M/s. Software Paradigms Infotech Private Limited, Mysore V. Income Tax Officer, Ward- 1, Mysore

ITTPA 630/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5760 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G S PRASHANTH
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; TDS; Set aside
• Section: 234B; 133(6); 90

Judgement Text

IT(TP)ANO.6 3 0(B)/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : B, BANGALORE BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SMT BEENA PILLAI, JUDICAL MEMBER IT(TP)A NO. 630 (BANG)/201 7 (ASSESSMENT YEAR : 20 12 - 13 ) M/S SOFTWARE PARADIGMS I N FOTECH PVT.LTD., NO.316 - 318, SPI CITY HEBBAL INDUSTRIAL AREA, MYSOE - 570 016 PAN NO.AA LCS7583C APPELLANT VS THE INCOME TAX OFFICER , WARD - 1(1), MYSORE RESPONDENT APPELLANT BY : SRI G.S.PRASHANTH, C A REVENUE BY : MISS. NEERA MALHOTRA, CIT DATE OF HEARING : 1 1 - 07 - 2019 DATE OF PRONOUNCEMENT : 07 - 08 - 2019 O R D E R PER SMT BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST FINAL ASSESSMENT ORDER DATED 31/01/17, PASSED BY LD. DCIT (TP) - 2 (2) (2) FOR ASSESSMENT YEAR 2012 - 13 ON FOLLOWING GROUNDS OF APPEAL: 1. THE ORDERS OF THE TPO/ DRP/ ASSESSING OFFICER IN SO FAR AS THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, IT(TP)ANO.6 3 0(B)/2017 2 W EIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF TO BE ASSESSED ON A TOTAL INCOME OF RS.5,58,10,708/ - AS AGAINST INCOME OF RS. 4,92,53,041/ - DECLARED BY THE APPELLANT. 3. A) TH E ORDER OF THE ASSESSMENT IS BAD IN LAW AS THE MANDATORY CONDITIONS TO INVOKE THE JURISDICTION UNDER SECTION 92CA OF THE ACT DID NOT EXIST, OR HAVING NOT BEEN COMPLIED WITH AND CONSEQUENTLY THE ORDER OF THE ASSESSING OFFICER IS BAD IN LAW FOR WANT OF REQUI SITE JURISDICTION. B) THE ASSESSING OFFICER ERRED IN NOT PROVIDING THE COPY OF THE APPROVAL GRANTED BY THE COMMISSIONER WHICH IS IN VIOLATION OF THE SETTLED PRINCIPLES OF NATURAL JUSTICE AND THUS THE ORDER OF ASSESSMENT NEEDS TO BE SET ASIDE. 4. THE ADDITION OF RS. 64,16,427/ - BEING ADJUSTMENT UNDER SECTION 92CA OF THE ACT MADE BY THE ASSESSING OFFICER IS BAD IN LAW AND THUS THE ADDITION MADE NEEDS TO BE DELETED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE TPO, DRP AND THE AO ERRED IN REJECTING THE COMPARABLES SELECTED BY THE APPELLANT WITHOUT GIVING ANY COGENT REASONS. 6. THE TPO, DRP AND THE ASSESSING OFFICER ERRED IN A) REJECTING THE TP STUDY OF THE APPELLANT. B) REJECTING THE USE OF MULTIPLE YEAR DATA WHILE ARRIVING AT APPROPRIATE COMPARABLES. C) REJECTING COMPANIES HAVING DIFFERENT FINANCIAL YEAR ENDING. D) REJECTING COMPANIES THAT HAVE EXPORT SALES LESS THAN 75% OF THE SALES E) REJECTING COMPANIES THAT HAVE SALES FROM ITES LESS THAN 75% OF THE TOTAL OPERATING REVENUE. F) NOT APPLYING REASONABLE EMPLOYEE COST FILTERS. IT(TP)ANO.6 3 0(B)/2017 3 G) APPLYING RELATED PARTY FILTER AT 25% OF SALES. 7. THE TPO AND THE AO OUGHT TO HAVE RESTRICTED THE UPPER LIMIT OF TURNOVER AT 10 TIMES THAT OF THE ASSESSEE AS HELD BY THE. JURISDICTIONAL TRIBUNAL IN THE CASE OF ACIT VS. MCAFEE SOFTWARE (INDIA)(P.) LTD., REPORTED IN 8. WIT HOUT PREJUDICE, THE TPO AND AO OUGHT TO HAVE APPLIED THE TURNOVER FILTER OF RS. 1 CRORE TO RS.200 CRORES FOR SELECTION OF COMPARABLES AS H ELD BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. PENTAIR WATER INDIA PVT. LTD., REPORTED IN 381 ITR 216. 9. THE TPO AND THE AO ERRED IN SELECTING COMPANIES WITH SUPER - PROFIT MARGINS NAMELY TCS E - SERVE LTD., UNIVERSAL PRINT SYSTEMS LTD.(SEG), B N R UDYOG LTD. AND THUS THE ALP MARGIN COMPUTED IS WRONG AND CONSEQUENTLY THE ORDERS OF TPO & AO NEED TO BE CANCELLED ON THE FACTS OF THE CASE. 10.A) THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE COMPANY UNIVERSAL PRINT SYSTEMS LTD. IS FUNCTIONALLY DISSIM ILAR AND THUS ERRED IN TREATING THE SAME AS COMPARABLE ON THE FACTS OF THE CASE. B) THE AUTHORITIES BELOW ERRED IN TREATING EXCEL INFOWAYS AS COMPARABLE ON THE FACTS OF THE CASE. C) THE AUTHORITIES BELOW ERRED IN TREATING BNR UDYOG LTD. AS COMPARABLE ON THE FACTS OF THE CASE. D) THE DRP ERRED IN REJECTING INFORMED TECHNOLOGIES INDIA LTD. AS COMPARABLE THOUGH IT IS FUNCTIONALLY SIMILAR TO THAT OF THE APPELLANT ON THE FACTS OF THE CASE. 11. THE COMPARABLES INFOSYS BPO LTD. AND E4E HEALTHCARE BUSINESS SERVICES PVT . LTD. SELECTED BY THE TPO NEEDS TO BE EXCLUDED AS THEY DO NOT PASS THE TURNOVER FILTER, ALTHOUGH THEY FORMED PART OF THE ASSESSEE'S ORIGINAL COMPARABLES ON THE FACTS OF THE CASE. RELIANCE IS PLACED ON THE DECISION OF IT(TP)ANO.6 3 0(B)/2017 4 CHANDIGARH TRIBUNAL (SPECIAL BENCH) IN THE CASE OF DCIT VS. QUARK SYSTEMS PVT. LTD., REPORTED IN 38 SOT 307. 12. THE TPO AND THE AO ERRED IN SELECTING EXTERNAL COMPARABLES OVER INTERNAL COMPARABLES OF THE ASSESSEE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 13. A ) THE TPO AND THE AO ERRED IN MAKING NEGATIVE WORKING CAPITAL ADJUSTMENT OF - 030% TO THE ARITHMETIC MEAN OF THE COMPARABLE COMPANIES IN DETERMINING THE ARM'S LENGTH PRICE RELATING TO INTERNATION AL TRANSACTIONS OF THE ASSESSEE. B) WITHOUT PREJUDICE, EVEN IF A NY WORKING CAPITAL ADJUSTMENT IS TO BE MADE, ONLY A POSITIVE ADJUSTMENT HAS TO BE MADE TO THE COMPARABLES. 14. THE TPO, DRP AND THE AO FAILED TO APPRECIATE THAT THE APPELLANT BEING A CAPTIVE SERVICE PROVIDER RUNS A 'SINGLE CUSTOMER RISK'. B) THE TPO, DRP A ND THE AO FURTHER ERRED IN NOT APPRECIATING THAT THE APPELLANT RENDERS SERVICES ONLY TO THEIR PARENT COMPANY AND THUS SUITABLE RISK ADJUSTMENT NEEDS TO BE MADE IN CASE OF THE APPELLANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 15. THE TPO, DRP AND THE AO FAILED TO UNDERSTAND THE SPIRIT AND INTENT OF RULE 10B(1)(E)(II) AS PER WHICH EVEN IF ONE OF THE COMPARABLES SELECTED BY THE APPELLANT SATISFIES THE COMPUTATION MECHANISM FOR DETERMINATION OF THE ALP, THE DETERMINATION OF ALP BY USING ARITHMETIC MEAN OF DIFFERENT COMPARABLES IS NOT WARRANTED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. IT(TP)ANO.6 3 0(B)/2017 5 16. THE TPO, DRP AND THE ASSESSING OFFICER ERRED IN NOT GRANTING THE BENEFIT OF THE PROVISO TO SECTION 92C(2) OF THE ACT WHICH IS MANDATORY UNDE R THE SCHEME OF THE ACT. 17. THE APPELLANT DENIES ITSELF LIABLE TO BE LEVIED TO INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT AND FURTHER THE COMPUTATION OF INTEREST UNDER SECTIONS 234B AND 234C WAS NOT PROVIDED TO THE APPELLANT AS REGARD TO THE RATE, PE RIOD AND METHOD OF CALCULATION OF INTEREST UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 18.THE APPELLANT CRAVES LEAVE TO 'ADD, ALTER, DELETE, AND MODIFY ANY OF THE GROUNDS WHICH ARE URGED ABOVE. 