Appeal details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 2155 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 9 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Transfer Pricing) Appeal
Pronouncement Date
27-11-2020
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
C
Assessment Year
2009-2010
Appeal Filed On
21-02-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI. B.R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A NO.77/BANG/2014 ASSESSMENT YEAR : 2009-10 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-12(2), BENGALURU. VS. M/S OUTSOURCE PARTNERS INTERNATIONAL PVT. LTD., TOWER 2D, PHASE-I, VIKAS TELECOM LTD., SEZ, VRINDAVAN TECH VILLAGE, DEVERABEESANAHALLI, BENGALURU-560 087. PAN AAACO 5734 C APPELLANT RESPONDENT IT(TP)A NO.110/BANG/2014 ASSESSMENT YEAR : 2009-10 M/S OUTSOURCE PARTNERS INTERNATIONAL PVT. LTD., TOWER 2D, PHASE-I, VIKAS TELECOM LTD., SEZ, VRINDAVAN TECH VILLAGE, DEVERABEESANAHALLI, BENGALU RU-560 087. PAN AAACO 5734 C VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-12(2), BENGALURU. APPELLANT RESPONDENT REVENUE BY : SHRI PRADEEP KUMAR, CIT (DR) PAGE 2 OF 26 IT(TP)A NO.77 & 110/BANG/2014 ASSESSEE BY : SHRI K.R VASUDEVAN, ADVOCATE DATE OF HEARING : 13-10-2020 DATE OF PRONOUNCEMENT : 27-11-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT CROSS APPEALS HAS BEEN FILED BY ASSE SSEE AS WELL AS REVENUE AGAINST ORDER PASSED BY LD.DCIT, CIRCLE 12( 2) UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE AC T FOR ASSESSMENT YEAR 2009-10 ON FOLLOWING GROUNDS OF APP EAL: ITA NO. 110/B/2014 I. TRANSFER PRICING 1. THE LEARNED ASSESSING OFFICER ('LEARNED AO') AND THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX (TRANSFER PRICING-II), B ANGALORE ('TRANSFER PRICING OFFICER' OR THE 'LEARNED TPO') GROSSLY ERRE D IN MAKING AN ADJUSTMENT TO THE TRANSFER PRICING OF THE APPELLANT WITH RESPECT TO THE ITES SERVICES BY RS. 3,84,85,382. 2. THE LEARNED AO/LEARNED TPO ERRED IN REJECTING TH E TRANSFER PRICING ('TP') DOCUMENTATION MAINTAINED BY THE APPELLANT ON INVOKING PROVISIONS OF SUB-SECTION (3) OF 92C OF THE ACT CONTENDING THA T THE INFORMATION OR DATA USED IN THE COMPUTATION OF ARM'S LENGTH PRICE IS NOT RELIABLE OR CORRECT. IN DOING SO: 2.1. THE LEARNED AO/LEARNED TPO ERRED IN REJECTION OF COMPARABILITY ANALYSIS CARRIED IN THE TP DOCUMENTATION AND IN CON DUCTING A FRESH COMPARABILITY ANALYSIS BY INTRODUCING VARIOUS FILTE RS IN DETERMINING THE ARM'S LENGTH PRICE. 