M/s Goldman Sachs Services Private Limited , Bangalore V. Joint Commissioner of Income Tax Special Range-3 , Bangalore

ITTPA 3244/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7719 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-12-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 04-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SARATH RAO
• Keywords: Related party transaction; Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Earning of tax free income; Services rendered outside India; Additional evidence; TDS; Rule 8D; Set aside
• Section: 43B; 143(3); 14A; 195; 250; 144C; 43; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO. 3244/BANG/2018 ASSESSMENT YEAR : 2014 15 M/S. GOLDMAN SACHS SERVICES PVT. LTD., WIN G A, WING B AND WING C (GROUND FLOOR TO 6 TH FLOOR), HELIOS BUSINESS PARK, 150 OUTER RING ROAD, KADUBEESANAHALLI, BANGALORE 560 103. PAN NO : AACCG2435N VS. JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE 3, BMTC BUILDING, 80 FEET ROAD, KORAM ANGALA, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SRI. SARATH RAO, C.A RESPONDENT BY : MS. NEERA MALHOTRA, CIT DR DATE OF HEARING : 05.12.2019 DATE OF PRONOUNCEMENT : O R D E R PER BEENA PILLAI JUDICIAL M EMBER : PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST FINAL ASSESSMENT ORDER DATED 29/10/18 PASSED BY JCIT SPECIAL RANGE - 3 BANGALORE, ON FOLLOWING GROUNDS OF APPEAL: 1. THE ASSESSMENT ORDER PASSED BY HE LEARNED JOINT COMMISSIONER OF INCOME - T AX, SPECIAL RANGE - 3 (AO) PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961 (THE ACT), THE ORDER OF IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 2 OF 51 THE LEARNED TRANSFER PRICING OFFICER (TPO) ISSUED UNDER SECTION 92CA OF THE ACT AND THE DIRECTIONS OF THE HONOURABLE DISPU TE RESOLUTION PANEL (DRP) ISSUED UNDER SECTION 144C(5) OF THE ACT FOR THE ASSESSMENT YEAR (AY) 2014 - 15, IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF GOLDMAN SACHS SERVICES PRIVATE LIMITED (GSSPL OR THE APPELLANT), ARE NOT IN ACCORDANCE WITH T HE LAW, MADE IN VIOLATION OF THE PRINCIPLES OF EQUITY AND NATURAL JUSTICE AND ARE CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 2. ADJUSTMENT UNDER SECTION 92CA OF THE ACT 2.1. THE HONOURABLE DRP AND THE LEARNED AO/TPO HAVE ERRED, IN LAW AND ON FA CTS, IN MAKING AN ADJUSTMENT OF INR 154,43,05,770, WITH RESPECT TO THE INTERNATIONAL TRANSACTIONS OF RENDERING INFORMATION TECHNOLOGY ENABLED SERVICES (ITES) AND SOFTWARE DEVELOPMENT SERVICES (SWD), TO THE TAXABLE INCOME OF THE APPELLANT AND HOLDING TH AT THE SAID INTERNATIONAL TRANSACTIONS WERE NOT AT ARMS LENGTH PRICE (ALP) AS DEFINED UNDER SECTION 92F(II) OF THE ACT. 2.2. THE HONOURABLE DRP AND THE LEARNED AO/TPO HAVE ERRED IN LAW AND ON FACTS IN REJECTING, WITHOUT APPROPRIATE REASONS, THE DETAILED BENC HMARKING ANALYSIS CONDUCTED BY THE APPELLANT AND EMBARKING ON A FRESH SEARCH FOR COMPARABLES WITH RESPECT TO THE SWD AND ITES SEGMENT WITH MODIFIED FILTERS. 2.3. THE HONOURABLE DRP AND THE LEARNED AO/TPO ERRED IN FACT AND IN LAW IN DETERMINING THE ARMS LENGTH PRICE (ALP) BY ADOPTING THE FINANCIAL DATA FOR A SINGLE YEAR (I.E. THE FINANCIAL YEAR 2013 - 14) OF THE COMPARABLES AS AGAINST MULTIPLE YEAR DATA CONSIDERED BY THE APPELLANT. 2.4. THE DRP AND THE LEARNED AO/TPO HAS ERRED IN DETERMINING THE ALP BASED ON FOLLOWI NG COMPANIES WHICH ARE NOT COMPARABLE TO THE APPELLANT DUE TO VARIOUS FACTORS SUCH AS FUNCTIONAL DISSIMILARITY, PRODUCT/INTANGIBLE LED REVENUES, INADEQUATE FINANCIAL INFORMATION, IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 3 OF 51 NON - AVAILABILITY OF SEGMENT FINANCIALS, EXTRA ORDINARY EVENTS/ GROWTH, BUSINE SS RESTRUCTURING, ENGAGED IN RESEARCH & DEVELOPMENT ETC. WITH RESPECT TO THE SWD AND ITES SEGMENT: INFOSYS LIMITED; LARSEN AND TOUBRO INFOTECH LIMITED; PERSISTENT SYSTEMS LIMITED; CIGNITI TECHNOLOGIES LIMITED; THIRDWARE SOLUTIONS LIMITED; INFOSYS BP O LIMITED; MICROLAND LIMITED;AND CROSSDOMAIN SOLUTIONS LIMITED 2.5. THE HONOURABLE DRP AND THE LEARNED AO/TPO ERRED IN REJECTING THE FOLLOWING COMPARABLE COMPANIES BASED ON INAPPROPRIATE REASONS WITH RESPECT TO THE SWD AND ITES SEGMENT: AKSHAY SOFTWARE TEC HNOLOGIES LIMITED ; EVOKE TECHONOLOGIES LIMITED ; GOLDSTONE TECHNOLOGIES LIMITED; HELIOS & MATHESON INFORMATION TECHNOLOGY LIMITED; R SYSTEMS INTERNATIONAL LIMITED; SASKEN COMMUNICATION TECHNOLOGIES LMITED; EXILANT TECHNOLOGIES PRIVATE LIMITED; DAFFODIL SO FTWARE LIMITED; 12T2 INDIA LIMITED; SANKHYA INFOTECH LIMITED; AVANICIMCON TECHNOLOGIES LIMITED; CAT TECHNOLOGIES LIMITED; ACE BPO SERVICES PRIVATE LIMITED; CALIBER POINT BUSINESS SOLUTIONS LIMITED; INFORMED TECHNOLOGIES INDIA LIMITED; AND JINDAL INTELLI COM LIMITED IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 4 OF 51 2.6. THE HONOURABLE DRP AND THE LEARNED AO/TPO ERRED IN COMPUTING THE OPERATING MARGINS OF THE COMPARABLE COMPANIES AT HIGHER LEVELS THAN ACTUALS. 2.7. THE HONOURABLE DRP AND THE LEARNED AO/TPO HAVE ERRED IN NOT APPRECIATING THAT THE APPELLANT, BEING A C APTIVE SERVICE PROVIDER, OPERATES AT LOWER RISK LEVELS AS COMPARED TO COMPARABLE COMPANIES, WHICH CARRY HIGHER RISKS (INCLUDING RECEIVABLES, MARKET AND CREDIT RISK) AND ACCORDINGLY ERRED IN NOT GRANTING APPROPRIATE WORKING CAPITAL AND RISK ADJUSTMENTS TO T HE MARGINS OF THE COMPARABLE COMPANIES, 2.8. THE HONOURABLE DRP AND THE LEARNED AO/TPO HAVE ERRED IN LAW BY RELYING UPON THE INFORMATION NOT AVAILABLE IN PUBLIC DOMAIN WHILE CARRYING OUT THE BENCHMARKING ANALYSIS UNDER THE ACT. 3. OTHER TP GROUNDS . 3.1. THE HONOURABL E DRP AND THE LEARNED AO/TPO ERRED IN LAW AND ON FACTS IN UPHOLDING THE ARMS LENGTH MARGIN ARRIVED AT BY THE LEARNED TPO BY CONSIDERING THE LOWER RANGE OF 3 PERCENT FROM THE MEAN MARGIN AS ALLOWED UNDER THE ACT AND THE RULES. 4. DISALLOWANCE UNDER SECTION 14A OF THE ACT 4.1. THEN HONOURABLE DRP HAS ERRED IN LAW AND ON FACTS IN U PHOLDING THE DISALLOWANCE OF RS. 2,01,750 UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES IN CONNECTION WITH THE INVESTMENT OF FUNDS LARGELY MADE IN ITS GROUP COMPANIES. 4.2. THE HONO URABLE DRP AND THE LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING AN AMOUNT OF RS 2,01,750 UNDER SECTION 14 A OF THE ACT BY MECHANICALLY APPLYING RULE 8D WHEN THERE IS NO BASIS TO REJECT THE APPELLANTS CLAIM THAT NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT INCOME . 4.3. THE HONOURALBE DRP AND LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE CONTENTION OF THE APPELLANT THAT THERE IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 5 OF 51 WAS NO EXEMPT INCOME EARNED IN THE FIRST PLACE AND CONSEQUENTLY NO EXPENDITURE COULD HAVE BEEN INCURRED F OR EARNING EXEMPT INCOME DURING THE RELEVANT AY AND HENCE THE APPLICABILITY OF SECTION 14A OF THE ACT DOES NOT ARISE. 5. DISALLOWANCE UNDER SECTION 43A OF THE ACT TOWARDS LEAVE ENCASHMENT 5.1. THE HONOURALBE DRP AND LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DI SALLOWING AN AMOUNT OF RS.25,40,056 UNDER SECTION 43B OF THE ACT, HOLDING THAT LEAVE ENCASHMENT WAS NOT PAID TO THE EMPLOYESS. 5.2. THE HONOURALBE DRP AND THE LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING AN ARBITRARY AMOUNT EQUAL TO 33 PERCENT OF LE AVE ENCASHMENT CLAIMED AS A DEDUCTION UNDER SECTION 43B OF THE ACT. 5.3. THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED ON FACTS IN STATING THAT THE APPELLANT COULD NOT PRODUCE ADEQUATE AND SUBSTANTIAL EVIDENCE TO JUSTIFY THAT THE PAYMENT OF LEAVE ENCASHMENT WAS ACTUALLY MADE, EVEN THOUGHT THE APPELLANT HAD SUBMITTED THE FOLLOWING EVIDENCES: I. A LIST CONTAINING THE PERMANENT ACCOUNT NUMBERS (PAN) OF THE EMPLOYEES AND AMOUNT PAID AS LEAVE ENCASHMENT; II. 78 SALARY PAY - SLIPS COVERING APPROXIMATELY 68 PERCENT OF THE TOTAL PAYMENTS; AND III. LEDGER EXTRACT CONTAINING THE PAYMENT OF LEAVE ENCASHMENT . 6. DISALLOWANCE UNDER SECTION 43B OF THE ACT TOWARDS BONUS PAYMENT 6.1. THE HONOURALBE DRP AND LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING AN AMOUNT OF RS. 20,01,73,768 UNDER SECTION 43B OF THE ACT, HOLDING THAT BONUS WAS NOT PAID TO THE EMPLOYEES. 