19.FOR THE ABOVE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS YOUR HONOUR TO CONSIDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND JUSTICE RENDERED. THE ADDITIONAL GROUNDS RAISED BY ASSESSEE ARE AS UNDER: THE APPELLANT BEGS T O SUBMIT THE UNDER MENTIONED ADDITIONAL GROUNDS OF APPEAL WHICH WERE NOT URGED SPECIFICALLY IN THE ORIGINAL GROUNDS OF APPEAL FILED AT THE TIME OF INSTITUTION OF APPEAL. THESE GROUNDS DO NOT INVOLVE ANY INVESTIGATION OF ANY FACTS OTHERWISE ON THE RECORD OF THE DEPARTMENT AND THEREFORE, IT IS PRAYED THAT THE ADDITIONAL POUNDS MAY KINDLY BE ADMITTED AND DISPOSED OFF ON MERITS FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF NATION AL THERMAL POWER CO. LTD. VS. CIT REPORTED IN 229 ITR 383 AND ON THE DECISION OF MYSORE HIGH COURT IN THE CASE OF GUNDATHUR THIMMAPPA & SONS CIT REPORTED IN 70 ITR 70. IT(TP)ANO.6 3 0(B)/2017 6 1. THE AUTHORITIES BELOW ERRED IN TREATING TCS E - SERVE LIMITED AS A COMPARABLE COMPANY T HOUGH IT IS FUNCTIONALLY DIFFERENT TO THAT OF THE APPELLANT ON THE FACTS OF THE CASE. 2. THE AUTHORITIES BELOW ERRED IN TREATING INFOSYS BPO LIMITED AS A COMPARABLE COMPANY THOUGH IT IS FUNCTIONALLY DIFFERENT TO THAT OF THE APPELLANT ON THE FACTS OF THE CASE. 3.THE COMPARABLE INFOSYS BPO LTD. SELECTED BY THE TPO NEEDS TO BE EXCLUDED AS IT IS FUNCTIONALLY DIFFERENT, ALTHOUGH IT FORMED PART OF THE ASSESSEE'S ORIGINAL COMPARABLES ON THE FACTS OF THE CASE. 2. IT HAS BEEN SUBMITTED THAT COMPARABLES ALLEGED FOR EXCLUSION IN ADDITIONAL GROUND WERE RAISED BEFORE DRP, HOWEVER, IN ADVERTENTLY THE SAME WAS MISSED OUT WHILE FILING PRESENT APPEAL BEFORE THIS TRIBUNAL. PLACING RELIANCE ON DECISION OF HONBLE SUPREME COURT IN CASE OF NTPC LTD VS CIT REPORTED IN 229 ITR 383 , AND JUTE CORPORATION OF INDIA VS CIT REPORTED IN 53 TAXMANN.85 PRAYED FOR ADMISSION OF ADDITIONAL GROUNDS. LD. CIT DR THOUGH, OPPOSED THE ADMISSION COULD NOT CONTROVERT SUBMISSIONS OF LD.AR. 3. WE HAVE PERU S ED RECORDS IN LIGHT OF SUBMISSIONS ADVANCED . IN OUR CONSIDERED VIEW IT IS OBSERVED THAT THESE COMPARABLES WERE A LLEGED BY ASSESSEE BE F ORE A UTHORITIES BELOW FOR EXCLUSION. CONSIDERING INADVERTENT MISTAKE, IN R A ISING THESE COMPARABLES ASSESSEE TO RAISE THEM NOW. ACCORDINGLY, ADDITIONAL GROUND RAISED BY ASSESSEE VIDE APPLICATION DATED 10 - 07 - 2018 STANDS ALLOWED. 4 . BRIEF FACTS OF THE CASE ARE AS UNDER: A SSESSEE IS A COMPANY ENGAGED IN BUSINESS OF SOFTWARE DEVELOPMENT, IT ENABLED AND BPO SERVICE PROVIDERS. RETURN OF INCOME FOR YEAR UNDER CONSIDERATION WAS FILED ON 29/09/1 2 IT(TP)ANO.6 3 0(B)/2017 7 DECLARING TOTAL INCOME OF RS.4,92,53, 040/ - . RETURN WAS PROCESSED UNDER SECTION 143 (1) , SUBS EQUENTLY CASE WAS SELECTED FOR SCRUTI NY AND NOTICE UNDER SECTION 143 (2) WAS ISSUED TO ASSESSEE. IN RESPONSE TO STATUTORY NOTICES, ASSESSEE APPEARED BEFORE LD. AO AND FILED REQUI SITE DETAILS AS CALLED FOR. LD.AO OBSERVED THAT ASSESSEE ENTERED INTO IN TERNATI ONAL TRANSACTION DURING YEAR UNDER CONSIDERATION WITH ASSOCIATED ENTERPRISES AND THEREFORE CASE WAS REFERRED TO TRANSFER PRICING OFFICER. LD. TPO UPON RECEIPT OF REFERENCE UNDER SECTION 90 2C OF THE A CT , ISSUED NOTICE TO ASSESSEE CALLING U PON TO FILE ECONOM IC DETAILS OF INTE RNATIONAL TRANSACTION IN FORM 3 CEB. LD.TPO FROM TRANSFER PRICING REPORT OBSERVED THAT ASSESSEE RENDERS IT ENABLED SERVICES TO INSPINITY AND SOFTWARE D EVELOPMENT S ERVICES TO SPI LLC. IT WAS OBSERVED THAT ASSESSEE WAS PROVIDING BACKEND CUST OMER CARE AND ADMINISTRATIVE SERVICES TO U.S. - BASED CLIENTS FROM HEALTHCARE AND FINANCIAL SERVICES SECTORS. LD.TPO OBSERVED THAT ASSESSEE ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTION WITH ITS AES: PARTICULARS AMOUNT MEDICAL TRANSCRIPTION SERVICE 3,45,71,603 PROVISION OF SOFTWARE SERVICES 55,66,75,560 IT WAS OBSERVED THAT ASSESSEE USED TNMM AS MOST APPROPRIATE METHOD BY USING OP/OC AS PLI AND COMPUTED ITS MARGIN UNDER SOFTWARE DEVELOPMENT SERVICES AT 15.84% AND ITES SERVICES (BPO DIVISION) AT 12 .36%. ASSESSEE USED 11 COMPARABLES FOR SOFTWARE DEVELOPMENT SERVICES AND 9 COMPARABLES IN RESPECT OF IT ENABLED IT(TP)ANO.6 3 0(B)/2017 8 SERVICES. IT HAS BEEN SUBMITTED THAT ONLY DISPUTED SEGMENT BY LD.TPO, IS IT ENABLED SERVICE SEGMENT. FOR IT ENABLED SERVICE SEGMENT ASSESSEE U SE D FOLLOWING 9 COMPARABLES WITH AN AVERAGE MARGIN OF 15.27%: SL.NO. NAME OF THE COMPANY WEIGHTED AVERAGE 1 ADITYA BIRLA MINACS WORLDWIDE LTD. 2.81 % 2 CALIBER POINT BUSINESS SOLUTIONS LTD. 13.17 % 3 COSMIC GLOBAL LTD. 24.82 % 4 DATAMATICS FINANCIAL SERVICES LTD. 0.45% 5 E4E HEALTHCARE BUSINESS SERVICES PVT.LTD. 16.47% 6 ICRA TECHNO ANALYTICS LTD. 21.73% 7 INFORMED TECHNOLOGIES INDIA LTD. 18.57% 8 INFOSYS BPO LTD., 26.48% 9 JINDAL INTELLICOM LTD. 12.93% ARITHMETIC MEAN 15.27 LD. TPO REJECTED ECONOMIC ANALYSIS DETERMINED BY ASSESSEE AND SELECTED NEW SET OFF FOLLOWING COMPARABLES HAVING AN AVERAGE MARGIN OF 28.11%: SL.NO. NAME OF THE CASE OP/OC 1 ACCENTIA TECHNOLOGIES LTD. 11.75% 2 UNIVERSAL PRINT SYSTEMS LTD.(SEG. (BPO) 52.46% 3 INFORMED TECHNOLOGIES LTD. 6.08% 4 INFOSYS BPO LTD. 36.30% 5 JINDAL INTELLICOM LTD. - 0.05% 6 MICROGENETIC SYSTEMS LTD. 19.61% 7 TCSE SERVE LTD. 63.69% 8 BNR UDYOG LTD.(SEG.) (IT/BVPO) 50.61% 9 EXCEL INFOWAYS LTD.(SEG)(IT/BVPO) 29.79% 10 E4E HEALTHCARE SERVICES PVT.LTD. AVERAGE PLI 28.11 LD. TPO THUS PROPOSED ADJUSTMENT OF RS.47,61,028 FOR IT ENABLED SERVICE SEGMENT. 