2.2. THE LEARNED AO/LEARNED TPO ERRED IN REJECTING COMPANIES THAT ARE COMPARABLE TO THE APPELLANT WHILE PERFORMING THE CO MPARABILITY ANALYSIS. SPECIFICALLY, THE APPELLANT BELIEVES THAT THE FOLLO WING COMPANIES SHOULD HAVE BEEN INCLUDED AS COMPARABLE LEE & NEE SOFTWARE (EXPORTS) LIMITED CALIBER POINT BUSINESS SOLUTIONS LIMIT R SYSTEMS INTERNATIONAL LIMITED ~7 2.3. THE LEARNED AO/LEARNED TPO ERRED IN INCLUDING COMPANIES THAT DO NOT SATISFY THE V TEST OF COMPARABILITY. SPECIFICAL LY, THE APPELLANT BELIEVES THAT THE FOLLOWING COMPANIES SELECTED AS COMPARABLE BY THE LEARNED AO/ LEARNED TPO SHOULD BE REJECTED. PAGE 3 OF 26 IT(TP)A NO.77 & 110/BANG/2014 * INFOSYS BPO LIMITED * ACCENTIA TECHNOLOGIES LIMITED * COSMIC GLOBAL LIMITED * EELERX SERVICES LIMITED 3. THE LEARNED AO/LEARNED TPO ERRED IN COMPUTING MA RK-UP FOR ALISEC TECHNOLOGIES LIMITED BY ERRONEOUSLY CONSIDERING THE PROVISION FOR BAD AND DOUBTFUL DEBTS AS NON- OPERATING IN NATURE. 4. THE LEARNED AO/LEARNED TPO ERRED IN NOT CONSIDER ING THE MULTIPLE YEAR/PRIOR YEAR FINANCIAL DATA OF COMPARABLE COMPAN IES WHILE DETERMINING THE ARM'S LENGTH PRICE. 5. THE LEARNED AO/LEARNED TPO ERRED IN USING DATA A S AT THE TIME OF ASSESSMENT PROCEEDINGS, INSTEAD OF THAT AVAILABLE A S ON THE DATE OF PREPARING THE TP DOCUMENTATION FOR COMPARABLE COMPA NIES WHILE DETERMINING ARM'S LENGTH PRICE. 6. THE LEARNED AO/LEARNED TPO ERRED IN IGNORING THE LIMITED RISK NATURE OF THE CONTRACTUAL SERVICES PROVIDED BY THE APPELLA NT AND IN NOT PROVIDING AN APPROPRIATE ADJUSTMENT TOWARDS THE RISK DIFFEREN TIAL, EVEN WHEN THE FULL-FLEDGED ENTREPRENEURIAL COMPANIES ARE SELECTED AS COMPARABLE COMPANIES II. RE-COMPUTATION OF DEDUCTION UNDER SECTION 1OA O F THE ACT BY ADJUSTING THE EXPORT TURNOVER AND TOTAL TURNOVER 7. THE LEARNED AO ERRED IN RE-COMPUTING DEDUCTION U NDER SECTION 10A OF THE ACT BY REDUCING AN AMOUNT OF RS. 7,50,000 FROM THE EXPORT TURNOVER AND TOTAL TURNOVER WHICH WERE INCURRED BY THE ASSES SEE TOWARDS TELECOMMUNICATION EXPENSES. 8. THE LEARNED AO ERRED IN NOT APPRECIATING THE FAC T THAT THE TELECOMMUNICATION EXPENSES CANNOT BE REDUCED FROM T HE EXPORT TURNOVER AND TOTAL TURNOVER AS THE SAME IS INCURRED DURING T HE COURSE OF THE NORMAL BUSINESS ACTIVITY AND CANNOT BE SEPARATELY A TTRIBUTED TO THE DELIVERY OF SOFTWARE OUTSIDE INDIA. III. RE-COMPUTATION OF DEDUCTION UNDER SECTION 10AA OF THE ACT BY ADJUSTING THE EXPORT TURNOVER AND TOTAL TURNOVER 9. THE LEARNED AO ERRED IN RE-COMPUTING DEDUCTION U NDER SECTION 10AA OF THE ACT BY REDUCING AN AMOUNT OF RS.13,159,696 F ROM THE EXPORT TURNOVER AND TOTAL TURNOVER WHICH WERE INCURRED BY THE ASSESSEE TOWARDS TELECOMMUNICATION EXPENSES. 