6.2.THE HONOURALBE DRP AND THE LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING AN ARBITRARY AMOUNT EQUAL TO 33 PERCENT OF THE DEDUCTION FOR BOUNS CLA IMED UNDER SECTION 43B OF THE ACT. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 6 OF 51 6.3 THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED ON FACTS IN STATING THAT THE APPELLANT COULD NOT PRODUCE ADEQUATE AND SUBSTANTIAL EVIDENCE TO JUSTIFY THAT THE PAYMENT OF BOUNS WAS ACTUALLY MADE, DESPITE PROVIDING TH E FOLLOWING EVIDENCES BEFORE THE LEARNED AO AND HONOURABLE DRP I. LIST CONTAINING THE DETAILS OF THE PAN OF THE EMPLOYEES AND THE AMOUNT PAID TO THEM AS BONUS DURING THE YEAR; II. A STATEMENT CONTAINING THE MODE OF PAYMENT (ONLINE TRANSFER/DEMAND DRAFT),THE DATE OF PAYMENT, THE TRANSACTION REFERENCE/DEMAND DRAFT NUMBER AND THE AMOUNT OF PAYMENT ALONG WITH THE EXTRACT OF THE BANK STATEMENT; AND III. DETAILS OF TDS ON THE BONUS PAY - OUT ALONG WITH A COPY OF THE TDS CHALLAN EVIDENCING THE PAYMENT OF TDS TO THE GOVERNMENT AUTHORITIES. 7. DISALLOWANCE OF PROVISION FOR EXPENSES UNDER SECTION 40(A)(I)/(IA) OF THE ACT ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE PERTAINING TO OTHER PAYABLES 7.1 THE HONOURALBE DRP AND LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING A N AMOUNT OF RS. 5,91,20,000 UNDER SECTION 40(A)(I)/(IA) OF THE ACT. 7.2.THE HONOURALBE DRP AND THE LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING AN ARBITRARY AMOUNT EQUAL TO 10 PERCENT OF THE OTHER PAYABLESAS APPEARING IN NOTE 3.5 OF THE F INANCIAL STATEMENTS OF THE APPELLANTY, UNDER SECTION 40(A)(I)/(IA) OF THE ACT. 7.3. THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED ON FACTS IN HOLDING THAT THE ENTIRE AMOUNTS APPEARING IN OTHER PAYABLES ARE PROVISIONS FOR EXPENSES CREATED AT THE END O F THE YEAR, EVEN THOUGH THE APPELLANT HAD SUBMITTED THE RECONCILIATION OF THE SAID PAYABLES INTO PROVISIONS CREATED AT THE END OF THE YEAR AND CREDITORS FOR IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 7 OF 51 EXPENSES, ON WHICH TAXES HAVE BEEN APPROPRIATELY DEDUCTED AT THE TIME OF ACCRUAL OF EXPENSES, WHERE VER APPLICABLE. 7.4.THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED ON FACTS IN HOLDING THAT THE APPELLANT HAS NOT WITHHELD TAXES ON YEAR - END PROVISIONS DESPITE THE APPELLANT PROVIDING A SPREADSHEET CAPTURING THE RELEVANT DETAILS OF TDS ON YEAR - END PROVIS IONS (LIKE THE NAME AND PAN OF THE VENDOR, DESCRIPTION OF SERVICES, THE AMOUNT OF PROVISION, AND THE AMOUNT OF TDS ON SUCH PROVISIONS ALONG WITH THE DETAILS OF THE TDS CHALLAN THROUGH WHICH THE TDS WAS PAID TO THE GOVERNMENT TREASURY) SUBSTANTIATING WITHHO LDING OF TAXES ON THE YEAR - END PROVISIONS. 8. DISALLOWANCE OF PROVISION FOR EXPENSES UNDER SECTION 40(A)(I)/(IA) OF THE ACT ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE PERTAINING TO PAYABLES TO RELATED PARTIES 8.1. THE HONOURALBE DRP AND LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING AN AMOUNT OF RS. 22,55,10,000 UNDER SECTION 40(A)(I)/(IA) OF THE ACT. 8.2.THE HONOURALBE DRP AND THE LEARNED AO HAVE ERRED IN LAW AND ON FACTS IN DISALLOWING AN ARBITRARY AMOUNT EQUAL TO 10 PERCENT OF THE PAYABLES TO RELATED PARTIES,AS APPEARING IN NOTE 3.5 OF THE FINANCIAL STATEMENTS OF THE APPELLANT, UNDER SECTION 40(A)(I)/(IA) OF THE ACT, WITHOUT PROVIDING ANY RATIONALE/ REASON. 8.3 THE HONOURABLE DRP AND THE LEARNED AO HAVE ERRED ON FACTS IN TREATIN G THE ENTIRE AMOUNTS TO BE PROVISIONS CREATED FOR EXPENSES AT THE END OF THE YEAR AND FURTHER, ALLEGING THAT THE APPELLANT HAS FAILED TO WITHHOLD TAXES ON SUCH PROVISIONS, WITHOUT APPRECIATING THE FACTS PROVIDED IN THE SUBMISSIONS, THE SUCH PAYABLES TO R ELATED PARTIES ATE NOT YEAR - END PROVISIONS BUT ACTUAL LIABILITIES WHICH WERE INCURRED DURING THE RELEVANT PREVIOUS YEAR AND IN THE PAST FINANCIAL IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 8 OF 51 YEARS, ON WHICH TAXES HAVE BEEN DEDUCTED WHEREVER APPLICABLE, AND DULY PAID AS PER THE PROVISIONS OF CHAPTER XVII B OF THE ACT. EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HEARING, OF THE APPEAL, SO AS TO ENABLE THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. LD.AO OBSERVED THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSIN ESS OF EXPORT OF SOFTWARE DEVELOPMENT AND IT ENABLED SERVICES. ASSESSEE FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 29/11/14 DECLARING TOTAL INCOME OF RS.3,39,78,38,220/ - UNDER NORMAL PROVISIONS OF THE ACT AND RS.2,88,08,15,284/ - UNDER MAT. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143 (2) AND 142 (1) OF THE ACT WERE ISSUED. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD.AO, AND FILED BOOKS OF ACCOUNT AND OTHER DETAILS AS CALLED FOR. 2.1. LD. AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES AND IT ENABLED SERVICES AND ACCORDINGLY THE CASE WAS REFERRED TO TRANSFER PRIC ING IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 9 OF 51 OFFICER. LD.TPO UPON RECEIPT OF REFERENCE CALLED FOR ECONOMIC DETAILS OF INTERNATIONAL TRANSACTION IN FORM 3 CEB. FROM DETAILS FILED, LD.TPO OBSERVED THAT ASSESSEE IS A SUBSIDIARY OF GOLDMAN SASCHS (MAURITIUS) LLC AND GOLDMAN SACHS (MAURITIUS) NBFC LLC , WHICH WERE HELD BY GOLDMAN SACHS GROUP INC. LD.TPO OBSERVED THAT ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES: INTERNATIONAL TRANSACTIONS AMOUNT RECEIVED/RECEIVABLE (IN INR) AMOUNT PAID/PAYABLE (IN INR) IT ENABLED SERVICES 11,59,23,08,564/ - IT SERVICES 7,57,31,26,744/ - CAMPUS RECHARGERS 4,10,89,743/ - ISSUE OF EQUITY SHARES 2,08,78,560/ - SHARE PREMIUM RECEIVED 3,05,66,21,184/ - REIMBURSEMENT OF EXPENSES 2,29,06,37,234/ - RECOVERY OF 9,54,22,397/ - IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 10 OF 51 EXPENSES CAPITAL WIP RECHARGERS 27,53,21,203/ - 2.2. ASSESSEE USED TNMM AS MOST APPROPRIATE METHOD TO DETERMINED THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION IN IT SERVICES (SWD) AND ITES SEGMENT PROVIDED TO THE ASSOCIATED ENTERPRISES., WITH OP/OC AS THE PLI. LD.TPO OBSERVED THAT IN TP STUDY ASSESSEE SELECTED FOLLOWING 8 COMPARABLES FOR SWD SEGMENT AND 5 COMPARABLES IN ITES SEGMENT: COMPARABLES SELECTED BY ASSESSEE FOR SWD SEGMENT: S.NO. NAME OF COMPANY MARGIN 1. AKSHAY SOFTWARE TECHNOLOGIES LTD 5.15% 2. EVOKE TECHNOLOGIES PVT.LTD 7.68% 3. GOLDSTONE TECHNOLOGIES LTD 9.58% 4. HELIOS& MATHESON INFORMATION TECHNOLOGY LTD 20.14% 5. MINDTREE LTD 19.40% 6. RS SOFTWARE (INDIA) LTD 19.42% 7. R SYSTEMS INTERNATIONAL LTD 13.61% 8. SASKEN COMMUNICATIONS TECHNOLOGIES LTD 17.44% AVERAGE MARGIN 14.05% IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 11 OF 51 AS ASSESSEE EARNED MARGIN OF 16% UNDER THIS SEGMENT WHICH FALLS ABOVE THE AVERAGE MEAN OF COMPARABLES SELECTED, THE TRANS ACTION WAS HELD TO BE AT ARMS LENGTH. 2.3. COMPARABLES SELECTED BY ASSESSEE FOR ITES SEGMENT: S.NO. NAME OF COMPANY MARGIN 1. CALIBRE POINT BUSINESS SOLUTIONS LTD 4.74% 2. ACE BPO SERVICES PVT.LTD 3.42% 3. INFORMED TECHNOLOGIES INDIA LT D 9.15% 4. MICROGENETIC SYSTEMS LTD 19.07% 5. JINDAL INTELLICOM LTD 7.96% AVERAGE MARGIN 8.87% AS ASSESSEE EARNED MARGIN OF 16% UNDER ITES SEGMENT WHICH FALLS ABOVE THE ARITHMETIC MEAN OF THE AVERAGE MARGIN OF COMPARABLES SELECTED U NDER THIS SEGMENT, THE TRANSACTION WAS HELD TO BE AT ARMS LENGTH. 