5. AGGRIEVED BY PROPOSED ADJUSTMENT, ASSESSEE PREFERRED OBJECTIONS BEFORE DRP. DRP THOUGH UPHELD MOST OF THE IT(TP)ANO.6 3 0(B)/2017 9 COMPARABLE S SELECTED BY LD. TPO, HOWEVER EXCLUDED ACCENTIA T ECHNOLOGIES BASED ON FUNCTIONAL DIFFERENCES. DRP ALSO EXCLUDED M/S INFORMED TECHNOLOGIES INDIA LTD THOUGH IT WAS NOT OBJECTED BY ASSESSEE. UPON RECEIPT OF DRP DIRECTIONS LD. AO PASSED FINAL ASSESSMENT ORD ER BY MAKING AN ADDITION OF RS.64,16, 4 2 7/ - AS TP ADJUSTMENT. L.AO ALSO DISALLOWED DONATION CLAIMED BY ASSESS EE IS EXPENSES AMOUNTING TO RS.1,41, 240/ - . 6. AGGRI EVED BY ORDER PASSED BY LD. AO, ASSESSEE IS IN APPEAL BEFORE US NOW. IT HAS BEEN SUBMITTED THAT G ROUND NO. 1 ,4 & 18 - 19 ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 7 GR OUND NO. 5 - 16 ALONG WITH ADDITIONAL GROUND 1 - 2 ARE IN RESPECT OF COMPARABLES ALLEGED TO BE EXCLUDED/INCLUDED BY ASSESSEE. ASSESSEE PLACED BEFORE US CHART , WHEREIN FOLLOWING COMPARABLES ARE SOUGHT TO BE EXCLUDE/INCLUDE COMPARABLES SOUGHT TO BE EXCLUDED: UNIVERSAL PRINT SYSTEMS LTD (SEGMENTAL) (BPO) INFOSYS BPO LTD TCS E - SERVE LTD BNR UDYOG LTD (SEGMENT) (MEDICAL TRANSCRIPTION) EXCEL INFOWAYS LTD (SEGMENTAL) (IT) (BPO) COMPARABLES SOUGHT FOR INCLUSION INFORMED TECHNOLOGIES INDIA LTD B EFORE WE UNDERTAKE COMPARAB ILITY ANALYSIS , IT IS SINE QUA NON TO UNDERSTAND FUNCTIONS PERFORMED , ASSETS OWNED AND RISK ASSUMED BY ASSESSEE UNDER THE SEGMENT: IT(TP)ANO.6 3 0(B)/2017 10 FUNCTIONS I N THE TP STUDY , IT IS OBSERVED THAT ASSESSEE I S CATEGORISED UNDER BROAD HEAD OF MEDICAL TRANSCRIPTION. IT HAS BEEN SUBMITTED THEREIN THAT ASSESSEE SERVES VARIOUS INDUSTRIES LIKE MEDICAL, LEGAL, BUSINESS, EDUCATION. M EDICAL TRANSCRIPTION SERVICES HAS BEEN FURTHER ST REAMLINED INTO TO FURTHER DIVISION CALLED MEDICAL TRANSCRIPTION AND MEDICAL CODING. UNDER THESE SEGMENTS ASSESSEE PROVIDES OUTSOURCING SERVICES TO COMPANIES IN U.S. HEALTHCARE SYSTEMS WITH ASSISTANCE FROM COMPANIES IN - HOUSE INFORMATION TECHNOLOGY DIVISION. UNDER MEDICAL CODING SEGMENT ASSESSEE ASS I STS U.S. HEALTHCARE M EDICAL BILLING C OMPANIES AND MEDICAL PROVIDERS TO OBTAIN PROPER REIMBURSEMENT DUE FOR THEIR SERVICES. ASSETS EMPLOYED: I T HAS BEEN SUBMITTED THAT ASSESSEE OWNS ROUTINE ASSETS LIKE COMPUTER EQU IPMENT, NETWORK EQUIPMENT, SOFTWARE AND APPLICATIONS. IT IS ALSO BEEN SUBMITTED THAT ASSESSEE DOES NOT OWN ANY NONROUTINE VALUABLE INTANGIBLE ASSETS. RISKS ASSUMED : I T HAS BEEN SUBMITTED THAT ASSESSEE ACTED MERELY AS SUB CONTRACTOR OF SERVICES AND THEREFOR E IT BEARS LIMITED CONTRACT RISK AS COMPARED TO SPI LLC. ASSESSEE HOWEVER ASSUMES SUBSTANTIAL FOREIGN CURRENCY FLUCTUATION RISK , AS IT DEALS WITH CUSTOMERS IN VARIOUS COUNTRIES. AS ASSESSEE WORKS ON AN ASSURED MARKUP ON ALL COST INCURRED TOWARDS RENDERING SERVICES AND THERE IS NO PRICE RISK BONE BY ASSESSEE. IT(TP)ANO.6 3 0(B)/2017 11 THUS ASSESSEE HAS BEEN CONCLUDED TO BE NOT ASSUMING ANY UNIQUE OR EXTRAORDINARY RISK IN COURSE OF PROVIDING IT ENABLED SERVICES. BASED UPON ABOVE FAR ANALYSIS OF ASSESSEE, WE SHALL CONSIDER COMPARABLES ALLEGED BY ASSESSEE FOR EXCLUSION/INCLUSION. COMPARABLES SOUGHT TO BE EXCLUDED: 8. UNIVERSAL PRINT SYSTEMS LTD (SEGMENTAL) (BPO) ASSESSEE SOUGHT TO EXCLUDE THIS COMPARABLE FOR REASON THAT, IT FAILS EMPLOYEE COST FILTER AND HAS INSUFFICIENT COMPANY INFORMATION. IT IS ALSO BEEN SUBMITTED THAT, FUNCTIONALLY THIS COMPANY IS PROVIDING INTEGRATED PRINT SOLUTION TO ITS CUSTOMERS AND DOES NOT PROVIDES ROUTINE ITES SERVICES LIKE THAT OF ASSESSEE. IT HAS BEEN SUBMITTED THAT THIS COMPANY IS NOT A CAPTIVE SERVICE PROVIDER LIKE THAT OF ASSESSEE AND HAS PRODUCTS SALE AS WELL AS SERVICES S ALE, WHICH IS EVIDENT FROM PAGE 579 OF PAPER BOOK VOLUME II . 8.1 LD.CIT DR PLACED RELIANCE UPON ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THIS COMPARABLE IS FUNCTIONALLY COMPARABLE WITH THAT OF ASSESSEE. 9. WE HAVE HEARD SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORD PLACED BEFORE US. ON PERUSAL OF ANNUAL REPORT OF THIS COMPANY PLACED IN PAPER BOOK , WE ARE OF CONSIDERED OPINION THAT THIS COMPARABLE IS BASICALLY INTO SALE OF PRODUCTS AND SERVICES UNLIKE A CAPTIVE SERVICE PROVIDER SUCH AS ASSESSEE, WHO WORKS ON COST PLUS BASIS, PROVIDING SERVICES ONLY TO ITS AES. IT IS ALSO OBSERVED THAT THIS COMPARA BLE IS BASICALLY PROVIDING BPO SERVICES FROM ITS PREPRESS UNITS. IN WRITTEN SUBMISSION FILED, ASSESSEE PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CASE OF ZYME SOLUTIONS PVT LTD., VS ACIT REPORTED IN (2019) 101 TAXMAN.COM IT(TP)ANO.6 3 0(B)/2017 12 292, WHEREIN THIS COMPARABLE HAS BEEN EXCLUDED BY OBSERVING AS UNDER: 10.4 WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF UNIVERSAL PRINT SYSTEMS LTD. WITH THAT OF THE ASSESSEE - COMPANY HAS BEEN DULY CONSIDERED BY TPO AFTER REFERRING TO IN FORMATION CONTAINED IN ANNUAL REPORT. THE RELEVANT FINDINGS OF THE TPO HAD NOT BEEN COUNTENANCED BY LEARNED AR OF THE ASSESSEE. HOWEVER, THE ISSUE OF COMPARABILITY OF UNIVERSAL PRINT SYSTEMS LTD. HAS ALSO BEEN CONSIDERED BY THE CO - ORDINATE BENCH OF THIS TR IBUNAL IN THE CASE OF CGI INFORMATION SYSTEMS & MANAGEMENT CONSULTANTS PVT. LTD. (SUPRA) WHEREIN IT WAS HELD AS FOLLOWS: 47. THE NEXT SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS WITH REGARD TO EXCLUSION OF 2 COMPARABLE COMPANIES FROM THE L IST OF 7 COMPARABLE COMPANIES THAT REMAIN AFTER THE ORDER OF THE DRP. THE FIRST COMPARABLE COMPANY SOUGHT TO BE EXCLUDED IS UNIVERSAL PRINT SYSTEMS LTD. THIS COMPANY WAS CHOSEN AS A COMPARABLE COMPANY BY THE TPO. IN REPLY TO THE PROPOSAL OF THE TPO TO INCLUDE THIS COMPANY AS A COMPARABLE COMPANY, THE ASSESSEE VIDE ITS LETTER DATED 22.12.2015 HAD POINTED OUT ITS OBJECTIONS TO INCLUDING THIS COMPANY AS A COMPARABLE COMPANY. A COPY OF THE SAID OBJECTION IS AT PAGE - 785 OF THE ASSESSEE'S PAPER BOOK. THE ASSESSEE POINTED OUT THAT THE OP TC OF THIS COMPANY AS WORKED OUT