10. THE LEARNED AO ERRED IN NOT APPRECIATING THE FA CT THAT THE TELECOMMUNICATION EXPENSES CANNOT BE REDUCED FROM T HE EXPORT TURNOVER AND TOTAL TURNOVER AS THE SAME IS INCURRED DURING T HE COURSE OF THE NORMAL BUSINESS ACTIVITY AND CANNOT BE SEPARATELY A TTRIBUTED TO THE DELIVERY OF SOFTWARE OUTSIDE INDIA. PAGE 4 OF 26 IT(TP)A NO.77 & 110/BANG/2014 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, RESCIND A ND MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS, FACTS AN D EVIDENCE BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. FOR THE ABOVE AND ANY OTHER GROUNDS WHICH MAY BE RA ISED AT THE TIME OF HEARING, IT IS PRAYED THAT NECESSARY RELIEF MAY BE PROVIDED. ITA NO. 77/B/2014 1. THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL ARE OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE DISPUTE RESOLUTION PANEL ERRED IN LAW IN DIRECTING THE AO T O EXCLUDE THE BROADBAND CHARGES AND TRAVEL EXPENSES BOTH FROM THE EXPORT TURNOVER AS WELL AS FROM TOTAL TURNOVER FOR THE PURPOSE OF COMP UTATION OF DEDUCTION U/S 10A, WITHOUT APPRECIATING THE FACT THAT THE STA TUTE ALLOWS EXCLUSION OF SUCH EXPENDITURE ONLY FROM EXPORT TURNOVER BY WAY O F SPECIFIC DEFINITION OF EXPORT TURNOVER AS ENVISAGED BY SUB-CLAUSE (4) OF E XPLANATION 2 BELOW SUB-SECTION (8) OF SECTION 10A AND THE TOTAL TURNOV ER HAS NOT BEEN DEFINED IN THIS SECTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE DISPUTE RESOLUTION PANEL ERRED IN DIRECTING THE AO TO COMPU TE DEDUCTION U/S 10A IN THE ABOVE MANNER BY PLACING RELIANCE ON THE DECI SION OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S TATA ELXSI LT D., WHICH HAS NOT BECOME FINAL SINCE THE SAME HAS NOT BEEN ACCEPTED B Y THE DEPARTMENT AND SLPS ARE PENDING BEFORE THE HON'BLE SUPREME COU RT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AS PER THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL, WHETHER WORKING CAPITAL ADJUSTMENT CAN BE MADE ON THE BASIS OF ADVANCE RECE IVED FROM AES IN ABSENCE OF DEBTORS AND INVENTORY IN THE CASE OF ASS ESSEE FOR CALCULATING THE COST OF WORKING CAPITAL BUILT IN THE PROFIT MAR GIN. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE DISPUTE RESOLUTION PANEL IS NOT JUSTIFIED IN DIRECTING THE TPO TO ADJUST THE PROFIT MARGIN OF THE ASSESSEE FOR THE ENTIRE AMOUNT OF ADV ANCES RECEIVED FROM AE ON THE GROUND THAT THERE IS TIME VALUE FOR MONEY . BRIEF FACTS OF THE CASE ARE AS UNDER: 2. ASSESSEE IS A COMPANY AND HAS FILED ITS ORIGINAL RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 28/09/2009. SUBSEQUENTLY THE RETURN WAS REVISED ON 09/04/2010 D ECLARING TAXABLE INCOME OF RS.2,5499,721/-. RETURN WAS PROCE SSED UNDER PAGE 5 OF 26 IT(TP)A NO.77 & 110/BANG/2014 SECTION 143(1) OF THE ACT AND WAS SELECTED FOR SCRU TINY. LD.AO ISSUED NOTICE UNDER SECTION 143(2) AND 142(1), IN R ESPONSE TO WHICH REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD .AO AND FILED REQUISITE DETAILS AS CALLED FOR. 3. FROM THE DETAILS FILED US, LD.AO OBSERVED THAT A SSESSEE HAD INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRI SES FOR MORE THAN RS.15 CRORES. ACCORDINGLY AS PER THE PROVISION S OF THE ACT REFERENCE TO TRANSFER PRICING OFFICER WAS MADE FOR DETERMINATION OF ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION. ON RECEIPT OF REFERENCE UNDER SECTION 92CA OF THE A CT, LD.TPO CALLED UPON ASSESSEE TO FILE ECONOMIC DETAILS OF IN TERNATIONAL TRANSACTION IN FORM 3 CEB. FROM DETAILS FILED, LD.T PO OBSERVED THAT, ASSESSEE HAD FOLLOWING INTERNATIONAL TRANSACT ION WITH ITS ASSOCIATED ENTERPRISE: TYPE OF TRANSACTION AMOUNT PAID (RS) AMOUNT RECEIVED (RS) BACK OFFICE SERVICES (ITES) 68,28,43,287 REIMBURSEMENT OF EXPENSES 32,85,609 1,41,15,132 4. LD.TPO NOTED THAT, ASSESSEE OPERATED AS AN OFFSH ORE PROCESSING CENTRE FOR ITS ASSOCIATED ENTERPRISE IN U.S. AND ALSO RENDERS SIMILAR SERVICES TO CUSTOMERS IN INDIA. IT WAS NOTED BY LD.TPO THAT ASSESSEE IS A PART OF BPO GROUP. BUSINE SS PROCESS OUTSOURCING INC.,CAYMAN ISLAND, THE ULTIMATE HOLDIN G COMPANY OF THE GROUP. LD.TPO NOTED THAT ASSESSEE HAS TWO UN ITS, ONE IN PAGE 6 OF 26 IT(TP)A NO.77 & 110/BANG/2014 BANGALORE AND OTHER IN DELHI BEING 100% EXPORT ORIE NTED UNIT AND OPERATES FROM SEZ. 5. LD.TPO NOTED THAT ASSESSEE USED TNMM AS MOST APP ROPRIATE METHOD AND OP/OC AS PLI TO COMPUTE ITS MARGIN AT 15 .67%. IT HAD USED FOLLOWING 8 COMPARABLES WITH AN AVERAGE MA RGIN OF 14.34% ON COST.: S.NO. PARTICULARS MARGIN 1. ADITYA BIRLA MINACS WORLDWIDE LTD 2. ALLSEC TECHNOLOGIES LTD 3. COSMIC GLOBAL LTD 4. INFORMED TECHNOLOGIES INDIA LTD 5. R SYSTEMS INTERNATIONAL LTD. 6. MAPLE ESOLUTIONS LTD 7. CALIBER POINT BUSINESS SOLUTIONS LTD 8. MSOURCE INDIA PVT. LTD. 6. ASSESSEE THUS HELD ITS TRANSACTION TO BE AT ARMS LENGTH MARGIN. SL.NO. NO NAME OF THE COMPANY MARGIN 1 INFOSYS BPO LTD. 24.41% 2 ADITYA BIRLA MINACS WORLDWIDE LTD. 23.86% 3 MICROLAND LTD.