2.4. LD.TPO REJECTED TP STUDY CONDUCTED BY ASSESSEE AND MADE FRESH ANALYSIS BY INCLUDING/EXCLUDING CERTAIN COMPARABLES UNDER BOTH SEGMENTS AS FOLLOWS: COMPARABLES SELECTED BY TPO FOR SWD SEG MENT: S.NO. NAME OF COMPANY MARGIN 1. INFOSYS LTD 36.13% IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 12 OF 51 2. LARSEN AND TOUBRO INFOTECH LTD 24.61% 3. PERSISTENT SYSTEMS LTD 35.10% 4. CIGINITI TECHNOLOGIES LTD 27.62% 5. MINDTREE LTD 20.43 % 6. RS SOFTWARE (INDIA) LTD 22.25 % 7. S QS INDIA BSF I LTD 22.37 % 8. THIRDWARE SOLUTION LTD 44 .68 % AVERAGE MARGIN 29.40% LD.TPO, THUS COMPUTED PROPOSED ADJUSTMENT BEING SHORTFALL IN ARMS LENGTH PRICE FOR SWD SEGMENT AT RS.87,50,25,800/ - 2.5. COMPARABLES SELECTED BY LD.T PO FOR ITES SEGMENT: S.NO. NAME OF COMPANY MARGIN 1. INFOSYS BPO LTD 27.43% 2. MICROGENETIC SYSTEMS LTD 18.06% 3. MICROLAND LTD 20.07% 4. BNR UDYOG LTD (SEG.) 25.08% 5. CROSSDOMAIN SOLUTIONS PVT.LTD. 21.07% AVERAG E MARGIN 22.34% LD.TPO, THUS COMPUTED PROPOSED ADJUSTMENT BEING SHORTFALL IN ARMS LENGTH PRICE FOR ITES SEGMENT AT RS.64,40,32,300/ - . IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 13 OF 51 2.6. LD.AO THEN ISSUED DRAFT ASSESSMENT ORDER UNDER SECTION 143 (3) READ WITH 92CA OF THE ACT ON 22/12/17 AND MADE TRANSF ER PRICING ADJUSTMENT AT RS.1,51,90,58,100/ - , AS SUGGESTED BY LD.TPO UNDER SECTION 92CA OF THE ACT. IN THE DRAFT ASSESSMENT ORDER LD.AO ALSO MADE DISALLOWANCE UNDER SECTION 14A READ WITH R 8D(III) AMOUNTING TO RS.2,01,750/ - , LEAVE ENCASHMENT AND BONUS CLAI MED WAS DISALLOWED UNDER SECTION 43B AT 33% AMOUNTING TO RS.25,40,056/ - AND RS.20,01,73,768/ - RESPECTIVELY. 2.7. LD.AO DISALLOWED OF PROVISION FOR EXPENSES UNDER SECTION 40 (A) (I)/(IA) FOR NON - DEDUCTION OF TAX AT SOURCE PERTAINING TO OTHER PAYABLES. AND D ISALLOWANCE OF 10% AD HOC BASIS UNDER SECTION 40 (A) (I)/(IA) IN RESPECT OF PAYABLES TO RELATED PARTIES. ASSESSEE THEREAFTER FILED OBJECTIONS BEFORE DRP AGAINST DRAFT ASSESSMENT ORDER, CHALLENGING TP ADJUSTMENT AND OTHER ADDITIONS COMPUTED BY LD.AO. 3. DRP WHILE PASSING THEIR ORDER EXCLUDED CIGINITI TECHNOLOGIES LTD AND BNR UDYOG LTD (SEG.) FROM ITES LIST OF COMPARABLES. IN RESPECT OF SWD SEGMENT, DRP UPHELD EXCLUSION OF AKSHAY SOFTWARE TECHNOLOGIES LTD, EVOKE TECHNOLOGIES LTD., R SYSTEMS INTERNATIONAL LTD ., GOLDSTONE TECHNOLOGIES IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 14 OF 51 LTD., SASKEN COMMUNICATION TECHNOLOGIES LTD (SEG), EXILANT TECHNOLOGIES PVT.LTD., AVANI TECHNOLOGIES LTD. DRP ALSO UPHELD INCLUSION OF CAT TECHNOLOGIES LTD., AND ACROPETAL TECHNOLOGIES LTD. 3.1. BEFORE DRP, ASSESSEE ALSO RAISED OB JECTIONS OF ERRONEOUS COMPUTATION OF OPERATING PROFIT MARGINS OF COMPARABLES WHICH WAS REJECTED. IN RESPECT OF WORKING CAPITAL ADJUSTMENT ALLEGED BY ASSESSEE, DRP HELD THAT AS ACCURATE ADJUSTMENT IS NOT POSSIBLE, THE DIFFERENCES IN WORKING CAPITAL REQUIRES TO BE BASED ON VARIOUS ASSUMPTIONS. AS ASSESSEE FAILED TO DEMONSTRATE SUCH MATERIAL DIFFERENCES, DRP UPHELD NOT GRANTING OF WORKING CAPITAL ADJUSTMENT TO ASSESSEE. DRP ALSO REJECTED THE RISK ADJUSTMENT ALLEGED BY ASSESSEE. AS REGARDS THE OTHER ADDITIONS C HALLENGED BEFORE DRP, IT UPHELD 14 A DISALLOWANCE COMPUTED BY LD.TPO. IN REGARDS 43B DISALLOWANCE COMPUTED BY LD.AO TOWARDS LEAVE ENCASHMENT AND BONUS, ASSESSEE FILED ADDITIONAL SUBMISSIONS AND EVIDENCES, WHICH INCLUDED PAN OF EMPLOYEES, FORM 16, EVIDENCE OF LEAVE ENCASHMENT PAYMENT BEING MADE, COPIES OF RETURN OF INCOME OF EMPLOYEES, AGAINST WHICH CLAIM WAS MADE BY ASSESSEE, WHICH WERE NOT ADMITTED BY DRP. DRP HOWEVER ADMITTED ADDITIONAL EVIDENCE REGARDING BONUS PAYMENT AND IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 15 OF 51 DIRECTED LD.AO TO ALLOW THE CLAI M TO THE EXTENT THAT, SUCH CLAIM HAS BEEN SATISFACTORILY PROVED WITH REFERENCE TO EVIDENCES FILED. 3.2. DRP DIRECTED ASSESSEE TO FILE RELEVANT DETAILS BEFORE LD. AO REGARDING DISALLOWANCE OF 10 % OF PROVISION FOR EXPENSES UNDER SECTION 40 (A) (I)/(IA) FOR NO N - DEDUCTION OF TAX AT SOURCE, PERTAINING TO OTHER PAYABLES. AND DISALLOWANCE OF 10% ON AD HOC BASIS UNDER SECTION 40 (A) (I)/(IA) IN RESPECT OF PAYABLES TO RELATED PARTIES. ON RECEIPT OF DRP DIRECTIONS, LD.AO PASSED THE IMPUGNED ASSESSMENT ORDER BY MAKING ADDITION OF RS.5,42,96,89, 560/ - TO THE RETURNED INCOME OF ASSESSEE. AGGRIEVED BY ADDITIONS MADE BY LD.AO, ASSESSEE IS IN APPEAL BEFORE US NOW. 4. LD.AR SUBMITTED THAT GROUND NO. 1 - 2.3 ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ADJUDICATION. 4.1. G ROUND NO.2.4 - 2.5 HAS BEEN RAISED BY ASSESSEE CHALLENGING EXCLUSION/INCLUSION OF CERTAIN COMPARABLES UNDER SWD AND ITES SEGMENT. BEFORE WE UNDERTAKE COMPARABILITY ANALYSIS OF COMPARABLES ALLEGED BY ASSESSEE, ITS SINE QUA NON TO UNDERSTAND FUNCTIONS PERFORM ED, ASSETS OWNED AND RISKS EMPLOYED BY ASSESSEE UNDER THESE SEGMENTS. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 16 OF 51 4.2 . IN TP STUDY, IT HAS BEEN SUBMITTED THAT, ASSESSEE PROVIDES IT SERVICES AND IT ENABLED SERVICES TO ITS GROUP COMPANIES. ASSESSEE IS ENGAGED IN BUILDING AND MAINTAINING THE LOCAL INFOR MATION TECHNOLOGY INFRASTRUCTURE AND ASSISTS GLOBAL TEAMS IN SUPPORTING THE TECHNOLOGY ENVIRONMENT AND USAGE. 4.2.1. IT SEGMENT (SWD) FUNCTIONS ASSESSEE PROVIDES TO ITS GROUP COMPANIES FOLLOWING SERVICES UNDER THIS SEGMENT: - UNDER THIS SEGMENT THE SAME IS ALIGNED TO APPLICATION DEVELOPMENT FOR THE SECURITIES, IMD, FEDERATION, BANKING, LEGAL COMPLIANCE AND AUDIT DIVISIONS. PROVIDING SUPPORT IN DEVELOPING, MAINTAINING AND ENHANCING SUPPORT FOR VARIOUS APPLICATIONS AND DATA WAREHOUSES AS PART OF GLOBAL TEAM AN D WORKING CLOSELY WITH THEIR COUNTERPARTS TO SUPPORT VARIOUS DIVISIONS INTERNALLY SUCH AS: SECURITIES DIVISION TECHNOLOGY (EQUITY, FICCI, SALES AND DATA SERVICES, PRIME SERVICES EXCEPT) IMD TECHNOLOGY DIVISION; FEDERATION TECHNOLOGY DIVISION (OPERATIONS, C ONTROLLERS, FINANCIAL RISK, LEGAL COMPLIANCE IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 17 OF 51 AUDIT TECHNOLOGY, EX - CM AND COMPENSATION ACCOUNTING AND SERVICES) AND BANKING TECHNOLOGY DIVISION CONSULTING WITH AE IS IN RESPECT OF REQUIREMENT ANALYSIS AND FUNCTIONAL SPECIFICATIONS FOR THE SOFTWARE SOLUTIONS TO BE DEVELOPED; SUPPORTING IS IN DEVELOPING THE TECHNOLOGY FOR AUTOMATED EXECUTION ALGORITHMS, WHICH ARE USED FOR TRADING AND PRINCIPAL RISK MANAGEMENT. SUPPORTING AE IN DEVELOPING THE TECHNOLOGY FOR RISK MANAGEMENT SOLUTIONS INVOLVES: SUPPORTING IS IN U NDERTAKING SOFTWARE CODING ACCORDING TO THE FUNCTIONAL SPECIFICATIONS AND SOFTWARE REQUIREMENT ANALYSIS AGREED WITH AES. ASSESSEE RECEIVES TECHNICAL ASSISTANCE IF REQUIRED, FROM DURING THE CODING COUPLED WITH REGULAR REVIEWS AND FEEDBACK. THE CODE IS SO P REPARED WILL BE REVIEWED BY THE AE IS TO ENSURE THAT THE SAME IS IN LINE WITH THE REQUIREMENTS MENSIONED BY AES. SUPPORTING A DEVELOPING SOFTWARE TO AID OFFSHORE PORTFOLIO MANAGERS AND ONE OPINION MAINTAINING SOFTWARE INFRASTRUCTURE FOR IMD. THIS WORK IS DONE AS AN DISCUSSION AND IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 18 OF 51 GUIDANCE OF THE OFFSHORE AES WHO APPROVE OR SIGN OFF THE FINAL MODEL. ENSURING QUALITY TESTING OF SOFTWARE SOLUTIONS BASED ON THE PREDEFINED QUALITY CONTROL PROCEDURES. SUPPORTING IS IN INITIAL/UNIT TESTING OF THE MODULES/COMPONE NTS DEVELOPED TO ENSURE THAT THE ACTIVITY RELATIVE MEET THE SPECIFICATIONS/REQUIREMENTS AS AGREED WITH THE. THE FINAL ACCEPTANCE TESTING OF THE SOFTWARE PRODUCT VESTS WITH THE AES. 4.2.2. ITES SEGMENT SERVICES RENDERED BY ASSESSEE UNDER THIS SEGMENT ARE DI VIDED INTO VARIOUS DIVISIONS BEING OPERATIONS, TECHNOLOGY, FINANCE, COMPLIANCE DIVISION, HUMAN CAPITAL MANAGEMENT, INTERNAL AUDIT, LEGAL AND COMPLIANCE, SECURITIES, INVESTMENT MANAGEMENT DIVISION, SERVICE FINANCE PROCUREMENT. IT HAS BEEN SUBMITTED THAT ALL THESE DIVISIONS ARE INVOLVED IN PROVIDING BACKEND SUPPORT SERVICES TO SUPPORT THE BUSINESS PROCESS OF ASSESSEES GROUP CONCERNS. IT HAS BEEN SUBMITTED IN TP STUDY THAT ASSESSEE HAS ENTERED INTO SELF - SERVICE AGREEMENT WITH THE GROUP COMPANIES ON 09/03/06 P ROVISION OF VARIOUS BACK AND SUPPORT SERVICES. DETAILS OF VARIOUS SERVICES RENDERED IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 19 OF 51 BY ASSESSEE UNDER THESE DIVISIONS ARE AT PAGE 129 - 144 OF PAPER BOOK VOLUME 1. ASSETS OWNED: ASSESSEE DOES NOT OWN ANY ROUTINE VALUABLE TANGIBLE AND INTANGIBLE ASSETS. ASSES SEE ONLY OWNS ASSETS LIKE COMPUTER EQUIPMENT OFFICE EQUIPMENT FURNITURES AND FIXTURES ETC FOR RUNNING THE DAY - TO - DAY AFFAIRS OF BUSINESS. RISKS ASSUMED: IT HAS BEEN SUBMITTED THAT, ASSESSEE DO NOT OWN ANY RISKS AND GROUP COMPANIES BEING ASSOCIATED ENTERPR ISES, ASSUMES FULL RISK IN TERMS OF CONTRACT, CREDIT, MARKET, PRICE, QUALITY CAPACITY UTILISATION RISKS. AS ASSESSEE WORKS ON COST PLUS BASIS AND THE REMUNERATION RECEIVED BY ASSESSEE IS IN FOREIGN EXCHANGE, IT HAS TO BEAR A LIMITED FOREIGN EXCHANGE FLUCTU ATION RISK. FURTHER, ASSESSEE EMPLOYEES ITS OWN HUMAN RESOURCES BEING THE VITAL RESOURCE OF THE COMPANY AND THEREFORE INCURS COSTS OR RECRUITING TRAINING AND RETRAINING EMPLOYEES. THEREFORE EMPLOYEE RISK IS ALSO BORNE BY ASSESSEE. ASSESSEE HAS BEEN THEREFO RE CHARACTERISED AS ASSUMING LESS THAN ORDINARY RISKS IN COURSE OF PROVIDING CONTRACT SERVICES TO ITS ASSOCIATED ENTERPRISES. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 20 OF 51 BASED UPON ABOVE FAR OF ASSESSEE UNDER BOTH SEGMENTS, WE SHALL NOW ANALYSE THE COMPARABLES ALLEGED BY ASSESSEE FOR EXCLUSION/INCLU SION UNDER THE SEGMENTS. 5. GROUND NO. 2.4 IS CHALLENGING INCLUSION OF CERTAIN COMPARABLES BY LD.TPO UNDER SWD AND ITES SEGMENT AS UNDER: 5.1. FOR EXCLUSION IN SWD SEGMENT: INFOSYS LTD LARSEN AND TOUBRO INFOTECH LTD PERSISTENT SYSTEMS LTD., THIRDWARE SOLUT IONS LTD 5.2. FOR EXCLUSION IN ITES SEGMENT INFOSYS BPO LTD MICROLAND LTD CROSSDOMAIN SOLUTIONS LTD 5.1.1 INFOSYS LTD: THIS COMPARABLE WAS UPHELD BY AUTHORITIES BELOW AND HAS BEEN OBJECTED BY ASSESSEE FOR ITS INCLUSION. LD.AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE WITH THAT OF ASSESSEE AS IT IS ENGAGED IN PROVIDING DIVERSIFY ACTIVITIES LIKE BUSINESS CONSULTING, TECHNOLOGY, ENGINEERING AND OUTSOURCING SERVICES. IT HAS BEEN SUBMITTED THAT THIS COMPANY IS A MARKET LEADER IN IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 21 OF 51 SOFTWARE DEVELOP MENT SEGMENT AND PROVIDES IP - BASED SOLUTIONS. IT HAS ALSO BEEN SUBMITTED THAT THIS COMPANY OWNS HUGE INTELLECTUAL PROPERTIES AND REVENUES FROM LICENSING OF SOFTWARE PRODUCTS WHICH IS NOT AT ALL AKIN TO THE FUNCTIONS PERFORMED AND ASSETS OWNED BY ASSESSEE. LD.AR SUBMITTED THAT, THIS COMPANY IS A HUGE BRAND VALUE AND EXPENSES OF BRAND BUILDING IS HIGH. REFERRING TO PAGE 1860 OF PAPER BOOK VOLUME 3 LD.AR SUBMITTED THAT THIS COMPANY OWNS PROD AND ARE ALSO INVOLVED IN RESEARCH AND DEVELOPMENT ACTIVITIES. LD. CIT DR PLACED RELIANCE UPON ORDERS OF AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. FROM THE ANNUAL REPORT OF THIS COMPANY PLACED IN THE PAPER BOOK RELIED UPON BY LD.AR, IT IS OBSERVED THAT THIS CO MPANY IS NOT COMPARABLE TO THE PROFILE OF ASSESSEE. FURTHER IT IS AN ACCEPTED POSITION THAT THIS COMPANY IS A GIANT RISK - TAKING COMPANY AND IS ENGAGED IN DEVELOPMENT AND SALE OF SOFTWARE PRODUCTS AND OWN INTANGIBLE ASSETS. UNDER SUCH CIRCUMSTANCES WE DEEM IT FIT AND PROPER TO EXCLUDE THIS COMPARABLE FROM THE FINALIST. ACCORDINGLY LD. AO/TPO IS DIRECTED TO EXCLUDE THIS COMPANY. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 22 OF 51 5.1.2. LARSEN AND TOUBRO INFOTECH LTD THIS COMPARABLE WAS UPHELD BY AUTHORITIES BELOW AND HAS BEEN OBJECTED BY ASSESSEE FOR ITS INCL USION. LD.AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE WITH THAT OF ASSESSEE AND IS ENGAGED IN PROVIDING CONSULTANCY AND TESTING SERVICES. FURTHER IT HAS BEEN SUBMITTED THAT THERE IS NO SEGMENTAL INFORMATION AVAILABLE IN THE ANNUAL REPORTS OF THIS COMPANY. LD.AR SUBMITTED THAT THIS COMPANY OWNS ITS OWN BRAND AND HAVE PRODUCTS AND ARE ENGAGED IN TRADING ACTIVITY. THIS COMPANY ALSO HAS R&D SERVICES AND PRESENCE OF HUGE INTANGIBLES AND BRANDS. ON THE CONTRARY, LD.CIT DR SUBMITTED THAT, THIS CO MPANY SHOULD BE REMANDED BY FOLLOWING THE VIEW TAKEN BY COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS (P) LTD. VS DCIT REPORTED IN (2019) 101 TAXMANN.COM 294. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH S IDES IN LIGHT OF RECORDS PLACED BEFORE US. LD.CIT DR PLACED RELIANCE ON DECISION OF CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS (P) LTD. VS DCIT (SUPRA) , WHEREIN THIS TRIBUNAL OBSERVED AND DECIDED AS UNDER: IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 23 OF 51 '9. IN RESPECT OF THE APPLICABILITY OF TH IS TRIBUNAL ORDER FOR EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD, THIS HAS BEEN SUBMITTED BY LD. AR OF ASSESSEE IN THE CHART SUBMITTED BEFORE US THAT ON PAGE NO. 698 OF ANNUAL REPORT PAPER BOOK, THIS COMPANY HAS DEBITED AN AMOUNT OF RS. 27,10,89,274/ - AS CO ST OF BOUGHT - OUT ITEMS FOR RESALE. BUT THIS FACT WAS NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL IN THE CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. ( SUPRA ). IT HAS ALSO BEEN SUBMITTED THAT ON PAGE NO. 706 OF ANNUAL REPORT PAPER BOOK, THIS HA S BEEN REPORTED THAT THIS COMPANY IS ENGAGED IN SALE OF SERVICES TO ITS RELATED PARTIES AND THIS FACT WAS ALSO NOT BROUGHT TO THE NOTICE OF TRIBUNAL IN CASE OF ADVICE AMERICA SOFTWARE DEVELOPMENT CENTER (P.) LTD. ( SUPRA ). WHEN WE EXAMINE PARAS 14 TO 20 OF THIS TRIBUNAL ORDER WHERE THERE IS DISCUSSION REGARDING INCLUSION/EXCLUSION OF LARSEN & TOUBRO INFOTECH LTD, WE FIND THAT THERE IS NO DISCUSSION ON THESE TWO ASPECTS THAT THIS COMPANY IS HAVING SIGNIFICANT AMOUNT OF COST OF BOUGHT - OUT ITEMS FOR RESALE AND IT IS ENGAGED IN SALE OF SERVICES AND PRODUCTS TO ITS RELATED PARTIES AND HENCE, IN OUR CONSIDERED OPINION, THIS TRIBUNAL ORDER CANNOT BE CONSIDERED AS A BINDING PRECEDENCE BECAUSE THIS TRIBUNAL ORDER IS SILENT ON IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 24 OF 51 THESE TWO IMPORTANT ASPECTS AS TO THIS ASP ECT THAT THIS COMPANY IS HAVING SIZEABLE AMOUNT OF BOUGHT OUT ITEMS FOR RESALE AND HAVE RELATED PARTY TRANSACTIONS IN RESPECT OF SALES OF SERVICES AND PRODUCTS. WE ALSO FIND THAT IN THE CASE OF REMAINING THREE TRIBUNAL ORDERS I.E. MICROSOFT RESEARCH LAB IN DIA PVT. LTD.'S CASE ( SUPRA ), WM GLOBAL TECHNOLOGY SERVICES (INDIA) (P.) LTD. ( SUPRA ) AND IN THE CASE OF TECNOTREE CONVERGENCE PVT. LTD. ( SUPRA ), THE MATTER WAS REMANDED TO THE TPO FOR FRESH DECISION. HENCE, WE FEEL IT PROPER THAT IN THE PRESENT CASE ALSO, THIS ISSUE SHOULD GO BACK TO THE FILE OF TPO FOR FRESH DECISION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND WHILE DECIDING THE ISSUE AFRESH, ALL THE AVAILABLE TRIBUNAL ORDERS ON THIS ISSUE SHOULD BE CONSIDERED BY THE TPO IN PRO PER PERSPECTIVE.' IT IS OBSERVED THAT THE DECISION IN CASE OF CGI INFORMATION SYSTEMS MANAGEMENT CONSULTANTS PVT.LTD VS. DCIT(SUPRA) WAS IN RESPECT OF ASSESSMENT YEAR 2013 - 14. ON PERUSAL OF ANNUAL REPORT OF THIS COMPARABLE PLACED AT PAGE 2012 OF PAPER BOOK VOLUME 5, IT IS OBSERVED THAT DURING THE YEAR THIS COMPANY HAS NOT DERIVED ANY REVENUE FROM SALE OF PRODUCTS. THE ONLY REVENUE EARNED BY THIS COMPARABLE DURING THE RELEVANT YEAR UNDER CONSIDERATION IS FROM SALE IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 25 OF 51 OF SERVICES. IT IS OBSERVED AT PAGE 2022 THA T THIS COMPANY INCURRED OVERSEAS STAFF COSTS AT RS.15,46,46,82,017/ - , REVEALS THAT REVENUE EARNED FROM SOFTWARE SERVICES IS MAINLY FROM OFFSHORE SERVICES. IN THE PRESENT CASE OF ASSESSEE, THERE IS NO SUCH EXPENSES INCURRED FOR OVERSEAS STAFF COSTS. AT PAGE 2022 OF PAPER BOOK V OLUME 5, IT IS CLEAR THAT EXPORT REVENUE FROM SOFTWARE SERVICES AMOUNTS TO RS.44,14,84,25,372/ - OUT OF GROSS INCOME OF RS.46,43,94,03,178/ - . IN VIEW OF THE AFORESTATED OBSERVATIONS FOR YEAR UNDER CONSIDERATION, THE ISSUE OF COMPARABILI TY OF THIS COMPANY SHOULD BE EXAMINED BY LD.AO/TPO AFRESH. ACCORDINGLY, WE SET ASIDE THIS COMPARABLE BACK TO LD. AO/TPO. 5.1.3. PERSISTENT SYSTEMS LTD., THIS COMPARABLE WAS INCLUDED BY LD.TPO AND OPPOSED BY ASSESSEE. LD.AR SUBMITTED THAT THIS COMPANY IS F UNCTIONALLY DIFFERENT WITH THAT OF ASSESSEE, AS IT IS INVOLVED IN PROVIDING COMPLETE PRODUCT LIFE CYCLE SERVICE TO ITS CLIENTS. IT HAS BEEN SUBMITTED BY LD.AR THAT THIS COMPANY SPECIALIZES IN SOFTWARE PRODUCTS, SERVICES AND TECHNOLOGY INNOVATIONS. HE REFER RED TO THE INFORMATION FURNISHED BY THIS COMPANY UNDER SECTION 133(6), WHICH IS PLACED AT PAGE 3020 OF PAPER BOOK WHEREIN THIS COMPANY IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 26 OF 51 IS IDENTIFIED TO BE CARRYING OUT SERVICES IN TELECOM TO TELECOM AND WIRELESS CLIENTS, LIFE SCIENCE AND HEALTH CARE, INFRA STRUCTURE AND SYSTEMS. ON THE CONTRARY, LD.CIT DR SUBMITTED THAT, THIS COMPANY SHOULD BE REMANDED BY FOLLOWING THE VIEW TAKEN BY COORDINATE BENCH OF THIS TTRIBUNAL IN CASE OF CGI INFORMATION SYSTEMS AND MANAGEMENT CONSULTANTS (P) LTD. VS DCIT REPORTED IN (2019) 101 TAXMANN.COM 294. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. THE DECISION RELIED UPON BY LD.CIT DR IN CASE OF CGI INFORMATION SYSTEMS & MANAGEMENT CONSULTANTS (P) LTD. VS DCIT HAS NOT CONSIDERED DETA ILS THAT HAS BEEN OBTAINED UNDER 133 (6) IN RESPECT OF THIS COMPANY FOR YEAR UNDER CONSIDERATION. THEREFORE, IN OUR OPINION THIS DECISION CANNOT BE OF ANY HELP TO REVENUE. COMING TO INFORMATION RECEIVED UNDER SECTION 133 (6) OF THE ACT, IT IS OBSERVED THAT THIS COMPANY HAS ACQUIRED CERTAIN INTELLECTUAL PROPERTY PRODUCTS AND GENERATE REVENUE FROM LICENSING AND SUPPORT OF SUCH PRODUCTS. IT IS ALSO OBSERVED THAT THIS COMPANY IS INVOLVED IN THE ENTIRE LIFE - CYCLE OF SOFTWARE DEVELOPMENT WHICH IS NOT SIMILAR TO W HAT ASSESSEE CATERS TO ITS ASSOCIATED ENTERPRISES. ASSESSEE CARRIES OUT ONLY SUCH FUNCTIONS WHICH ARE IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 27 OF 51 REQUIRED BY ASSOCIATED ENTERPRISE UNDER ITS SUPERVISION AND GUIDANCE. ACCORDINGLY, WE DIRECT LD. AO/TPO TO INCLUDE THIS COMPARABLE FROM THE FINALIST. 5.1. 4. THIRDWARE SOLUTIONS LTD THIS COMPARABLE HAS BEEN CONSIDERED BY LD.TPO WHICH HAS BEEN OBJECTED BY ASSESSEE. LD.AR SUBMITS THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AND EARNED REVENUES FROM EXPORT OF SERVICES, SUBSCRIPTION AND TRAINING AND SALE OF LICEN SING. LD.AR SUBMITTED THAT THERE ARE NO SEGMENTAL DETAILS IN RESPECT OF THIS COMPARABLE. LD.CIT DR HOWEVER PLACED RELIANCE UPON DECISION OF HONBLE DELHI HIGH COURT IN CASE OF STERIA INDIA LTD VS DCIT REPORTED IN (2018) 92 TAXMANN.COM 120 . SHE SUBMITTED TH AT HONABLE DELHI HIGH COURT HELD THIS COMPARABLE TO BE A GOOD COMPANY. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE. FROM THE ANNUAL REPORT OF THIS COMPANY PLACED AT PAGE 2334 - 2444, IT IS OBSERVED THAT AT PAGE 2413, SEGMENT REPORTING OF THIS COMPANY IS SET TO BE COMPRISED OF SOFTWARE DEVELOPMENT, IMPLEMENTATION AND SUPPORT SERVICES. FURTHER IT HAS BEEN SUBMITTED THEREIN THAT PRIMARY SEGMENT REPORTING IS BASED ON GEOGRAPHICAL AREAS, VIZ DOMESTIC = INDIA IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 28 OF 51 (PRODUCTS AND SERVICES) AND INTERNATIONAL = REST OF THE WORLD (EXPORTS - SOFTWARE SERVICES). IT IS ALSO BEEN SUBMITTED THEREIN THAT THIS COMPANY MAINTAINS SEPARATE BOOKS OF ACCOUNT FOR THE REPORTED SEGMENTS. IN PROFIT AND LOSS ACCOUNT AT PAGE 2431, IT IS OBSERVED THAT DUR ING THE YEAR UNDER CONSIDERATION, THIS COMPANY EARNED REVENUE FROM SALE OF PRODUCTS WHEREAS, REVENUE FROM SALE OF SERVICES IS SHOWN TO BE AT NIL . LD.TPO WHILE CONSIDERING THIS COMPARABLE ONLY CONSIDERED FOOTNOTE AT PAGE 2433, WHEREIN BIFURCATIONS OF REVE NUE FROM SALE OF PRODUCTS HAS BEEN GIVEN AS; EXPORT OF SOFTWARE SERVICES HAS BEEN RECORDED TO BE AT RS.20194.37, SOFTWARE SERVICES FROM LOCAL UNITS AMOUNTING TO RS.414.07, REVENUE FROM SUBSCRIPTION AND TRAINING AMOUNTING TO RS.59.32 AND SALE OF LICENSES AM OUNTING TO RS.7.98. WE THEREFORE REJECT THE CONTENTION OF ASSESSEE THAT SEGMENTAL DETAILS ARE NOT AVAILABLE IN RESPECT OF THIS COMPARABLE. IN OUR VIEW LD.TPO HAS CONSIDERED THE EXPORT OF SOFTWARE SERVICE SEGMENT FOR PURPOSES OF COMPARABILITY WITH THAT OF A SSESSEE (REFER COMPUTATION OF MARGIN FOR THIS COMPARABLE AT PAGE 55 OF ORDER PASSED BY LD.TPO). RESPECTFULLY FOLLOWING DECISION OF HONBLE DELHI HIGH COURT IN CASE OF STERIA INDIA LTD VS DCIT (SUPRA) WE DO NOT FIND IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 29 OF 51 ANY INFIRMITY IN THE VIEW OF AUTHORITIES BELOW IN INCLUDING THIS COMPANY. ACCORDINGLY, WE UPHOLD THE INCLUSION OF THIS COMPARABLE TO THE FINALIST. FOR EXCLUSION IN ITES SEGMENT 5.2.1. INFOSYS BPO LTD IT HAS BEEN SUBMITTED THAT THIS COMPARABLE HAS BEEN INCLUDED BY LD.TPO AND HAS BEEN OBJECTED BY AS SESSEE. LD.AR SUBMITTED THAT, THIS COMPANY IS FUNCTIONALLY DIFFERENT WITH THAT OF ASSESSEE, AS IT IS ENGAGED IN DIVERSE BUSINESS ACTIVITY SUCH AS SOURCING AND PROCUREMENT, CUSTOMER SERVICES, FINANCIAL ACCOUNTING, LEGAL PROCESS OUTSOURCING, SALES AND FULFIL MENT, ANALYTICS, BUSINESS PLATFORM, BUSINESS TRANSFORMATION SERVICE, HUMAN RESOURCE OUTSOURCING, TECHNOLOGY SOLUTION OPTIMISATION. IT IS ALSO SUBMITTED BY LD.AR THAT THIS COMPANY RENDERS SERVICES TO VARIOUS VERTICALS LIKE FINANCIAL SERVICES MANUFACTURING, TELECOM, RETAIL ETC. IT HAS BEEN SUBMITTED THAT THIS COMPANY PROVIDES CLOUD - BASED SERVICES AND OWNS INTANGIBLES, IP, BRAND. LD.AR SUBMITTED THAT THIS COMPARABLE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 - 12 HAS BEEN EXCLUDED BY DRP. ON THE CONTRARY, L D. CIT DR PLACED RELIANCE UPON AUTHORITIES BELOW. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 30 OF 51 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS OBSERVED FROM THE ANNUAL REPORT OF THIS COMPANY PLACED AT PAGE 905 - 1043 OF PAPER BOOK VOLUME 3 THAT THIS COMPA NY HAS EARNED REVENUE BASICALLY FROM OUTSOURCING SOLUTIONS TO SEVERAL CLIENTS AND ITS SERVICE OFFERINGS SPAN ACROSS MULTIPLE INDUSTRIES SEGMENT LIKE FINANCIAL SERVICES AND INSURANCE, MANUFACTURING ENTERPRISES, ENERGY UTILITIES, COMMUNICATION AND SERVICES R ETAIL, CONSUMER PACKAGED GOODS, LOGISTICS AND LIFE SCIENCE IS. FURTHER, IT IS OBSERVED THAT THIS COMPANY HAS INCURRED HUGE SELLING AND MARKETING COST WHICH HAS BEEN ON AN INCREASING TREND YEAR AFTER YEAR. FURTHER, IT IS OBSERVED THAT THIS COMPANY HAS PAREN T SIGNIFICANTLY IN BUILDING AND RETRAINING ITS BRAND VALUE. SUCH ACTIVITIES ARE NOT COMPARABLE WITH THE BACK - END SUPPORT SERVICES RENDERED BY ASSESSEE TO ITS AES ONLY. ACCORDINGLY WE DIRECT EXCLUSION OF THIS COMPARABLE FROM THE FINAL LIST. 5.2.2 MICROLAND LTD IT HAS BEEN SUBMITTED THAT THIS COMPANY WAS INCLUDED BY LD.TPO AND OBJECTED BY ASSESSEE. LD.AR SUBMITTED THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE WITH ASSESSEE AS IT IS ENGAGED IN IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 31 OF 51 INFRASTRUCTURE MANAGEMENT SERVICES AND HAS 2 SEGMENTS BEING INF RASTRUCTURE MANAGEMENT AND ITES. LD.AR SUBMITTED THAT LD.TPO ERRONEOUSLY CONSIDERED ENTITY LEVEL MARGINS FOR COMPARABILITY PURPOSES. HE ALSO SUBMITTED THAT, THIS COMPANY OWNS INTANGIBLES AND HAS ITS OWN DATA PROCESSING EQUIPMENT AND EARNS REVENUE FROM DEVI CE MANAGEMENT. IT ALSO PROVIDES R&D ACTIVITIES SERVICES AND PROVIDES CLOUD - BASED SERVICES TO ITS CLIENTELE. LD. CIT DR PLACED RELIANCE UPON THE AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. LD .CIT DR SUBMITTED THAT THAT THIS COMPARABLE WAS REJECTED BY DRP IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 - 12, WHICH WAS UPHELD BY THIS TRIBUNAL WIDE ITS ORDER DATED 16/01/17 IN ITA (TP) A NO. 267/B/2015, IS PLACED AT PAGE 33 2 4 OF PAPER BOOK CASELAW C OMPILATION - 1 IS OBSERVED FROM ANNUAL REPORT OF THIS COMPARABLE PLACED AT PAGE 1044 - 1181 OF PAPER BOOK VOLUME 3 THAT SEGMENTAL REPORTING OF THIS COMPANY HAS BEEN PROVIDED. IT IS OBSERVED THAT ASSESSEE HAS EARNED REVENUE FROM IT ENABLED SERVICES AMOUNTING TO RS.32,512 LAKHS AND LD.TPO WHILE COMPUTING THE MARGIN OF THIS COMPANY HAS TAKEN INCOME AT RS.34,903 LAKHS. WE THEREFORE REJECT SUBMISSIONS OF LD.AR THAT, ENTITY LEVEL REVENUE WAS IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 32 OF 51 CONSIDERED BY LD.TPO FOR PURPOSES OF COMPUTING ITS MARGIN. FURTHER WE HAVE PERUSED THE ORDERS PASSED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 - 12 WHEREIN THIS TRIBUNAL HAS UPHELD ITS INCLUSION. WE OBSERVE THAT SIMILAR IS THE CIRCUMSTANCES OBSERVED FOR YEAR UNDER CONSIDERATION AS HAS BEEN NOTED BY THIS TRIBU NAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 - 12. UNDER SUCH CIRCUMSTANCES WE DO NOT FIND ANY REASON TO DEVIATE FROM THE SAME AND THIS COMPARABLE IS DIRECTED TO BE RETAINED IN THE FINALIST. ACCORDINGLY THIS COMPARABLE IS TO BE RETAINED IN THE FINAL L IST OF COMPARABLES. IN RESPECT OF OTHER COMPARABLES, AS ASSESSEE DO NOT WISH TO CONTEST THE SAME IS NOT CONSIDERED HEREIN ABOVE FOR YEAR UNDER CONSIDERATION. HOWEVER ASSESSEE SEEKS LIBERTY TO CONTEST OTHER COMPARABLES IN AN APPROPRIATE SITUATION. ACCORDIN GLY REMAINING COMPARABLES UNDER BOTH SEGMENTS ALLEDGED BY ASSESSEE FOR EXCLUSION IN THIS GROUND ARE DISMISSED , WITH THE LIBERTY TO CONTEST IN AN APPROPRIATE CASE. ACCORDINGLY GROUND 2.4 RAISED BY ASSESSEE STANDS ALLOWED PARTLY AS INDICATED HEREINABOVE. 