BY THE TPO A T 59.40% WAS WRONG AND UNALLOCATED COSTS AS PER THE ANNUAL REPORT SHOULD BE ALLOCATED TO BPO SEGMENT AND IF THAT IS DONE THEN THE OP TC OF THIS COMPANY WILL BE ONLY 51.80%. THE ASSESSEE FURTHER POINTED OUT (PAGE 764 OF PAPER BOOK) THAT THE TPO HAD APPLIED REVENUE FILTER OF MORE THAN 75% BEING FROM NON - FINANCIAL SERVICE INCOME. THE ASSESSEE POINTED OUT THAT THE PERCENTAGE OF INCOME FROM ITES WAS ONLY 21.6% OF THE TOTAL REVENUE FROM OPERATIONS OF THIS COMPANY AS PER ITS ANNUAL REPORT. THE .ASSESSEE ALSO POINT ED OUT THAT IN THE PRE - PRESS IT(TP)ANO.6 3 0(B)/2017 13 BPO SEGMENT THIS COMPANY WAS PROVIDING INTEGRATED PRINT SOLUTIONS TO ITS CUSTOMERS, WHICH INCLUDES SCANNING, DESIGN/LAYOUT, TRAPPING, HAND - OUTLINED CLIPPING PATH AND IMAGE MASKING AND MAGAZINE AND CATALOGUE PUBLISHING. THE ASSE SSEE SUBMITTED THAT THE AFORESAID SERVICES ARE NOT IN THE NATURE OF ITES. THE ASSESSEE POINTED OUT THAT AS PER THE SAFE HARBOUR RULES INTRODUCED BY THE CBDT ITES HAS BEEN DEFINED AS BUSINESS PROCESS OUTSOURCING SERVICES PROVIDED MAINLY WITH THE ASSISTANCE OR USE OF INFORMATION TECHNOLOGY. IT WAS ALSO SUBMITTED THAT THIS COMPANY DOES NOT SATISFY THE DEFINITION OF ITES AS CONTAINED IN RULE IOTA(E) OF THE RULES. SINCE USE OF INFORMATION TECHNOLOGY IS ABSENT .IN THE VARIOUS SERVICES PROVIDED BY THIS COMPANY, IT CANNOT BE REGARDED AS ITES COMPANY. THE ASSESSEE ALSO SUBMITTED THAT THIS COMPANY FAILS THE EMPLOYEE COST FILTER. THE EMPLOYEE COST FILTER REQUIRES THAT THE EMPLOYEES COST INCURRED BY THE COMPANY MUST BE MORE THAN 25% OF ITS REVENUE. 48. THE TPO AT PAGE - 20 OF HIS ORDER HAS DEALT WITH THE ABOVE OBJECTIONS BY OBSERVING AS FOLLOWS: (A) PRE - PRESS BPO UNIT PROVIDES BACK OFFICE SUPPORT SERVICES. ( B) THIS COMPANY HAS FOUR MAJOR SEGMENTS VIZ., REPRO, LABEL PRINTING, OFFSET PRINTING AND PRE - PRESS BPO. THE EMPLOYEE COST OF PRE - PRESS BPO WAS MORE THAN 25% OF THE REVENUE FROM PRE - PRESS BPO AND THEREFORE THE EMPLOYEE COST FILTER IS SATISFIED IN THE CASE OF THIS COMPANY. (C )ON THE SERVICE REVENUE FILTER VIZ., THE REQUIREMENT THAT A COMPARABLE COMPANY MUST HAVE REVENUE FROM RENDERING SERVICES OF MORE THAN 75% OF ITS TOTAL REVENUE, THE TPO AGAIN HELD THAT THE PRE - PRESS BPO SEGMENT'S ENTIRE INCOME IT(TP)ANO.6 3 0(B)/2017 14 IS FROM SERVICES AND THEREFORE THIS OBJECTION IS NOT TO BE ACCEPTED. 49. ON OBJECTIONS BY THE ASSESSEE BEFORE THE DRP, THE DRP CONFIRMED THE ACTION OF THE TPO. ONE OF THE OBJECTION BEFORE THE DRP WAS THAT THIS COMPANY DID NOT FIGURE IN THE LIST OF COMPANIES ENGAGED IN ITES. ON THIS OBJECTION THE DRP HELD THAT THOUGH THIS COMPANY DID NOT FIGURE IN THE LIST OF COMPANIES IN 1TES IN THE MAIN SEARCH OF CAPITAL LINE AND PROWESS DATABASE BUT ON A SEGMENTAL SEARCH THESE TWO COMPANIES SATISFIED THE REQUIREMENT OF BEING CONSIDERED AS COMPANIES ENGAGED IN PROVIDING ITES. AGGRIEVED B Y THE DIRECTIONS OF THE DRP, THE ASSESSEE IS I N APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS THAT WERE MADE BEFORE THE TPO/DRP. IN PARTICULAR IT WAS SUBMITTED THAT THE SERVICE REVENUE FILTER WAS APPLIED BY THE TPO HIMSELF AT THE ENTITY LEVEL AND ON SUCH SEARC H THIS COMPANY WAS NOT REGARDED AS ENGAGED IN PROVIDING ITES. AT THIS STAGE THE TPO OUGHT TO HAVE DROPPED THIS COMPANY AS A COMPARABLE COMPANY BECAUSE THIS FILTER HAS TO BE APPLIED AT THE ENTITY LEVEL AND NOT AT THE SEGMENTAL LEVEL. THE LEARNED DR SUBMITTE D THAT IF THE SERVICE REVENUE FILTER ISAPPLIED AT THE SEGMENTAL LEVEL THERE CAN BE NO OBJECTION BY THE ASSESSEE. SHE RELIED ON THE ORDER OF THE DRP/TPQ. 50. THE REQUIREMENTS OF RULE 10B(1)(2) & (3) OF THE RULES IN THE MATTER OF COMPARABILITY OF COMPANIES UNDER TNMM NEEDS TO BE SEEN. THE SAME READS AS FOLLOWS: '10B. (1) FOR THE PURPOSES, OF SUB - SECTION (2) OF SECTION 92C, THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEING THE MOST APPROPR IATE METHOD, IN THE FOLLOWING MANNER, NAMELY: IT(TP)ANO.6 3 0(B)/2017 15 (A) TO (D). ****** (E) TRANSACTIONAL - MARGIN METHOD, BY WHICH, (I) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE FROM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSOCIATED ENTERPRISE IS COMPUTED IN RELATION TO COSTS INCURRED OR SALES EFFECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAVING REGARD TO ANY OTHER RELEVANT BASE; (II) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGARD TO THE SAME BASE; (III) THE NET PROFIT MARGIN REFERRED TO IN SUB - CLAUSE (IF) ARISING IN COMPARABLE UNCONTROLLED TRANSACTIONS IS ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSACTIONS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERIALLY AFFECT THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET; (IV) THE NET PROFIT MARGIN REALISED BY THE ENTERPRISE AND REFERRED TO IN SUB - CLAUSE (I) IS ESTABLISHED TO BE THE SAME AS THE NET PROFIT MARGIN REFERRED TO IN SUB - CLAUSE (III): (V)THE NE T PROFIT MARGIN THUS ESTABLISHED IS THEN TAKEN INTO ACCOUNT AN ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION. (2) FOR THE PURPOSES OF SUB - RULE (1), THE COMPARABILITY OF AN INTERNATIONAL TRANSACTION WITH AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFERENCE TO THE FOLLOWING, NAMELY: - V V I T H A N (A) THE SPECIFIC CHARACTERISTICS OF THE PROPERTY TRANSFERRED OR SERVICES PROVIDE: EITHER TRANSACTION; (B) THE FUNCTIONS PERFORMED, TAKING INTO ACCOUNT ASSETS EMPLOYED OR TO BE EMPLOYED AND THE RISKS ASSUMED, BY THE RESPECTIVE PARTIES TO THE TRANSACTIONS IT(TP)ANO.6 3 0(B)/2017 16 (C) THE SPECIFIC CHARACTERISTICS OF THE PROPERTY TRANSFERRED OR SERVICES PROVIDE: EITHER TRANSACTION; (D) THE FUNCTI ONS PERFORMED, TAKING INTO ACCOUNT ASSETS EMPLOYED OR TO BE EMPLOYED AND THE RISKS ASSUMED, BY THE RESPECTIVE PARTIES TO THE TRANSACTIONS (E) THE CONTRACTUAL TERMS (WHETHER OR NOT SUCH TERMS ARE FORMAL OR IN WRITING) OF THE TRANSACTIONS WHICH LAY DOWN EXPLICITLY OR IMPLICITLY HOW THE RESPONSIBILITIES, RISKS AND BENEFITS ARE TO BE DIVIDED BETWEEN THE RESPECTIVE PARTIES TO