(BOTH SEGMENTS) 1.53 % PAGE 7 OF 26 IT(TP)A NO.77 & 110/BANG/2014 7. LD.TPO REJECTED THE TRANSFER PRICING DOCUMENTATI ON MAINTAINED BY ASSESSEE AND BY APPLYING VARIOUS FILT ERS AND REJECTED FOR COMPARABLES SELECTED BY ASSESSEE. LD.T PO CARRIED OUT FRESH SEARCH AND SELECTED A FINAL SET OF FOLLOWING 8 COMPARABLES HAVING AVERAGE PLI OF 25.03%: 8. LD.TPO ALSO RESTRICTED THE WORKING CAPITAL ADJUS TMENT AT 0.91% AND DID NOT GRANT RISK ADJUSTMENT TO ASSESSEE . HE THUS COMPUTED THE PROPOSED ADJUSTMENT BEING SHORTFALL AT RS.5,08,97,427/-. 9. LD.AO WHILE PASSING THE DRAFT ASSESSMENT ORDER R EWORKED THE EXEMPTION CLAIMED BY ASSESSEE UNDER SECTION 10A OF THE ACT. LD.AO EXCLUDED TELECOMMUNICATION CHARGES FROM EXPOR T TURNOVER. HE ALSO REJECTED THE SUBMISSION OF ASSESS EE THAT ON THIS ISSUE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS TATA LXE DIRECTED TO EXCLUDE THE SAME ITEM FROM THE TOTAL TU RNOVER. LD.AO THUS PROPOSED ADDITION OF RS.5,26,08,958/- IN THE H ANDS OF ASSESSEE. 4 ALLSEC TECHNOLOGIES LTD. -16.63% 5 ACCENTIA TECHNOLOGIES LTD. 46.40% 6 INFORMED TECHNOLOGIES INDIA LTD. 22.61% 7 COSMIC GLOBAL LTD. 40.61% 8 ECLERX SERVICES LTD. 57.46% AVERAGE PLI 25.03% PAGE 8 OF 26 IT(TP)A NO.77 & 110/BANG/2014 10. AGGRIEVED BY THE ADDITION PROPOSED BY LD.AO ASS ESSEE OBJECTED BEFORE DRP. 11. BEFORE DRP ASSESSEE HAD RAISED OBJECTIONS IN RE SPECT OF INCLUSION OF CERTAIN COMPARABLES WHICH WERE REJECTE D. DRP UPHELD THE ACTION OF LD.TPO/AO IN RESPECT OF THE AD DITION PROPOSED. 12. DRP ALSO DIRECTED TO RETAINED THE EXPORT TURNOV ER AND TOTAL TURNOVER AS OBSERVED BY LD.AO IN THE DRAFT ASSESSME NT ORDER FOR PURPOSES OF COMPUTING DEDUCTION UNDER SECTION 10A O F THE ACT. ON RECEIPT OF DRP DIRECTION, LD.AO PASSED FINAL ASS ESSMENT ORDER. HOWEVER, LD.AO CORRECTED SOME CLERICAL ERROR IN MENTIONING THE FIGURE OF DEDUCTION UNDER SECTION 10 A IN ADOPTING THE EXPORT TURNOVER AND THE PROFIT OF THE UNDERTAKI NG. 13. AGGRIEVED BY THE ADDITION MADE BY LD.AO IN THE FINAL ASSESSMENT ORDER, ASSESSEE IS IN APPEAL BEFORE US N OW. 14. LD.AR REFERRED TO GROUNDS FILED ON 12/12/2019. HE SUBMITTED THAT, IN THE EVENT FOLLOWING COMPARABLES ALLEGED IN RESPECTIVE GROUNDS ARE CONSIDERED ASSESSEE WOULD BE WITHIN THE MARGIN AS REQUIRED: IT HAS BEEN SUBMITTED BY LD.AR THAT IN GROUND NO.2. 2 ASSESSEE ONLY WISH TO ARGUE ON INCLUSION OF R SYSTE MS INTERNATIONAL LTD LD.AR WISHES TO ARGUE EXCLUSION OF 4 COMPARABLES RA ISED IN GROUND 2.3. HE SUBMITTED THAT 2 COMPARABLES MAY BE CONSIDERED ON FUNCTIONAL DISSIMILARITIES. PAGE 9 OF 26 IT(TP)A NO.77 & 110/BANG/2014 ASSESSEE HAS ALSO RAISED IN ADDITIONAL GROUND NO.7, WHEREIN, IT HAS BEEN RAISED THAT, ADJUSTMENT ON ACC OUNT OF DIFFERENCE IN THE RATE OF DEPRECIATION CHARGED BY A SSESSEE VIS-A-VIS COMPARABLES NEEDS TO BE PROVIDED. IT IS A SUBMISSION OF LD.AR THAT WITH ADJUDICATION OF THESE ISSUES ASSESSEE WOULD BE WITHIN THE MARGIN OF +/-5%. 