6. G ROUND NO. 2.5. THIS GROUND HAS BEEN RAISED BY ASSESSEE AGAINST REJECTING INCLUSION OF CERTAIN COMPARABLES UNDER SWD SEGMENT BY AUTHORITIES BELOW. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 33 OF 51 FOR INCLUSION OF COMPARABLES UNDER SWD EVOKE TECHNOLOGIES LTD . CAT TECHNOLOGIES LTD , I2T2 INDIA LTD. EXILANT T ECHNOLOGIES PVT.LTD. 6.1. EVOKE TECHNOLOGIES LD.AR SUBMITTED THAT THE ASSESS EE PRAYED FOR INCLUSION OF THIS COMPAN Y BEFORE DRP. HOWEVER, DRP REJECTED THE PRAYER OF THE ASSESSEE FOR THE REASON THAT FINANCIAL RESULTS INCORPORATED BRANCH REVENUE AND PROFIT, W HICH WAS BASED ON UNAUDITED FINANCIAL STATEMENTS OF BRANCH OUTSIDE INDIA. IT WAS ALSO OBSERVED BY DRP THAT EXPORT REVENUE CONSTITUTED ONLY 20.34% WHICH DID NOT FULFIL L FILTER APPLIED BY LD.TPO. LD.AR PLACED RELIANCE UPON ANNUAL REPORTS OF THIS COMPANY PLAC ED AT PAGE 2491 OF PAPER BOOK VOLUME 6 WHEREIN AT PAGE 2511 GEOGRAPHIC INCOME HAS BEEN TABULATED FOR YEAR UNDER CONSIDERATION AND INCOME FROM SOFTWARE SERVICES AND PRODUCTS BY THIS COMPANY HAS BEEN SHOWN TO BE AT 3621.72 LAKHS. IT IS OBSERVED AT PAGE 2512 THAT THIS COMPANY IS EARNING RS.35,99,47, 572/ - IN FOREIGN EXCHANGE UNDER SOFTWARE DEVELOPMENT SEGMENT. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 34 OF 51 6.2. EXILANT TECHNOLOGIES PVT.LTD. LD.AR SUBMITTED THAT THE ASSESSEE PRAYED FOR INCLUSION OF THI S COMPANY BEFORE DRP. HOWEVER, DRP REJECTED THE PRAYER OF THE ASSESSEE FOR T HE REASON THAT FINANCIAL RESULT OF THIS COMPANY IS NOT AVAILABLE IN PUBLIC DOMAIN. LD.AR HAS PLACED THE ANNUAL REPORT OF THIS COMPANY AT PAGE 2611 OF PAPER BOOK VOLUME 6. AT PAGE 2630 TO IS OBSERVED THAT REVENUE FROM OPERATIONS HAS BE EN EARNED BY THIS COMPANY FROM PRODUCTS SALE IN INDIA AMOUNTING TO RS.1,05,76,204/ - AND AT PAGE 2611 THE FINANCIAL RESULTS SHOW THAT INCOME FROM SOFTWARE SERVICES AND PRODUCTS TOTAL TO RS.2981.0 3 MILLION. 6.2.1. IN RESPECT OF ABOVE TWO COMPARABLES LD.CIT D R SUBMITTED THAT THESE COMPANIES MAY BE SENT BACK TO LD.AO/TPO FOR DUE VERIFICATION DUE TO CONTRADICTIONS IN RESPECT OF ANNUAL REPORT. 6.2.2. WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IN OUR OPINION LD. AO SHALL VERIFY THAT ANNUAL REPORTS FILED BY ASSESSEE IN RESPECT OF THESE COMPARABLES AND THEN ASCERTAINED THE COMPARABILITY WITH THAT OF ASSESSEE. IT IS OBSERVED THAT IN RESPECT OF THESE 2 COMPARABLES REVENUE IS GENERATED FROM SOFTWARE SERVICES AS WELL AS PRODUCTS. IF IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 35 OF 51 THE SEGMENTAL DETAILS COULD BE ASCERTAINED IN RESPECT OF SOFTWARE SERVICES THEN THESE COMPARABLES MAY BE CONSIDERED AFRESH FOR PURPOSES COMPARABILITY WITH THAT OF ASSESSEE IN ACCORDANCE WITH LAW, KEEPING IN MIND THAT ASSESSEE IS A CAPTIVE SER VICE PROVIDER THAT OPERATES AT LOW RISK LEVELS. ACCORDINGLY THESE COMPARABLES ARE SET ASIDE TO LD.AO/TPO. 6.3. CAT TECHNOLOGIES PVT.LTD LD.AR SUBMITTED THAT THE ASSESSEE PRAYED FOR INCLUSION OF THIS COMPANY BEFORE DRP. HOWEVER, DRP REJECTED THE PRAYER OF THE ASSESSEE FOR THE REASON THAT THIS COMPARABLE IS NOTED TO HAVE EXCLUSIVE BUSINESS IN MEDICAL TRANSCRIPTION, TRAINING SOFTWARE DEVELOPMENT AND CONSULTANCY SERVICES WHICH IS TAKEN AS ONLY REPORTABLE SEGMENT. LD.DRP WAS OF THE VIEW THAT THESE SERVICES CANN OT BE CATEGORISED AS SOFTWARE DEVELOPMENT AND THAT SPECIFIC INFORMATION RELATING TO REVENUE FROM SOFTWARE DEVELOPMENT SERVICES WAS NOT AVAILABLE. 6.3.1. LD.AR PLACED RELIANCE ON ANNUAL REPORT OF THIS COMPANY PLACED AT PAGE 2991 OF PAPER BOOK VOLUME 6, WHER EIN FOR YEAR UNDER CONSIDERATION, REVENUE IS GENERATED UNDER 2 SEGMENTS BEING, CONSULTANCY FEE RECEIPTS AMOUNTING TO RS.16,30,728/ - AND SOFTWARE IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 36 OF 51 DEVELOPMENT RECEIPTS AMOUNTING TO RS.3,87,43,019/ - . HE THUS SUBMITTED THAT THE OBSERVATIONS BY DRP IS CONTRARY T O THE ANNUAL REPORT OF THIS COMPANY. 6.3.2. LD. CIT DR PLACED RELIANCE UPON DECISION OF ITAT CHENNAI BENCHES IN CASE OF GE CONVERTEAM EDC PVT.LTD VS ACIT REPORTED IN (2017) 79 TAXMANN.COM 498. SHE ALSO SUBMITTED THAT THIS COMPARABLE IS FUNCTIONALLY NOT SI MILAR WITH THAT OF ASSESSEE. 6.3.3. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS OBSERVED THAT THE DECISION RELIED UPON BY LD.CIT DR PERTAINS TO ASSESSMENT YEAR 2009 - 10. IT IS FURTHER OBSERVED THAT THE LD.T PO HAS CONSIDERED THIS COMPARABLE TO BE FUNCTIONALLY SIMILAR WITH THAT OF ASSESSEE WHICH HAS BEEN CATEGORICALLY RECORDED AT PAGE 33 OF ORDER PASSED BY HIM. THUS WE REJECT ARGUMENT ADVANCED BY LD.CIT DR IN RESPECT OF FUNCTIONAL DISSIMILARITY WITH THAT OF AS SESSEE. HOWEVER WE DIRECT LD. AO/TPO TO VERIFY THE SAID COMPARABLE AFRESH KEEPING IN MIND THAT ASSESSEE IS A CAPTIVE SERVICE PROVIDER THAT OPERATES AT LOW RISK LEVELS.. ACCORDINGLY , THIS COMPARABLE IS ALSO SET ASIDE TO LD.AO/TPO FOR DUE VERIFICATION OF FAR IN ACCORDANCE WITH LAW. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 37 OF 51 6.4. I2T2 INDIA LTD LD. AR SUBMITTED THAT AUTHORITIES BELOW REJECTED THIS COMPARABLE ONLY FOR THE REASON THAT DETAILS REGARDING RELATED PARTY TRANSACTION IN CASE OF THIS COMPANY WAS NOT AVAILABLE . FURTHER IT HAS BEEN OBSERVED BY A UTHORITIES BELOW THAT THIS COMPANY IS OPERATING IN ITES INDUSTRY. LD.AR HOWEVER SUBMITTED THAT THIS COMPANY UNDERTAKES VARIOUS IT SERVICES, BUT ITS INDIAN COMPANY IS ENGAGED IN UNDERTAKING SOFTWARE DEVELOPMENT SERVICES IN INDIA IN THE NATURE OF EXECUTING S OFTWARE PROJECTS IN INDIA. IT IS ALSO SUBMITTED THAT THIS COMPANY UNDERTAKES SOFTWARE CONSULTANCY SERVICES WHICH FORMS A WHEREIN MINISCULE PART OF THE REVENUE BASE AND THEREFORE IT CAN BE SAID THAT THIS COMPANY IS PREDOMINANTLY ENGAGED IN THE BUSINESS OF S OFTWARE DEVELOPMENT SERVICES. HE PLACED RELIANCE UPON DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF LG S OFT INDIA PVT. LT D ., IN ITA (TP) A NO. 3122/BANG/2018 . ON THE CONTRARY LD.CIT DR PLACED RELIANCE UPON ORDERS OF AUTHORITIES BELOW. WE HAVE PE RUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. THE ONLY REASON FOR EXCLUDING THIS COMPARABLE BY THE AUTHORITIES BELOW IS FOR THE REASON THAT RPT TRANSACTIONS HAVE NOT BEEN REPORTED IN THE ANNUAL REPORT. WE HAVE IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 38 OF 51 PERUS ED THE DECISION OF THIS TRIBUNAL IN CASE OF LG SOFT INDIA PRIVATE LIMITED (SUPRA) WHEREIN ON SIMILAR REASONING LD. TPO HAD EXCLUDED THIS COMPARABLE THEREIN AND THIS TRIBUNAL OBSERVED AS UNDER: 12. WE FIND FORCE IN THE CONTENTIONS OF LD. AR. IF THE ANNUAL REPORT OF THIS COMPANY DOES NOT MENTION ABOUT RELATED PARTY TRANSACTIONS, THEN THE ASSESSEE CANNOT BE HELD RESPONSIBLE TO PROVE A FACT RELATING TO A 3 RD PARTY, WHICH MAY OR MAY NOT EXIST. WE NOTICE FROM AUDITORS REPORT OF M/S.I2T2 INDIA LTD., THAT THE AUDI TOR IN PARAGRAPH 5 (B) OF ANNEXURE TO THE AUDITORS REPORT HAS MENTIONED AS UNDER: - THERE ARE NO TRANSACTIONS THAT ARE MADE ENTERPRISES EXCEEDING RS. 5 LACS IN RESPECT OF ANY PART WHO IS COVERED UNDER SECTION 301 OF THE ACT DURING THE FINANCIAL YEAR. HENC E, IN THE ABSENCE OF ANY SPECIFIC INFORMATION, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE ABOVE SAID COMPANY MIGHT NOT HAVE HAD RELATED PARTY TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY WE DO NOT AGREE WITH THE REASONING G IVEN BY LD. DRP FOR EXCLUDING THIS COMPANY AS A COMPARABLE. ACCORDINGLY WE DIRECT THE LD. AO/U.S. INCLUDE THIS COMPANY. IT IS OBSERVED THAT DRP IN PRESENT CASE OBJECTED FOR INCLUSION OF THIS COMPARABLE BECAUSE THIS COMPANY IS OPERATING IN ITES INDUSTRY. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 39 OF 51 ANNUAL REPORT OF THIS COMPARABLE HAS BEEN PLACED AT PAGE 5 93 OF PAPER BOOK VOLUME 2 . IT IS OBSERVED FUNCTIONALLY IT IS PROVIDING EXPORT OF SOFTWARE AND SERVICES. ANNUAL REPORT PLACED IN PAPER BOOK DOES NOT CONTAIN FUNCTIONS PERFORMED BY THIS COMPARABLE IN ORDER TO ASCERTAIN WHETHER THIS COMPANY IS RENDERING SWD SERVICES OR NOT. WE THEREFORE, SET ASIDE THIS ISSUE TO LD.AO/TPO FOR VERIFICATION. LD.AO/TPO SHALL CALL FOR REQUISITE INFORMATION FROM THIS COMPANY, A COPY OF WHICH SHALL BE PROVIDED TO ASSESSEE ALS O. COMPARABILITY OF THIS COMPANY WITH ASSESSEE SHALL THEN BE CONSIDERED BY GIVING PROPER OPPORTUNITY TO ASSESSEE. ACCORDINGLY, THIS COMPARABLE IS SET ASIDE TO LD.AO/TPO. IN RESPECT OF OTHER COMPARABLES, AS ASSESSEE DO NOT WISH TO CONTEST THE SAME IS NOT CONSIDERED HEREIN ABOVE FOR YEAR UNDER CONSIDERATION. HOWEVER ASSESSEE SEEKS LIBERTY TO CONTEST OTHER COMPARABLES IN AN APPROPRIATE SITUATION. ACCORDINGLY REMAINING COMPARABLES UNDER BOTH SEGMENTS ALLEGED BY ASSESSEE FOR EXCLUSION IN THIS GROUND ARE DISMI SSED , WITH THE LIBERTY TO CONTEST IN AN APPROPRIATE CASE. ACCORDINGLY GROUND 2.5 RAISED BY ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 40 OF 51 7. GROUND NO. 2.6 - 2.7 ARE IN RESPECT OF COMPUTING INCORRECT OPERATING MARGINS OF COMPARABLES BY NOT GRANTING APPROPRIATE WORKING CAPITAL AND RISK ADJUSTMENTS. 7.1. IT HAS BEEN SUBMITTED BY LD.AR THAT WORKING CAPITAL AND RISK ADJUSTMENT HAS BEEN DENIED TO ASSESSEE ON THE GROUND THAT ASSESSEE FAILED TO DEMONSTRATE SUCH DIFFERENCES COULD HAVE ANY IMPACT ON ASSESSEE S PROFIT. IT HAS BEEN SUBMITTED BY LD. AR THAT THE SUBMISSIONS ADVANCED BY ASSESSEE DEMONSTRATING COMPUTATIONAL IMPACT HAS NOT BEEN CONSIDERED BY THE LD.AO/TPO. BEFORE US , LD.AR SUBMITTED THAT IT IS AN ACCEPTED PRINCIPLE UPHELD IN VARIOUS DECISIONS OF THIS TRIBUNAL THAT WORKING CAPITAL ADJUSTMENT SHOULD BE ALLOWED ON ACTUALS. IT HAS BEEN SUBMITTED THAT ALL RELEVANT DETAILS FOR COMPUTATION OF WORKING CAPITAL WAS PROVIDED TO AO/DRP WHICH HAS BEEN DISREGARDED. HE PLACED RELIANCE UPON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF HUAWEI TECHNOLOGIES INDIA PVT. LTD VS JCIT REPORTED IN (2019) 101 TAXMAN.COM 313, WHEREIN IT HAS BEEN HELD THAT THE WORKING CAPITAL HAS TO BE GRANTED IN ACTUAL . 7.2. ON THE CONTRARY , LD.CIT DR PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 41 OF 51 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US INCLUDING THE DECISION RELIED UPON BY LD.AR IN CASE OF HUAWEI TECHNOLOGIES INDIA PVT.LTD VS JCIT (SUPRA). A READING OF RULE 10B(L)(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 COMP ARABLE UNCONTROLLED TRANSACTIONS, WHICH COULD MATERIALLY AFFECT THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET. 7.2. CHAPTERS I AND III OF OECD TRANSFER PRICING GUIDELINES CONTAIN GUID ELINES ON COMPARABILITY ANALYSES FOR TRANSFER PRICI NG PURPOSES. GUID LINES O N ADJUSTMENTS TO BE PROVIDED IS FOUND IN PARAGRAPHS 3.47 - 3.54 AND IN THE ANNEX TO CHAPTER III . THE GUIDELINE S MUST BE FOLLOWED FOR COMPUTING ARM'S LENGTH PRINCIPLE, AND FOR COMPAR ING COMPARABLE UNCONTROLLED TRANSACTIONS. REASONABLY ACCURATE ADJUSTME NTS SHOULD BE MADE TO ELIMINATE EFFECT OF ANY SUCH DIFFERENCES IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 42 OF 51 7.3. PARAGRAPHS 13 TO 16 OF OECD GUIDELINES, EMPHASIZES NEED FOR WORKING CAPITAL ADJUSTMENT IN TERMS OF RECEIVABLES AND PAYABLES AS UNDER : '13. IN A COMPETITIVE ENVIRONMENT, MONEY HAS A TIME VA LUE. IF A COMPANY PROVIDED, SAY, 60 DAYS TRADE TERMS FOR PAYMENT OF ACCOUNTS, THE PRICE OF THE GOODS SHOULD EQUATE TO THE PRICE FOR IMMEDIATE PAYMENT PLUS 60 DAYS OF INTEREST ON THE IMMEDIATE PAYMENT PRICE. BY CARRYING HIGH ACCOUNTS RECEIVABLE A COMPANY IS ALLOWING ITS CUSTOMERS A RELATIVELY LONG PERIOD TO PAY THEIR ACCOUNTS. IT WOULD NEED TO BORROW MONEY TO FUND THE CREDIT TERMS AND/OR SUFFER A REDUCTION IN THE AMOUNT OF CASH SURPLUS WHICH IT WOULD OTHERWISE HAVE AVAILABLE TO INVEST. IN A COMPETITIVE ENVIR ONMENT, THE PRICE SHOULD THEREFORE INCLUDE AN ELEMENT TO REFLECT THESE PAYMENT TERMS AND COMPENSATE FOR THE TIMING EFFECT . 14. THE OPPOSITE APPLIES TO HIGHER LEVELS OF ACCOUNTS PAYABLE. BY CARRYING HIGH ACCOUNTS PAYABLE, A COMPANY IS BENEFITTING FROM A REL ATIVELY LONG PERIOD TO PAY ITS SUPPLIERS. IT WOULD NEED TO BORROW LESS MONEY TO FUND ITS PURCHASES AND/OR BENEFIT FROM AN INCREASE IN THE AMOUNT OF CASH SURPLUS AVAILABLE TO INVEST. IN A COMPETITIVE ENVIRONMENT, THE COST OF GOODS SOLD SHOULD INCLUDE AN ELE MENT TO REFLECT THESE PAYMENT TERMS AND COMPENSATE FOR THE TIMING EFFECT. 15. A COMPANY WITH HIGH LEVELS OF INVENTORY WOULD SIMILARLY NEED TO EITHER BORROW TO FUND THE PURCHASE, OR REDUCE THE AMOUNT OF CASH SURPLUS WHICH IT IS ABLE TO INVEST. NOTE THAT THE INTEREST RATE JULY 2010 PAGE 6 MIGHT BE AFFECTED BY THE FUNDING STRUCTURE (E.G. WHERE THE PURCHASE OF INVENTORY IS PARTLY FUNDED BY EQUITY) OR BY THE RISK ASSOCIATED WITH HOLDING SPECIFIC TYPES OF INVENTORY) 16. MAKING A WORKING CAPITAL ADJUSTMENT IS AN A TTEMPT TO ADJUST FOR THE DIFFERENCES IN TIME VALUE OF MONEY BETWEEN THE TESTED PARTY AND POTENTIAL COMPARABLES, WITH AN ASSUMPTION THAT THE DIFFERENCE SHOULD BE REFLECTED IN PROFITS. THE UNDERLYING REASONING IS THAT: A COMPANY WILL NEED FUNDING TO COVER THE TIME GAP BETWEEN THE TIME IT INVESTS MONEY (I.E. PAYS MONEY TO SUPPLIER) AND THE TIME IT COLLECTS THE INVESTMENT (I.E. COLLECTS MONEY FROM CUSTOMERS) THIS TIME GAP IS CALCULATED AS: THE PERIOD NEEDED TO SEL L IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 43 OF 51 INVENTORIES TO CUSTOMERS + (PLUS) THE PERIOD NEEDED TO COLLECT MONEY FROM CUSTOMERS - (LESS) THE PERIOD GRANTED TO PAY DEBTS IN SUPPLIERS' 7.4. THE REVERSE APPLIES TO HUGE ACCOUNTS PAYABLE. BY HAVING HIGH ACCOUNTS PAYABLE, A COMPANY IS BENEFITTING FROM A RELATIVELY LONG PERIOD TO PAY ITS SUPPLIERS. IT WOULD NEED TO BORROW LESS MONEY TO FUND ITS PURCHASES AND/OR BENEFIT FROM AN INCREASE IN THE AMOUNT OF CASH SURPLUS AVAILABLE TO INVEST. IN A COMPETITIVE ENVIRONMENT, THE COST OF GOODS SOLD SHOULD INCLUDE A N ELEMENT TO REFLECT THESE PAYMENT TERMS AND COMPENSATE FOR THE TIMING EFFECT. A COMPANY WITH HIGH LEVELS OF INVENTORY WOULD SIMILARLY NEED TO EITHER BORROW TO FUND THE PURCHASE, OR REDUCE THE AMOUNT OF CASH SURPLUS WHICH IT IS ABLE TO INVEST. MAKING A WOR KING CAPITAL ADJUSTMENT IS AN ATTEMPT TO ADJUST FOR THE DIFFERENCES IN TIME VALUE OF MONEY BETWEEN THE TESTED PARTY AND POTENTIAL COMPARABLES, WITH AN ASSUMPTION THAT THE DIFFERENCE SHOULD BE REFLECTED IN PROFITS. METHODOLOGY TO COMPUTE WORKING CAPITAL ADJ USTMENT IS GIVEN IN PARAGRAPHS 13 TO 16 OF THE AFORESAID OECD G UIDELINES (SUPRA) . THE SE GUIDELINE ALSO INDICATE FACTORS THAT NEEDS TO CONSIDERED LIKE; 7.5. THE POINT IN TIME AT WHICH THE RECEIVABLES, INVENTORY AND PAYABLES SHOULD BE COMPARED BETWEEN TESTED PARTY IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 44 OF 51 AND COMPARABLES, AND WHETHER IT SHOULD BE THE FIGURES OF RECEIVABLES, INVENTORY PAYABLE AT THE YEAREND OR BEGINNING OF THE YEAR OR AVERAGE OF THESE FIGURES THAT SHOULD BE CONSIDERED; , 7.6. IN THE MATTER OF DETERMINATION OF ARM'S LENGTH PRICE, IT CA NNOT BE SAID THAT THE BURDEN IS ON THE ASSESSEE OR THE DEPARTMENT TO SHOW WHAT IS THE ARM'S LENGTH PRICE. THE DATA AVAILABLE WITH ASSESSEE AND DEPARTMENT SHOULD BE THE STARTING POINT AND DEPENDING ON THE FACTS AND CIRCUMSTANCES OF A CASE , FURTHER DETAILS C AN BE CALLED FOR. AS FAR AS ASSESSEE IS CONCERNED, THE FACTS AND FIGURES WITH REGARD TO ITS BUSINESS MUST BE FURNISHED. IN SO FAR AS APPLYING INVENTORY, RECEIVABLES AND PAYABLES FOR COMPUTING WORKING CAPITAL ADJUSTMENT ALLEDGED BY DRP/TPO IN CASE OF CERTAI N COMPARABLES , ITAT DELHI BENCH IN CASE OF ITO V E VALUE SERVC.COM , REPORTED IN [2016] 75 TAXMANN.COM 195 HELD THAT, INSISTING ON DAILY BALANCES OF WORKING CAPITAL REQUIREMENTS TO COMPUTE WORKING CAPITAL ADJUSTMENT IS NOT PROPER, AS IT WILL BE IMPOSSIBLE T O CARRY OUT SUCH EXERCISE AND THAT WORKING CAPITAL ADJUSTMENT HAS TO BE BASED ON THE OPENING AND CLOSING WORKING CAPITAL DEPLOYED. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 45 OF 51 7.7. IT MUST NOT BE FORGOTTEN THAT T RANSFER PRICING A NALYSIS IS ESTIMATION AND NOT AN EXACT SCIENCE. ONE HAS TO SEE THAT , RE ASONABLE ADJUSTMENT MUST BE MADE WHERE EVER IT IS NEEDED , SO AS TO BRING BOTH COMPARABLE AND TEST PARTY ON SAME FOOTING. IN PRESENT FACTS OF CASE, DRP MAY BE CORRECT IN DENYING WORKING ADJUSTMENT DUE TO UNAVAILABLITY REQUIRED DATA , HOWEVER THERE IS NO MERI T IN OBSERVATIONS OF DRP/TPO AS SUPPORTED BY LD.CIR DR , IN DENYING WORKING CAPITAL ADJUSTMENT DUE TO ABSENCE OF DETAILS FOR WORKING OUT ADJUSTMENTS IN COMPARABLE COMPANIES CHOSEN. IF WE APPRECIATE THE ARGUMENT ADVANCED BY LD.CIT DR, THERE WOULD REMAIN NO C OMPARABLES FOR THE PURPOSE OF COMPARIBILITY ANALYSIS TO DETERMINE ALP OF AN INTERNATIONAL TRANSACTION, AND THIS WOULD BE FATAL TO ENTIRE EXERCISE OF TRANSFER PRICING ANALYSIS. 7.8. REGARDING COMPARABLE COMPANIES, ONE HAS TO FALL BACK UPON ONLY ON INFORMATI ON AVAILABLE IN PUBLIC DOMAIN. IF THAT INFORMATION IS INSUFFICIENT, IT IS BEYOND THE POWER OF ASSESSEE TO PRODUCE CORRECT INFORMATION ABOUT COMPARABLE COMPANIES. REVENUE ON THE OTHER HAND HAS SUFFICIENT POWERS U/S.133(6) TO COMPEL PRODUCTION OF REQUIRED DE TAILS FROM COMPARABLE COMPANIES. IF TH IS POWER IS NOT EXERCISED TO FIND TO GET INFORMATION REQUIRED, THEN IT IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 46 OF 51 IS NO DEFENSE TO SAY THAT ASSESSEE HAS NOT FURNISHED REQUIRED DETAILS TO DENY ANY ADJUSTMENT ON ACCOUNT OF WORKING CAPITAL DIFFERENCES. THEREFORE T HIS OBJECTION OF DRP IS NOT SUSTAINABLE. THEREFORE IN, ENDEAVOR SHOULD BE MADE TO BRING IN COMPARABLE COMPANIES FOR THE PURPOSE OF BROAD COMPARISON AND WORKING CAPITAL ADJUSTMENT CLAIMED BY ASSESSEE SHOULD BE ANALYSED, KEEPING IN MIND, OECD GUIDELINES (SUP RA). 7.9. BASED ON THE ABOVE DISCUSSIONS, AND RESPECTFULLY FOLLOWING DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF HUAWEI TECHNOLOGIES INDIA (P.) LTD. ( SUPRA ), WE DIRECT WORKING CAPITAL ADJUSTMENT TO BE COMPUTED AND TO ALLOW AS PER ACTUALS, AFTER CONSIDERING EXCLUSION/INCLUSION OF COMPARABLE COMPANIES IN THE FINAL SET OF COMPARABLES AS DISCUSSED HEREINABOVE. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. 8. GROUND NO. 4 RAISED BY ASSESSEE IS IN RESP ECT OF DISALLOWANCE MADE BY LD . AO UNDER SECTION 14 A OF THE A CT. 8.1. AT THE OUTSET LD.AR SUBMITTED THAT THERE IS NO EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION AND THEREFORE NO DISALLOWANCE COULD BE COMPUTED UNDER IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 47 OF 51 SECTION 14 A BY APPLYING RULE 8D. IN SUPPORT OF HIS CONTENTIONS H E PLACED RELIANCE ON A RECENT RULING BY HONBLE MADRAS HIGH COURT IN CASE OF CIT VS CHITTINAD LOGISTICS LTD REPORTED IN (2018) 18 TAXMANN.COM 221 . IT IS ALSO BEEN SUBMITTED THAT HONBLE SUPREME COURT HAS DISMISSED SLP FILED BY REVENUE IN THIS CASE WHICH HA S BEEN REPORTED IN (2018) 95 TAXMANN.COM 250 . 8.2. LD.CIT DR PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 8.3. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ADMITTEDLY, THERE IS NO EXEMPT INCOME EARNED BY ASSESSEE DURING THE YEAR, AS HAS BEEN NOTED BY LD.AO IN IMPUGNED ORDER. UNDER SUCH CIRCUMSTANCES, RATIO OF HONBLE MADRAS HIGH COURT WHICH HAS BEEN APPROVED BY HON ABLE SUPREME COURT IN CASE OF CHITTINAD LOGISTICS LTD (SUPRA) IS SQUARELY APPLICABLE. RE SPECTFULLY FOLLOWING THE SAME WE DIRECT LD.AO TO DELETE ADDITION MADE UNDER SECTION 14 A READ WITH RULE 8D FOR YEAR UNDER CONSIDERATION. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 48 OF 51 9. GROUND NO. 5 - 6 IS IN RESPECT OF DISALLOWANCE UNDER SECTIO N 43 B TOWARDS LEAVE ENCASHMENT AND BONUS PAID TO THE EMPLOYEES. 9.1. ASSESSEE HAS FILED BEFORE US CERTAIN ADDITIONAL EVIDENCES FOR DEDUCTION CLAIMED UNDER SECTION 43B OF THE ACT TOWARDS LEAVE ENCASHMENT. IT HAS BEEN SUBMITTED THAT CERTAIN ADDITIONAL EVIDE NCES LIKE SALARY SLIP, FORM 16, PAN ETC., WERE FILED BEFORE DRP WHICH WAS REMANDED TO LD.AO FOR DUE CONSIDERATION. LD.AR SUBMITTED THAT IN THE REMAND REPORT LD.AO DID NOT ADMIT ADDITIONAL EVIDENCE WHICH WAS UPHELD BY DRP. HOWEVER LD.AO SUGGESTED CERTAIN EV IDENCES TO BE SUBMITTED TO SUBSTANTIATE THE CLAIM. DRP HAS NOTED THAT ASSESSEE FAILED TO PROVIDE ALL THE DETAILS AS CALLED FOR BY ACIT PURSUANT TO WHICH, CLAIM WAS REJECTED. AT THIS JUNCTURE, IT HAS BEEN SUBMITTED THAT ASSESSEE AGAIN FILES ADDITIONAL EVIDE NCE AS CALLED FOR BY ACIT WHICH MAY BE VERIFIED BY AUTHORITIES BELOW IN RESPECT OF THE CLAIM MADE. 9.2. LD.CIT DR OBJECTS TO THE ADMISSION OF ADDITIONAL EVIDENCE. SHE PLACED RELIANCE ON DECISION OF CHANDIGARH BENCH OF ITAT IN CASE OF RISHI SAGER VS ITO REP ORTED IN (2013) 36 TAXMANN.COM 508 . SHE SUBMITTED THAT AS ASSESSEE FAILED TO PRODUCE DOCUMENTS DURING ASSESSMENT PROCEEDINGS AND DID NOT COMPLY WITH VARIOUS NOTICES IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 49 OF 51 ISSUED TO COMPLY WITH THE REQUIREMENTS CALLED FOR BY LD.AO, ADDITIONAL EVIDENCE COULD NOT B E ACCEPTED AT THE STAGE OF 2 ND APPELLATE PROCEEDINGS. 9.3. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ON PERUSAL OF ORDER PASSED BY DRP, IT IS NOTED THAT ASSESSEE HAD FILED VARIOUS DOCUMENTS WHICH WAS CALLED FO R BY ACIT HOWEVER THE SAME HAS NOT BEEN CONSIDERED. ASSESSEES IS REALLY FILING THESE DOCUMENTS BEFORE THIS TRIBUNAL TO CONSIDER CLAIM OF LEAVE ENCASHMENT AND BONUS PAID TO EMPLOYEES IN ACCORDANCE WITH LAW. WE DO NOT FIND ANY REASON NOT TO ALLOW REQUEST OF LD.AR, AS IT IS IN CONSONANCE WITH PRINCIPLES OF NATURAL JUSTICE. WE THEREFORE ADMIT THE ADDITIONAL EVIDENCE FILED BY ASSESSEE AND SEND IT BACK TO LD.AO FOR VERIFICATION. LD.AO SHALL VERIFY THE DOCUMENTS FILED BY ASSESSEE AND CONSIDER THE CLAIM AS PER LAW . NEEDLESS TO SAY THAT PROPER OPPORTUNITY MUST BE GRANTED TO ASSESSEE OF BEING REPRESENTED. ACCORDINGLY, THESE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO. 7 - 8 IS IN RESPECT OF DISALLOWANCE OF PROVISION FOR EXPENSES UN DER SECTION 40 (A) (I)/(IA) ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE PERTAINING TO OTHER PAYABLES AND PERTAINING TO RELATED PARTIES. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 50 OF 51 10.1. IT HAS BEEN SUBMITTED THAT LD.AO/DRP DISALLOWED ARBITRARILY AMOUNT EQUAL TO 10% OF THE PAYABLES TO RELATED PARTIE S AND OTHER PAYABLES FOR NON - DEDUCTION OF TDS. IT HAS BEEN SUBMITTED THAT THERE IS NO RATIONAL FOR DISALLOWING 10% OF THE PAYABLES. LD.AR SUBMITTED THAT THERE IS NOTHING POINTED OUT BY AUTHORITIES BELOW TO ESTABLISH A DEFECT AND THAT LD.AO HAS ALSO NOT REJ ECTED THE BOOKS OF ACCOUNTS OF ASSESSEE FOR AN AD HOC DISALLOWANCE. 10.2. ASSESSEE SUBMITTED THAT IN RESPECT OF RELATED PARTY PAYABLES LD.AO HAS DISALLOWED ON THE CLOSING BALANCE. LD.AR SUBMITTED THAT DRP HAS DIRECTED LD.AO TO FACTUALLY VERIFY THE CLAIM B ASED UPON THE EVIDENCES TO BE FURNISHED BY ASSESSEE WITHIN 10 DAYS AND SUCH DIRECTION HAS NOT BEEN COMPLIED WITH BY LD.AO. HE SUBMITTED THAT LD.AO WHILE PASSING IMPUGNED ASSESSMENT ORDER DISALLOWED THE CLAIM OF ASSESSEE. 10.3. LD.CIT DR ALSO CONCURRED WITH LD.AR TO THE EXTENT THAT ASSESSING OFFICER HAS NOT FOLLOWED THE DIRECTIONS OF DRP. 10.4. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. AS IT HAS BEEN ADMITTEDLY SUBMITTED BY BOTH SIDES THAT ASSESSING OFFICER HAS NOT FOLLOWED THE DIRECTIONS OF DRP, WE ARE OF THE OPINION THAT THE ISSUE NEEDS TO BE SET - ASIDE TO LD.AO. IT (TP) A NO. 3244 / BANG/20 1 8 PAGE 51 OF 51 LD.AO SHALL VERIFY THE DETAILS FILED BY ASSESSEE AND CONSIDER THE CLAIM IS IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HEA RD SHOULD BE GRANTED TO ASSESSEE. ACCORDINGLY THESE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOWED AS INDICATED ABOVE FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON (B.R BASKARAN) ACCOUNTANT MEMBER (BEENA PILLAI) JUDICIAL MEMBER BANGALORE, DATED, COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR , ITAT, BANGALORE.