT RENDERED IN THE CASE OF PENTAIR (SUPRA) AND H ELD THAT INFOSYS BPO WAS RIGHTLY EXCLUDED AS NOT BEING A COMPARABLE COMPANY. OUR ATTENTION WAS ALSO DRAWN BY HIM TO A DECISION O F THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MERCER CONSULTING (I) (P) LTD. (2016) 76 TAXMANN.COM 153 ( PUNJAB & HARYANA) WHEREIN THE HONBLE COURT HELD THAT A GIAN T COMPANY CANNOT BE COMPARED WITH A COMPANY WHICH WAS A CAPTI VE SERVICE PROVIDED ASSUMING LIMITED RISKS. 17.6. AS FAR AS THE DECISIONS OF THE TRIBUNAL REND ERED ON THE APPLICATION OF TURNOVER FILTER THAT ARE CONTRARY TO THE DECISION RENDERED IN THE CASE OF M/S. GENISYS INTEGRATING SY STEMS (SUPRA), THE FIRST SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THOSE DECISIONS WERE RENDERED AT A LATER POINT OF TIME AND WERE TO BE REGARDED AS PER INCURIUM SINCE THESE DECISION S WERE ALSO RENDERED BY A BENCH OF EQUAL STRENGTH AND EITHER TH E SUBSEQUENT DECISIONS REFUSED TO FOLLOW OR WERE RENDERED IN IGN ORANCE OF AN EARLIER BINDING PRECEDENT. HE SUBMITTED THAT IF A BENCH OF EQUAL STRENGTH DIFFERS WITH A VIEW TAKEN EARLIER, THE PRO PER COURSE FOR THEM IS TO MAKE A REFERENCE TO LARGER BENCH. THEY CANNOT REFUSE TO FOLLOW A BINDING DECISION. IF THEY DO SO, THE DECI SIONS SO RENDERED HAVE TO BE REGARDED AS PER INCURIUM. EVEN IF THEY ARE RENDERED IN IGNORANCE OF THE EARLIER BINDING PRECEDENT, THEY HA VE TO BE REGARDED AS PER INCURIUM. IN THIS REGARD THE LEARN ED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISIONS OF HONBL E SUPREME COURT IN THE CASE OF UNION OF INDIA VS. RAGHUBIR S INGH AIR 1989 ITA NO.3171/BANG/2018 PAGE 13 OF 16 SC 1933, UNION OF INDIA VS. S.K. KAPOOR (2011) 4 SC C 589 AND SUNDEEP KUMAR BAFNA VS. STATE OF MAHARASHTRA AND AN OTHER (2014) 16 SCC 623. IN THE AFORESAID DECISIONS THE HONBLE SUPREME COURT HELD THAT IN A SITUATION WHERE THERE ARE CONFLICTING DECISIONS OF HIGH COURT ON AN ISSUE WHICH ARE IRREC ONCILEABLE AND PRONOUNCED BY JUDGES OF CO-EQUAL STRENGTH, THEN THE EARLIER VIEW HAS TO BE FOLLOWED AS THE LATER DECISION HAS TO BE REGARDED AS PER INCURIAM. THE HONBLE SUPREME COURT IN THE CASE OF SUNDEEP KUMAR BAFNA VS. STATE OF MAHARASHTRA & ANOTHER (201 4) 16 SCC 623 (AT PAGE-642 (PARA-19) HELD THAT A DECISION OR JUDGMENT CAN ALSO BE PER INCURIAM IF IT IS NOT POSSIBLE TO RECON CILE ITS RATIO WITH THAT OF A PREVIOUSLY PRONOUNCED JUDGMENT OF A CO-EQ UAL OR LARGER BENCH AND WHEN HIGH COURTS ENCOUNTER TWO OR MORE MU TUALLY IRRECONCILABLE DECISIONS OF THE SUPREME COURT CITED AT THE BAR, THE INVIOLABLE RECOURSE IS TO APPLY THE EARLIEST VIEW A S THE SUCCEEDING ONES WOULD FALL IN THE CATEGORY OF PER INCURIAM. T HE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE HONBLE SUPRE ME COURT: 19. IT CANNOT BE OVER-EMPHASISED