15. IN RESPECT OF CORPORATE GROUND ISSUE BEING GROU ND NO.7-10 ASSESSEE SUBMITS THAT REVENUE IS ALSO IN APPEAL IN SUPPORT OF THE ORDER PASSED BY LD.AO. IT HAS BEEN SUBMITTED THAT T HIS ISSUE IS IN RESPECT OF COMPUTATION OF EXPORT TURNOVER AND TO TAL TURNOVER FOR PURPOSES OF DEDUCTION TO BE DETERMINED UNDER SE CTION 10A & 10AA OF THE ACT. 16. WE SHALL 1 ST DEAL WITH CORPORATE TAX ISSUES RAISED BY ASSESSEE AS WELL AS REVENUE. 17. GROUND NO.II-III IN ASSESSEES APPEAL AND GROUND NO.2-5 IN REVENUES APPEAL ARE IN RESPECT OF DEDUCTION TO BE COMPUTED UNDER SECTION 10A/AA OF THE ACT. 18. WE NOTE THAT CHALLENGED BY REVENUE FOR EXCLUDIN G COMMUNICATION EXPENSES FOR COMPUTING TOTAL TURNOVER AND EXPORT TURNOVER AND EXCLUDING LOSS EARNED FROM NON-ELIGIBL E UNIT FOR PURPOSES OF 10A DEDUCTION. 19. WE NOTE THAT DRP REFERRED TO DECISION OF HON'BLE KARNATAKA HIGH COURT, IN THE CASE OF CIT V. TATA ELXSI LTD. REPORTED IN [2012] 17 TAXMANN.COM 100 HELD THAT, IF ANY EXPENDITURE IS EXCLUDED FROM EXPORT TURNOVER, THEN THE SAME NEEDS TO BE EXC LUDED FROM PAGE 10 OF 26 IT(TP)A NO.77 & 110/BANG/2014 TOTAL TURNOVER AS WELL, ACCORDINGLY, DIRECTING LD.A O TO EXCLUDE EXPENSES DEDUCTED FROM EXPORT TURNOVER FROM TOTAL T URNOVER FOR COMPUTING DEDUCTION U/S 10A OF THE INCOME-TAX ACT, 1961. 20. FURTHER IN RESPECT OF EXCLUSION OF LOSS EARNED FROM NON- ELIGIBLE UNIT FOR COMPUTING PROFITS OF ELIGIBLE UNI T UNDER SECTION 10 A, DRP RELIED ON DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF AND CIT V. YOKOGAVA INDIA LTD. REPORTED IN [2012] 21 TAXMANN.COM 154 . 21. WE DO NOT FIND ANY INFIRMITY IN THE VIEW TAKEN BY DRP AS IT IS SUPPORTED BY RATIOS HELD BY HONBLE JURISDICTIONAL HIGH COURT . THERE IS NOTHING ON RECORD BROUGHT BY REVENUE TO ES TABLISH ANY DISTINGUISHING FACTORS TO DEVIATE FROM THE RATIO OF HONBLE JURISDICTIONAL HIGH COURT . 22. LD.AO HOWEVER HAS NOT COMPUTED THE SAME IN THE MANNER AS DIRECTED BY DRP. 23. WE THEREFORE DIRECT LD.AO TO FOLLOW THE RATIO L AID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT V. YOKOGAVA INDIA LTD. (SUPRA). IT IS ALSO MENTIONED THAT THIS VIEW HAS BEEN FORTI FIED BY HONBLE SUPREME COURT IN CASE OF CIT V. HCL TECHNOLOGIES LTD. REPORTED IN (2018) 93 TAXMANN.COM 33 AND DCIT VS CITRIX R&D INDIA PRIVATE LIMITED REPORTED IN (2019) 104 TAXMANN.COM 85. WE THEREFORE ALLOW GROUND NO.II-III IN ASSESSEES A PPEAL AND DISMISS GROUND NO.2-5 IN REVENUES APPEAL. 