THE TRANSACTIONS: D)CON DITIONS PREVAILING IN THE MARKETS IN WHICH THE RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE, INCLUDING THE GEOGRAPHICAL LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORCE, COSTS OF LABOUR AND. CAPITAL IN THE MARKETS, OVERALL ECONOM IC DEVELOPMENT AND LEVEL OF COMPETITION AND WHETHER THE MARKETS ARE WHOLESALE RETAIL (3) AN UNCONTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIORIAL (I) NONE OF THE DIFFERENCES, IF ANY, BETWEEN THE TRANSACTIONS BEING COMPARED OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY MATERIALLY AFFECT THE PRICE OR COST CHARGED OR PAID IN, OR THE PROFIT ARISING FROM SUCH TRANSACTIONS IN THE OPEN MARKET; OR (II) REASONABLY ACCURATE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES.' 5.2.THERE APPEARS TO BE NO BAR IN THE RULES REFERRED TO ABOVE TO CONSIDERING SEGMENTAL DATA UNDER TNMM BECAUSE THE COMPARISON IS OF 'NET PROFIT MARGIN REALIZED BY THE ENTERPRISE FROM AN INTERNATIONAL TRANSACTION' WITH THE 'NET PROFIT REALIZED FROM A COMPARABLE UNCONTROLLED IT(TP)ANO.6 3 0(B)/2017 17 TRANSACTION'. THEREFORE COMPARISON IS OF SIMILAR TRANSACTION. WHEN SEGMENTAL INFORMATION IS AVAILABLE AND IS NOT DISPUTED, IT CANNOT BE ARGUED THAT FILTERS HAVE TO BE APPLIED AT ENTITY LEVEL. IT CANNOT BE ARG UED THAT WHEN THE TPO HIMSELF APPLIED THE FILTERS AT THE ENTITY LEVEL HE WAS NOT ENTITLED TO APPLY THE FILTERS AT SEGMENTAL LEVEL. AS WE HAVE ALREADY STATED IF CLEAR SEGMENTAL INFORMATION IS AVAILABLE THE FILTERS CAN BE APPLIED AT THE SEGMENTAL LEVEL IN TN MM. THEREFORE THE OBJECTION WITH REGARD TO THIS COMPANY FAILING THE EMPLOYEE COST FILTER AND SERVICE REVENUE FILTER IN OUR VIEW WAS RIGHTLY REJECTED BY THE TPO AND DRP. IT IS HOWEVER SEEN THAT THIS COMPANY HAS FOUR SEGMENTS VIZ., REPRO. LABEL PRINTING, OFF SET PRINTING AND PRE - PRESS BPO. WHETHER THE LABEL PRINTING AND OFFSET PRINTING SEGMENTS SUPPLEMENT THE FUNCTIONS PERFORMED IN THE PRE - PRESS BPO SEGMENT HAS TO BE SEEN. WE THEREFORE SET ASIDE THE ORDER OF THE DRP IN THIS REGARD AND REMAND FOR FRESH CONSIDER ATION BY THE TPO THE COMPARABILITY OF THIS COMPANY. IN TERMS OF RULE 10B(3) OF THE RULES THE PROFIT MARGINS OF PRE - PRESS BPO HAVE TO BE ADJUSTED TAKING INTO ACCOUNT THE FACT THAT TWO OTHER SEGMENTS SUPPLEMENT THE PRE - PRESS BPO SEGMENT. IF SUCH ADJUSTMENT C ANNOT BE REASONABLY OR ACCURATELY MADE THEN THIS COMPANY HAS TO BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES. THE TPO FOR THIS PURPOSE CAN USE HIS POWERS U/S. 133(6) OF THE ACT TO GET REQUIRED DETAILS FROM THIS COMPANY. AS FAR AS THE ARGUMENT THAT THI S COMPANY FAILS FUNCTIONAL COMPARABILITY, WE FIND THAT NONE OF THE OBJECTIONS RAISED THE ASSESSEE IN THIS REGARD ABOUT LACK OF INFORMATION ABOUT ALLIED SERVICES PERFORMED BY THE PRE - PRESS BPO SEGMENT OF THIS COMPANY AND THE BREAK - UP OF THE REVENUE FROM SUCH ALLIED SERVICES HAVE BEEN DEALT WITH SPECIFICALLY BY THE TPO OR DRP. SINCE THE COMPARABILITY OF THIS COMPANY IS BEING REMANDED TO BE TPO FOR CONSIDERATION OF ADJUSTMENTS AS MENTIONED ABOVE, IT(TP)ANO.6 3 0(B)/2017 18 THE OBJECTION WITH REGARD TO FUNCTIONAL COMPARABILITY SHOULD ALSO BE LOOKED INTO BY THE TPO IN THE REMAND PROCEEDINGS ON THE BASIS OF MATERIALS WHICH HE MAY GATH ER U/S. 133(6) OF THE ACT, THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY OF BEING HEARD BY THE TPO BEFORE THE ISSUE IS DECIDED BY THE TPO.' RESPECTFULLY FOLLOWING THE DECISION, WE REMAND THIS COMPARABLE TO THE FILE OF THE TPO/AO FOR FRESH ADJUDICATION ON THE AB OVE LINES. RESPECTFULLY FOLLOWING AFORESAID DECISION, WE REMAND THIS COMPARABLE TO FILE OF LD.AO/TPO, FOR FRESH ADJUDICATION, ON THE BASIS OF DIRECTIONS REPRODUCED HEREINABOVE. NEEDLESS TO SAY THAT PROPER OPPORTUNITY SHALL BE GRANTED TO ASSESSEE AS PER LAW . ACCORDINGLY WE SET ASIDE THIS COMPARABLE BACK TO LD.TPO . 9. INFOSYS BPO LTD. ASSESSEE OBJECTED FOR INCLUSION OF THIS COMPARABLE PRIMARILY ON THE BASIS OF FUNCTIONAL INCOMPATIBILITY AND PRESENCE OF INTANGIBLES. IT HAS BEEN SUBMITTED THAT THIS COMPANY OWNS HUGE BRAND AND NOT A FIT COMPARABLES FOR COMPANY LIKE ASSESSEE, WHO PROVIDE CAPTIVE SE RVICE TO ITS AES. 10. LD. CIT DR OPPOSED THE EXCLUSION AND PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 1 1 . WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. ASSESSEE PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CASE OF ZYME SOLUTIONS PVT LTD., IT(TP)ANO.6 3 0(B)/2017 19 VS ACIT VIDE ORDER DATED 28/06/19 IN ITA (TP) A NO. 1661/BANG/2016 , WHEREIN THIS COMPARABLE HAS BEEN EXCLUDED BY OBSERVING AS UNDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE COMPARABILITY OF INFOS YS BPO AS A COMPARABLE COMPANY. THE DELHI ITAT IN THE CASE OF BAXTER INDIA PVT. LTD. VS. ACIT ITA NO.6158/DEL/2016 FOR AY 2012 - 13 IN THE CASE OF A COMPANY RENDERING ITES SUCH AS THE ASSESSEE, VIDE ORDER DATED 24.8.2017 PARAGRAPH 23 HELD THAT INFOSYS BPO I S NOT COMPARABLE WITH A COMPANY RENDERING ITES FOR THE FOLLOWING REASONS: - 23. IN SO FAR AS EXCLUSION OF INFOSYS BPO LTD. IS CONCERNED, WE FIND FROM THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER/TPO/DRP IS THAT INFOSYS BPO LTD. IS PRED OMINANTLY INTO AREAS LIKE INSURANCE, BANKING, FINANCIAL SERVICES, MANUFACTURING AND TELECOM WHICH ARE IN THE NICHE AREAS, UNLIKE THE ASSESSEE. FURTHER IT WAS ALSO SUBMITTED THAT THE INFOSYS BPQ LTD. COMPRISES BRAND VALUE WHICH WILL TEND TO INFLUENCE ITS BU SINESS OPERATION AND THE PRICING POLICY THEREBY DIRECTLY IMPACTING THE MARGINS EARNED BY THE INFOSYS BPO LTD.. WE FIND THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE BEFORE TPO/DRP THAT IN ORDER TO MAINTAIN THE BRAND IMAGE OF INFOSYS BPQ LTD. IN THE M ARKET, THE COMPANY INCURS SUBSTANTIAL SELLING AND MARKETING EXPENDITURE WHEREAS THE ASSESSEE BEING A CONTRACT SERVICE PROVIDER DOES NOT INCUR SUCH EXPENSES TO MAINTAIN ITS BRAND HAS NOT BEEN CONTROVERTED BY THEM. FURTHER, INFOSYS BPO LTD. BEING A SUBSIDIAR Y OF INFOSYS HAS AN ELEMENT OF BRAND VALUE ASSOCIATED WITH IT. THIS CAN BE FURTHER CONFIRMED BY THE PRESENCE OF BRAND RELATED EXPENSES INCURRED BY INFOSYS BPO LTD. IT(TP)ANO.6 3 0(B)/2017 20 FURTHER, INFOSYS BPO LTD. HAS ACQUIRED AUSTRALIAN BASED COMPANY M/S PORTLAND GROUP PTY LTD. DURING FINANCIAL YEAR 2011 - 12. THEY PROVIDE SOURCING AND CATEGORY MANAGEMENT SERVICES IN SYDNEY, AUSTRALIA. THEREFORE, THIS COMPANY ALSO FAILED THE TPO'S OWN FILTER OF REJECTING COMPANIES WITH PECULIAR CIRCUMSTANCES. IN VIEW OF THE ABOVE I.E. FUNCTIONALLY NOT COMPARABLE, PRESENCE OF BRAND AND EXTRAORDINARY EVENT THAT HAS TAKEN PLACE DURING THE YEAR ON ACCOUNT OF ACQUISITION OF AUSTRALIAN BASED COMPANY, WE ARE OF THE CONSIDERED OPINION THAT INFOSYS BPO LTD. SHOULD NOT BE INCLUDED IN THE LIST OF COMPARABLES. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE INFOSYS BPO LTD. FROM THE LIST OF COMPARABLES FOR THE PURPOSE OF COMPUTING THE AVERAGE MARGIN. 2. IT WAS ALSO BROUGHT TO OUR NOTICE THAT THE HONBLE DELHI HIGH COURT IN ITA NO.260/2018 IN THE APPEAL FILED BY THE REVENUE AGAINST THE AFORESAID ORDER DISMISSED THE APPEAL AT THE ADMISSION STAGE OBSERVING THAT RATIONALE GIVEN BY THE ITAT FOR EXCLUSION WAS CORRECT. IN VIEW OF THE AFORESAID DECISION, WE DIRECT EXCLUSION OF INFOSYS BPO FROM THE LIST OF COMPA RABLE COMPANIES CHOSEN BY THE TPO. FROM ABOVE, IT IS CLEAR THAT THIS COMPANY IS FU NCTIONALLY NOT COMPARABLE WITH CAPTIVE SERVICE PROVIDER. RESPECTFULLY FOLLOWING THE SAME WE DIRECT THIS COMPANY TO BE EXCLUDED FROM FINAL L IST. 1 2 . TCS E - SERVE LTD. LD. AR SUBMITTED THAT THIS COMPANY HAS BEEN OBJECTED BY ASSESSEE FOR ITS FUNCTIONAL DISSIMILARITY AS IT RENDERS BOTH BPO IT(TP)ANO.6 3 0(B)/2017 21 AND KPO SERVICES WITHOUT SEGMENTAL REPORTING. IT IS SUBMITTED THAT THIS COMPANY OWNS HUGE BRAND OF TATA GROUP AND HAS ALSO INCURRED BRA ND RELATED EXPENSES AND THEREFORE CANNOT BE ACCEPTED TO BE COMPARED WITH A CAPTIVE SERVICE PROVIDER LIKE ASSESSEE. 1 3 . LD.CIT DR ON THE CONTRARY OPPOSED ITS EXCLUSION AND PLACED RELIANCE UPON ORDERS PASSED BY AUTHORITIES BELOW. 14 . WE HAVE PERUSED SUBMISSI ONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ASSESSEE PLACED RELIANCE UPON FOLLOWING DECISIONS IN SUPPORT OF ITS ARGUMENT FOR EXCLUSION OF THIS COMPARABLE: ZYME SOLUTIONS PVT LTD. VS ACIT (SUPRA) BAXTER INDIA PVT. LTD VS ACIT REPORTED I N (2017) 85 TAXMANN.COM 285 (DELHI - TRIB) PCIT VS BC MANAGEMENT SERVICES PVT. LTD. REPORTED IN TS - 948 - HC - 2017 (DEL) - TP IT IS OBSERVED THAT THIS COMPARABLE HAS BEEN EXCLUDED BY THIS TRIBUNAL. ASSESSEE PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CA SE OF ZYME SOLUTIONS PVT LTD., VS ACIT REPORTED IN (2019) 101 TAXMAN.COM 292, BY OBSERVING AS UNDER: 11.3 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE OF COMPARABILITY OF THIS COMPANY WAS CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF XLHEALTH CORPN. INDIA (P.) LTD. (SUPRA). THE RELEVANT FINDINGS OF THE TRIBUNAL AR E AS UNDER: IT(TP)ANO.6 3 0(B)/2017 22 '. . . . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE PERUSAL OF THE ANNUAL REPORT OF THIS ENTITY PLACED AT PAGE NOS. 583 TO 678 OF PAPER BOOK, AT PAGE NO. 604 IT IS STATED AS UNDER. '2. COMPANY OVERVIEW YOUR COMPANY, ALONG WITH ITS SUBSIDIARY COMPANIES - TCS E - SERVE INTERNATIONAL LIMITED AND TCS E - SERVE AMERICA INC., IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS PROCESS SERVICES (BPO) FOR ITS CUSTOMERS IN BANKING, FINANCIAL SERVICES AND INSURANCE DOMAIN. THE COMPANY'S OPERATIONS INCLUDE DELIVERING CORE BUSINESS PROCESSING SERVICES, ANALYTICS & INSIGHTS (KPO) AND SUPPORT SERVICES FOR BOTH DATA AND VOICE PROCESSES. YOUR COMPANY IS AN INTEGRAL PART OF THE TATA CONSULTANCY SERVICES' (TCS) STRATEGY TO BUILD ON ITS 'FULL SERVICES OFFERINGS' THAT OFFER GLOBAL CUSTOMERS AN INTEGRATED PORTFOLIO OF SERVICES RANGING FROM IT SERVICES TO BPO SERVICES. THE COMPANY PROVIDES ITS SERVICES FROM VARIOUS PROCESSING FACILITIES, BACKED T) A ROBUST AND SCALABLE INFRASTRUCTURE NETWORK TAILORED TO MEET CLIENTS' NEEDS. A DETAILED BUSINESS CONTINUITY PLAN HAS ALSO BEEN PUT IN PLACE TO ENSURE THE SERVICES ARE PROVIDED TO THE CUSTOMERS WITHOUT ANY DISRUPTIONS. THUS, THIS COMPANY IS ALSO STATED TO BE A KNOWLEDGE PROCESS OUTSOURCING AND THEREFORE FOR I' - REASONS STATED BY US WHILE DEALING WITH THIS ISSUE OF COMPARABILITY OF THE COMPANY INFOSYS BPOLTD. SHALL EQUALLY HOLD GOOD AND THEREFORE WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM : LIST OF COMPARABLES.' SINCE THE IT(TP)ANO.6 3 0(B)/2017 23 APPELLANT COMPANY IS INTO LOW END BPO, IT CANNOT BE COMPARED WITH KPO SERVICE PROVIDER. 11.4 RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF TRIBUNAL, WE DIRECT FOR EXCLUSION THIS COMPANY FROM THE LIST OF COMPARABLE. IT HAS BEEN OBSERVED T HAT THIS COMPANY IS INTO HIGH - END KPO SERVICES AND AN ASSESSEE RENDERING LOW END BPO SERVICES CANNOT BE COMPARED WITH IT. FURTHER, THIS COMPANY HAS BEEN EXCLUDED DUE TO ABSENCE OF SEGMENTAL INFORMATION. RESPECTFULLY FOLLOWING AFORESAID DECISION, WE DIREC T LD.TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 15. BNR UDYOG LTD. (SEGMENTAL) 15.1 LD.AR SUBMITTED THAT THIS COMPANY FAILS RPT FILTER AND ALSO FAILS EXPORT FILTER APPLIED BY LD.TPO. IT IS SUBMITTED THAT THIS COMPANY IS INTO MEDICAL TRANSCRIPTION, CODING, BUSINESS SUPPORT SERVICES AND E - GOVERNANCE PROJECTS AND THEREFORE FUNCTIONALLY NOT S IMILAR WITH THAT OF ASSESSEE. 16. LD. CIT DR HOWEVER CONTENDED THAT THIS COMPANY IS COMPARED ONLY FOR SEGMENT OF MEDICAL TRANSCRIPTION AND THEREFORE SHOULD NOT BE EXCLUDED. SHE PLACED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CASE OF MOBILY INFOTECH INDIA (P) LTD VS DCIT REPORTED IN (2018) 97 TAXMAN.COM 2 IN SUPPORT. 17. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. IT(TP)ANO.6 3 0(B)/2017 24 ASSESSEE IS CHALLENGING FUNCTIONAL DISSIMILARITY OF THIS COMPANY WITH THAT OF ASS ESSEE AS IT IS INTO MEDICAL TRANSCRIPTION. WE HAVE OUR RESERVATION TO CONSIDER MEDICAL TRANSCRIPTION SERVICES TO BE ONE OF KPO SERVICES. IN OUR CONSIDERED OPINION MEDICAL TRANSCRIPTION SERVICES IS BASICALLY BACK - OFFICE SERVICES PROVIDED BY GRADUATES WHO AR E TRAINED FOR SHORT PERIOD OF 6 MONTHS TO ONE YEAR. THESE ARE SHORT CRASH COURSES UNDERTAKEN BY GRADUATES WHO ARE TRAINED TO UNDERSTAND AND SPEAK ENGLISH. THERE IS NO VALUE ADDITION IN THE SERVICES RENDERED BY PEOPLE IN MEDICAL TRANSCRIPTION. TO OUR UNDERS TANDING, BASICALLY THESE PEOPLE WHO CARRY OUT MEDICAL TRANSCRIPTION SERVICES ARE TRAINED TO UNDERSTAND LANGUAGE SPOKEN BY DOCTORS, OUTSIDE INDIA TO WHOM MEDICAL REPORTS OF PATIENCE ARE SENT FOR EXPERT OPINION. MEDICAL TRAN SCRIPTIONIST SIMPLY REPRODUCES OPI NION EXPRESSED BY DOCTOR, WHICH IS THEN COMMUNICATED TO THE PATIENTS. IT IS OBSERVED FROM ANNUAL REPORT PLACED AT PAGE 9 3 4 OF PAPER BOOK VOLUME II THAT THIS COMPANY HAS SEGMENTAL INFORMATION OF MEDICAL TRANSCRIPTION AND REVENUE EARNED UNDER THIS SEGMENT IS RS.147.40 LACS. IT IS ALSO BEEN OBSERVED THAT VARIOUS OTHER DECISIONS BY CO - ORDINATE BENCHES OF THIS TRIBUNAL HAS REMANDED THIS COMPARABLE BACK TO LD.TPO, FOR PROPER ANALYSIS AND FRESH CONSIDERATION. WE DRAW SUPPORT FOR SAME FROM INDEGENE (P) LTD VS ACIT REPORTED IN (2017) 85 TAXMANN.COM 60, WHEREIN IT HAS BEEN HELD AS UNDER: 9.3.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE IT(TP)ANO.6 3 0(B)/2017 25 MATERIAL ON RECORD INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. FROM THE DETAILS ON RECOR D WE OBSERVE THAT WHILE THE ASSESSEE HAS CONTENDED THAT THE SERVICES RENDERED BY THIS COMPANY M/S TCS E - SERVE LTD ARE HIGH END KPO SERVICES, IT HAS NOT BROUGHT OUT AS TO WHICH OF THESE ARE THE SERVICES THAT WOULD COME UNDER TECHNICAL SERVICES. ON THE OTHE R HAND, W ALSO NOTICE THAT THAT THE TPO HAS HELD ALL THE SERVICES RENDERED BY THE ASSESSEE TO BE BPO SERVICES WITH ANY PROPER ANALYSIS. IN THIS FACTUAL MATRIX OF THE CASE, WE FIND THAT ON SIMILAR FACTS, THE CO - ORDINATE BENCH O ITAT BANGALORE IN THE CASE OF INDEGENE (P) LTD., (SUPRA) HAS REMANDED THE MATTER OF COMPARABILITY OF THIS COMPANY TO THE FILE OF THE TPO FOR FRESH CONSIDERATION. IN VIEW OF THE FACTUAL MATRIX OF THE CASE ON HAND, AS LAID OUT ABOVE AND FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE OF INDEGENE (P) LTD. (SUPRA) WHICH IS ALSO RENDERED ON SIMILAR FACTS, WE DEEM IT APPROPRIATE TO REMAND THE MATTER OF THE COMPARABILITY OF THIS COMPANY, TCS E - SERVE LTD. TO THE FILE OF THE TPO FOR FRESH CONSIDERATION IN THE LIGHT OF OUT ABOV OB SERVATIONS. NEEDLESS TO ADD, THE TPO SHALL AFFORD THE ASSESSEE ADEQUATE OPPORTUNITY OF IT(TP)ANO.6 3 0(B)/2017 26 BEING HEARD AND TO FILE DETAILS/SUBMISSIONS IN THIS REGARD. IT IS ALSO BEEN OBSERVED THAT SIMILAR VIEW HAS BEEN TAKEN BY DECISION OF THIS TRIBUNAL IN CASE OF M/S NIELSO N SPORTS INDIA PVT.LTD., VS ACIT IN IT(TP)A NO.196(B))/2017 VIDE ORDER DATED 28 - 06 - 2019. RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THIS COMPARABLE BACK TO LD.TPO FOR CONSIDERING IT AFRESH. NEEDLESS TO SAY THAT PROPER OPPORTUNITY SHALL BE GRANTED TO ASSESSEE AS PER LAW. ACCORDINGLY WE SET ASIDE THIS COMPARABLE BACK TO LD.TPO 18. EXCEL INFOWAYS LTD. (SEGMENTAL) THIS COMPARABLE ELECTED BY LD.TPO IS ALLEGED TO BE FUNCTIONALLY NOT COMPARABLE WITH ASSESSEE, AS IT IS HANDLING BUSINESS RELATIONS AND MANAGING CUSTOMER RELATIONSHIPS. IT HAS BEEN SUBMITTED BY LD.AR THAT THIS COMPARABLE FAILS EMPLOYEE COST FILTER. 1 9. LD.CIT DR HOWEVER CONTENDED THAT THIS COMPANY IS COMPARED ONLY FOR SEGMENT OF MEDICAL TRANSCRIPTION AND THEREFORE SHOULD NOT BE EXCLUDED. SHE PLAC ED RELIANCE UPON DECISION OF THIS TRIBUNAL IN CASE OF MOBILY INFOTECH INDIA (P) LTD VS DCIT REPORTED IN (2018) 97 TAXMAN.COM 2 IN SUPPORT. 20 . WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ANNUAL REPORT OF THIS C OMPANY IS PLACED AT PAGE 984 OF PAPER BOOK V OLUME II. IN THE SIGNIFICANT ACCOUNTING POLICIES REPORTED AT PAGE 1 01 8 OF PAPER BOOK, IT IS IT(TP)ANO.6 3 0(B)/2017 27 OBSERVED THAT COMPANIES OPERATING BUSINESSES ARE ORGANIZED AND MANAGED SEPARATELY, ACCORDING TO NATURE OF BUSINESS AND SERVICES PROVIDED WITH EACH SEGMENT, REPRESENTING DIFFERENT STRATEGIC BUSINESS UNIT. NOTE 15 AT PAGE 1023 TO REFERS TO REVENUES FROM OPER ATIONS UNDER THE HEAD INFORMATION TECHNOLOGY/BPO RELATED SERVICES SEPARATELY. IT IS OBSERVED THAT THE FUNCTION PERFORMED BY TH IS COMPANY AS REPORTED AT PAGE 996 REVEALS THAT IT IS ENGAGED IN BUSINESS OF PROVIDING CUSTOMER CARE SERVICES AND HANDLING CLIENT BUSINESS RELATIONS ON THEIR BEHALF BY MAINTAINING RELATION WITH CUSTOMERS AND ALSO PROVIDING SERVICES BY ASSISTING IN MANAGING THE WORKFLOW AND UPDATING THE RECORDS. IT IS OBSERVED THAT THIS TRIBUNAL IN CASE OF ZYME SOLUTIONS PVT LTD., VS ACIT VIDE ORDER DATED 28/06/19 IN ITA (TP) A NO. 1661/BANG/2016 , THIS COMPARABLE IS EXCLUDED BY OBSERVING AS UNDER: THE THIRD AND LAST COMPANY THAT IS SOUGHT TO BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES IS EXCLUSION OF EXCEL INFO LTD. THE TRIBUNAL HAD RETAINED THIS COMPANY AS A COMPARABLE COMPANY IN ITS ORIGINAL ORDER. THE ASSESSEE SOUGHT EXCLUSION OF THIS COMPANY ON THE GROUND THAT THIS COMPANY WAS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY AND THE EMPLOYEE COST TO THE REVENUE WAS LESS THAN THE THRESHOLD LIMIT OF 25% AND THAT THERE WERE PECULIAR ECONOMIC CIRCUMSTANCES WHICH IMPACTED THE PROFIT MARGIN OF THI S COMPANY THEREBY RENDERING THIS COMPANY AS NOT COMPARABLE COMPANY. THE TRIBUNAL WHILE ADJUDICATING OF EXCLUSION OF THIS COMPANY IN PARAGRAPH 14.3 OF ITS ORDER HELD THAT ON APPLICATION OF EMPLOYEE COST FILTER THAT THE ASSESSEE HAS FAILED TO IT(TP)ANO.6 3 0(B)/2017 28 SHOW AS TO HOW THE FINDINGS OF THE TPO AND DRP ARE NOT CORRECT. 