THAT THE DISCIP LINE DEMANDED BY A PRECEDENT OR THE DISQUALIFICATION OR DIMINUTION OF A DECISION ON THE APPLICATION OF THE PER INCURIAM RULE IS OF GREAT IMPORTANCE, SINCE WITHOUT IT, CERTAINTY OF LAW, CONSISTENCY OF RULINGS AND COMITY OF COURTS WOULD BECOME A COSTLY CASUALTY. A DECISION O R JUDGMENT CAN BE PER INCURIAM ANY PROVISION IN A STA TUTE, RULE OR REGULATION, WHICH WAS NOT BROUGHT TO THE NO TICE OF THE COURT. A DECISION OR JUDGMENT CAN ALSO BE PER INCURIAM IF IT IS NOT POSSIBLE TO RECONCILE ITS RAT IO WITH THAT OF A PREVIOUSLY PRONOUNCED JUDGMENT OF A CO-EQUAL O R LARGER BENCH; OR IF THE DECISION OF A HIGH COURT IS NOT IN CONSONANCE WITH THE VIEWS OF THIS COURT. IT MUST IMMEDIATELY BE CLARIFIED THAT THE PER INCURIAM RULE IS STRICTLY AND CORRECTLY APPLICABLE TO THE RATIO DECI DENDI AND NOT TO OBITER DICTA. IT IS OFTEN ENCOUNTERED IN HIG H COURTS THAT TWO OR MORE MUTUALLY IRRECONCILABLE DECISIONS OF THE SUPREME COURT ARE CITED AT THE BAR. WE THINK THAT T HE INVIOLABLE RECOURSE IS TO APPLY THE EARLIEST VIEW A S THE SUCCEEDING ONES WOULD FALL IN THE CATEGORY OF PER INCURIAM. ITA NO.3171/BANG/2018 PAGE 14 OF 16 IT WAS THEREFORE SUBMITTED BY HIM THAT THE EARLIEST VIEW RENDERED BY THE ITAT BANGALORE BENCH IN THE CASE OF GENISYS INTEGRATING (SUPRA) SHOULD BE FOLLOWED. 17.7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. TH E SUBSTANTIAL QUESTION OF LAW (QUESTION NO.1 TO 3) WHICH WAS FRAM ED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHRYSCAPITA L INVESTMENT ADVISORS (INDIA) PVT.LTD., (SUPRA) WAS AS TO WHETHE R COMPARABLE CAN BE REJECTED ON THE GROUND THAT THEY HAVE EXCEPT IONALLY HIGH PROFIT MARGINS OR FLUCTUATION PROFIT MARGINS, AS CO MPARED TO THE ASSESSEE IN TRANSFER PRICING ANALYSIS. THEREFORE AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE T HE OBSERVATIONS OF THE HON'BLE HIGH COURT, IN SO FAR AS IT REFERS T O TURNOVER, WERE IN THE NATURE OF OBITER DICTUM. JUDICIAL DISCIPLINE RE QUIRES THAT THE TRIBUNAL SHOULD FOLLOW THE DECISION OF A NON-JURISD ICTION HIGH COURT, EVEN THOUGH THE SAID DECISION IS OF A NON-JU RISDICTIONAL HIGH COURT. WE HOWEVER FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PENTAIR WATER INDIA PVT.LTD. TA X APPEAL NO.18 OF 2015 JUDGMENT DATED 16.9.2015 HAS TAKEN THE VIEW THAT TURNOVER IS A RELEVANT CRITERION FOR CHOOSING COMPANIES AS C OMPARABLE COMPANIES IN DETERMINATION OF ALP IN TRANSFER PRICI NG CASES. THERE IS NO DECISION OF THE JURISDICTIONAL HIGH COURT ON THIS ISSUE. IN THE CIRCUMSTANCES, FOLLOWING THE PRINCIPLE THAT WHERE T WO VIEWS ARE AVAILABLE ON AN ISSUE, THE VIEW FAVOURABLE TO THE A SSESSEE 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 N OT BE ANY NECESSITY TO EXAMINE AS TO WHETHER THE DECISION REN DERED IN THE