3. THE ASSESSEE HAS POINTED OUT CERTAIN FACTS WITH REGARD TO EMPLOYEE COST AND DIMINISHING REVENUE OF THIS COMPANY WHICH TAKES IT OUT OF THE COMPARABILITY AND THESE ASPECTS HAVE NOT BEEN CONSIDERED BY THE TR IBUNAL IN ITS ORDER. ON THE ABOVE OBJECTIONS IN THE MA, THE TRIBUNAL HELD AS FOLLOWS: - 8. WE HAVE EXAMINED THE CONTENTS IN THE MISC. PETITION AND WE FIND THAT THERE HAS BEEN OMISSION TO CONSIDER THE APPLICATION OF EMPLOYEE COST FILTER BY THE TRIBUNAL THO UGH ATTENTION OF THE BENCH WAS INVITED TO RELEVANT PAGES POINTED OUT IN THE MISC. PETITION. WE DO NOT HOWEVER AGREE WITH THE ASSESSEE THAT FUNCTIONAL COMPARABILITY OF THIS COMPANY HAS NOT BEEN EXAMINED BY THE TRIBUNAL IN PARAGRAPH 14.4. THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THIS COMPANY IS A ITES COMPANY AND THAT CANNOT BE REVIEWED IN THE MISC. APPLICATION. HOWEVER THERE HAS BEEN OMISSION TO ADJUDICATED EXCLUSION OF THIS COMPANY ON ACCOUNT OF EXTRAORDINARY EVENTS. WE THEREFORE RECALL THE ORDER OF T HE TRIBUNAL TO THE LIMITED EXTENT OF EXAMINING OF THE EMPLOYEE COST FILTER AND THE PRESENCE OF EXTRAORDINARY EVENTS ON WARRANTY EXCLUSION OF THIS COMPANY. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE EXCLUSION OF THIS COMPANY ON THE BASIS OF EXTRAORDINARY E VENTS THAT OCCURRED DURING THE RELEVANT PREVIOUS YEAR WHICH HAD IMPACT ON THE PROFIT MARGIN OF THIS COMPANY AND THEREFORE RENDERING THIS COMPANY FROM BEING CHOSEN AS A COMPARABLE COMPANY. THE DELHI ITAT IN THE CASE OF BT E - SERVE (INDIA) LTD. VS. ITO ITA NO .6690/DEL/2016 FOR AY 2012 - 13 ORDER DATED 19.6.2018 CONSIDERED THE COMPARABILITY OF THIS IT(TP)ANO.6 3 0(B)/2017 29 COMPANY AND CAME TO THE CONCLUSION IN PARAGRAPH 5.4 OF ITS ORDER THAT THERE WAS ABNORMAL VOLATILITY OF REVENUE OF THIS COMPANY FROM 2009 - 10 TO 2014 - 15 AND THEREFORE TH IS COMPANY SHOULD NOT BE REGARDED AS COMPARABLE COMPANY. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE DIRECT EXCLUSION OF THE AFORESAID COMPANY FROM THE LIST OF COMPARABLE COMPANIES CHOSEN BY THE TPO. 5. IT IS OBSERVED FROM ORDER PASSED BY LD.TPO AT PA GE 10 THAT ASSESSEE OBJECTED THIS COMPANY THAT EMPLOYEE COST FILTER BEING MORE THAN 25% HAS NOT BEEN EXAMINED BY LD.TPO. IT IS OBSERVED THAT IN DECISION OF COORDINATE BENCH OF DELHI TRIBUNAL IN CASE OF BAXTER INDIA PRIVATE LIMITED VS ACIT REPORTED IN (2017) 85 TAXMANN.COM 285 THIS COMPARABLE FAILING EMPLOYEE COST FILTER HAS BEEN ANALYZED AS UNDER: FURTHER, FROM THE ORDER OF THE TPO WE FIND HE HAS OBTAINED THE EMPLOYEE COST AND THE SALE FOR THE ITES SEGMENT BY EXERCISE OF HIS POWERS U S. 133(6). WHEREIN THE SAID COMPANY HAS ALLOCATED ENTIRE EMPLOYEE COST TO IT - BPO SEGMENT WITH NO ALLOCATION TO INFRA ACTIVITY SEGMENT WHICH ACCOUNTS TO 49% OF EXCEL'S TOTAL REVENUE. IN OUR OPINION. IT IS HIGHLY IMPRACTICAL THAT NO EMPLOYEE HAS BEEN HIRED BY EXCEL FOR INF RA ACTIVITY SEGMENT. WE. THEREFORE. FIND MERIT IN THE ARGUMENT OF THE ID. COUNSEL FOR THE ASSESSEE THAT THE INFORMATION PROVIDED AS PER SECTION 133(6) BY EXCEL INFOWAYS LTD. IS UNRELIABLE AND SHOULD NOT BE USED TO COMPUTE EMPLOY EE COST FOR ITES SEGMENT. T HE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MOTOROLA SOLUTIONS INDIA (P.) LTD. V. ASSTS. CIT[2014] IT(TP)ANO.6 3 0(B)/2017 30 48 TAXMANN.COM 24842015] 152 ITD 158 (DELHI) HAS HELD THAT A COMPANY SHOULD BE REJECTED AS COMPARABLE IN CASE THERE IS CONTRADICTION IN THE FACTS OR DATA SOURCED FROM ANNUAL REPORT AND AS PER THE INFORMATION GATHERED U/S. 133(6). IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT EXCEL INFOWAYS LTD. CANNOT BE CONSIDERED AS COMPARABLE AND SHOULD BE EXCLUDED FROM THE LI ST OF COMPARABLES. WE HOLD AND DIRECT ACCORDINGLY. FROM THE ABOVE OBSERVATION BY COORDINATE BENCH, OBJECTION RAISED BY LD.CIT DR STANDS CLARIFIED, AS THIS COMPANY FOR YEAR UNDER CONSIDERATION MADE A STATEMENT UNDER 133 (6) REGARDING ALLOCATING ENTIRE EMPLOYEE COST TO IT - BPO SEGMENT, WITH NO ALLOCATION TO O THER SEGMENT, WHICH AMOUNTS TO ALMOST 49% OF ITS TOTAL REVENUE DURING THE YEAR UNDER CONSIDERATION. AT THIS STAGE, WE CLARIFY THAT, WE ARE NOT INCLINED TO EXPRESS OUR OPINION REGARDING FUNCTIONAL SIMILARITIES/DISSIMILARITY OF THIS COMPANY WITH THAT OF PRE SENT ASSESSEE BEFORE US AND THE SAME IS KEPT OPEN TO BE CONSIDERED IN AN APPROPRIATE CASE. WE THEREFORE AGREE WITH CONTENTION RAISED BY ASSESSEE REGARDING THIS COMPARABLE NOT SATISFYING EMPLOYEE COST FILTER. RESPECTFULLY FOLLOWING AFORESTATED DECISION OF DELHI TRIBUNAL REPRODUCED HEREINABOVE, WE DIRECT LD.TPO TO EXCLUDE THIS COMPARABLE FROM THE FINAL LIST. 21. COMPARABLE SOUGHT FOR INCLUSION: 21.1 INFORMED TECHNOLOGIES INDIA LTD. IT HAS BEEN SUBMITTED BY LD.AR THAT THIS COM PANY IS FUNCTIONALLY COMPARABLE W ITH THAT OF ASSESSEE AND SUBMITS THAT IT PASSES IT(TP)ANO.6 3 0(B)/2017 31 THROUGH ALL FILTERS APPLIED BY LD.TPO. IT HAS BEEN SUBMITTED THAT THIS COMPARABLE WAS INCLUDED BY LD.TPO WHICH WAS ACCEPTABLE TO ASSESSEE. HOWEVER DRP DIRECTED TO EXCLUDE THE SAME, AS THERE WAS NO SEGMENTAL DETAIL AVAILABLE. 22. LD.CIT DR HOWEVER PLACED RELIANCE UPON ORDER OF DRP AND SUPPORTED ITS EXCLUSION DUE TO NON - AVAILABILITY OF SEGMENTAL INFORMATION. 23. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. IT IS OBSERVED THAT THIS COMPARABLE HAS BEEN NOT DISPUTED FOR FUNCTIONAL DISSIMILARITY BY DRP. HOWEVER THE OBSERVATION THAT SEGMENTAL INFORMATION S ARE NOT AVAILABLE NEEDS TO BE VERIFIED. W E ARE THEREFORE OF CONSIDERED OPINION THAT, THIS COMPARABLE NEEDS TO BE SET - ASIDE TO LD.TPO FOR VERIFICATION AFRESH. NEEDLESS TO SAY THAT ASSESSEE SHALL BE GRANTED PROPER OPPORTUNITY AS PER LAW TO REPRESENT ITS CASE. W E THUS SET ASIDE THIS COMPARABLE BACK TO LD.TPO . ACCORDINGLY, THESE GROUNDS RAISED ST A NDS ALLOWED AS INDICATED ABOVE. GROUND NO.17 I IN RESPECT OF INTEREST U/S 234B & 234C OF THE ACT, WHICH IS PREMATURE AT THIS STAGE. IN THE RESULT, APPEAL FILE D BY ASSESSEE STANDS ALLOWED AS INDICATED ABOVE. ORDER P RONOUNCED IN THE OPEN COURT ON 07 - 08 - 2019 SD/ - SD/ - (B.R.BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH AUGU S T, 2019. *AM IT(TP)ANO.6 3 0(B)/2017 32 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST. REGISTRAR IT(TP)ANO.670(B)/2017 33