CASE OF GENISYS INTEGRATING (SUPRA) BY THE ITAT BAN GALORE BENCH SHOULD CONTINUE TO BE FOLLOWED. SINCE ARGUMENTS WE RE ADVANCED ON THE CORRECTNESS OF THE DECISIONS RENDERED BY THE ITAT MUMBAI AND BANGALORE BENCHES TAKING A VIEW CONTRARY TO THA T TAKEN IN THE CASE OF GENISYS INTEGRATING (SUPRA), WE PROCEED TO EXAMINE THE SAID ISSUE ALSO. ON THIS ISSUE, THE FIRST ASPECT W HICH WE NOTICE IS THAT THE DECISION RENDERED IN THE CASE OF GENISYS I NTEGRATING ITA NO.3171/BANG/2018 PAGE 15 OF 16 (SUPRA) WAS THE EARLIEST DECISION RENDERED ON THE I SSUE 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 C ITED BY THE LEARNED DR BEFORE US IN THE CASE OF WILLIS PROCESSI NG SERVICES (SUPRA) AND CAPEGEMINI INDIA PVT.LTD. (SUPRA) ARE T O 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 L EARNED COUNSEL FOR THE ASSESSEE. THE DECISIONS RENDERED IN THE CA SE OF M/S.NTT DATA (SUPRA), SOCIETE GENERALE GLOBAL SOLUTIONS (SU PRA) AND LSI TECHNOLOGIES (SUPRA) WERE RENDERED LATER IN POINT O F TIME. THOSE DECISIONS FOLLOW THE RATIO LAID DOWN IN WILLIS PROC ESSING SERVICES (SUPRA) AND HAVE TO BE REGARDED AS PER INCURIUM. T HESE THREE DECISIONS ALSO PLACE RELIANCE ON THE DECISION OF TH E HONBLE 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 HONBLE BOMBAY HIGH COUR T 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 TUR NOVER IS NOT RELEVANT CRITERIA FOR DECIDING ON COMPARABILITY OF COMPANIES IN DETERMINATION OF ALP UNDER THE TRANSFER PRICING REG ULATIONS UNDER THE ACT. FOR THE REASONS GIVEN ABOVE, WE UPHOLD THE ORDER OF THE CIT(A) ON THE ISSUE OF APPLICATION OF TURNOVER FILT ER AND HIS ACTION IN EXCLUDING COMPANIES BY FOLLOWING THE RATIO LAID DOWN IN THE CASE OF GENISYS INTEGRATING (SUPRA). 13. FOLLOWING THE AFORESAID DECISION OF THE TRIBUN AL, WE HOLD THAT IT WOULD BE APPROPRIATE WHILE CHOOSING COMPARABLE COMP ANIES TO EXCLUDE COMPANIES BY APPLICATION OF TURNOVER FILTER. WE AL SO OBSERVE THAT THE TPO HAS HIMSELF APPLIED LOWER TURNOVER FILTER OF EXCLUD ING COMPANIES WITH TURNOVER OF LESS THAN RS.1 CRORE AND IN SUCH CIRCUM STANCES, THERE IS NO REASON AS TO WHY HE SHOULD NOT APPLY THE HIGHER TUR NOVER LIMIT. ITA NO.3171/BANG/2018 PAGE 16 OF 16 14. WE, THEREFORE, DIRECT THE AO TO RE-COMPUTE ALP BY EXCLUDING ABOVE SIX COMPANIES FROM THE LIST OF COMPARABLE COMPANIE S BY APPLYING THE TURNOVER FILTER. NO OTHER ARGUMENTS WERE ADVANCED O N THE DETERMINATION OF ALP. 15. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS A LLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JUNE, 2019. SD/- SD/- ( B.R. BASKARAN ) ( N.V . VASUDEVAN ) A C COUNTANT M EMBER VICE PRESIDENT BANGALORE, DATED, THE 28 TH JUNE, 2019. / D ESAI S MURTHY / COPY TO: 1. A PP ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.