24. ASSESSEES APPEAL IN RESPECT OF TRANS-APPRISING ISSUES ARE IN RESPECT OF IN EXCLUSION/INCLUSION OF FOLLOWING COMP ARABLES. PAGE 11 OF 26 IT(TP)A NO.77 & 110/BANG/2014 1. ASSESSEE IN GROUND 2.2 SEEKS INCLUSION OF R.S.SYSTE MS INTERNATIONAL LTD 2. ASSESSEE IN GROUND 2.3 SEEKS EXCLUSION OF INFOSYS B PO LTD, ACCENTIA TECHNOLOGIES LTD., COSMIC GLOBAL LTD., AND ECLERX SERVICES LTD. 25. BEFORE CARRYING OUT COMPARABILITY ANALYSIS, IT IS SINE QUA NON TO UNDERSTAND FUNCTIONS PERFORMED, ASSETS OWNED AND RISK ASSUMED BY ASSESSEE UNDER THIS SEGMENT. A. FUNCTIONS: IN THE TP STUDY PLACED AT PAGE 3837-382 OF PAPER BO OK, IT HAS BEEN STATED THAT ASSESSEE IS AN OFFSHORE PROCESSING CENTRE OF U.S. AE. ASSESSEE HAS AN INDIE GENIUS ARM WHICH CATERS T O TAX ADVISORS AND FINANCIAL SERVICES. IT HAS BEEN SUBMIT TED THAT IT IS ENGAGED IN BPO ACTIVITIES TO THE ASSOCIATED ENTERPR ISES. IT FUNCTIONS TO ENSURE PROPER MIGRATION OF PROCESS FRO M CLIENT TO ASSESSEE, PREPARED DOCUMENTATION FOR THE PROCESS, P ROVIDE BACK OFFICE TRANSACTION PROCESSING SERVICES TO ITS AE, E NSURES QUALITY OF SERVICES, IDENTIFICATION OF MANPOWER REQUIREMENT, R ECRUITMENT OF MANPOWER AND TRAINING, ASSIGNMENT OF QUALIFIED PROF ESSIONALS ON PROJECT. IT HAS BEEN SUBMITTED THAT ASSESSEE PERFORMS GENERA L OVERSIGHT ACTIVITIES WHICH IS KNOWN STEWARDSHIP ACTIVITIES. B. ASSET OWNED: PAGE 12 OF 26 IT(TP)A NO.77 & 110/BANG/2014 IT HAS BEEN SUBMITTED THAT ASSESSEE OWNS PRIMARY AS SETS ASSETS FOR PROVIDING BACK-OFFICE SERVICES LIKE EMPLOYEES, INFRASTRUCTURE AND WORKSTATIONS ETC. C. RISK ASSUMED. IN TP STUDY IT HAS BEEN SUBMITTED THAT ASSESSEE UND ERTAKES RISK OF DELIVERING QUALITY PRODUCT, RISK OF FINANCING TH E WORK CAPITAL, RISK OF APPROPRIATELY TRAINED HUMAN SKILL SETS FACI LITY RISK AND COMMUNICATION RISK ETC. BASED UPON ABOVE FAR, ASSESSEE HAS BEEN CHARACTERIS ED AS A LOW RISK SERVICE PROVIDER PROVIDING BPO/ITES SERVICES A ND ASSUMING NEGLIGIBLE RISK IN COURSE OF ITS BUSINESS WITH SOME MATERIAL AND SUPERVISORY ASSISTANCE FROM THE ASSOCIATED ENTERPRI SES. WE SHALL NOW CONSIDER THE COMPARABLES ALLEGED FOR EXCLUSION/INCLUSION BY ASSESSEE. 26. GROUND NO. 2.2: ASSESSEE IS SEEKING INCLUSION OF 1 COMPARABLE BEING R SYSTEMS INTERNATIONAL LTD IN THIS GROUND. THERE ARE 2 MORE COMPARABLES ALLEGED FOR INCLUSION HOWEVER, AT THE TIME OF HEARING, LD.AR SUBMITTED THAT THEY ARE NOT PRESSED. ACCORDINGLY, EXCEPT FOR R SYSTEMS INTERNATIONAL LTD ., OTHER COMPARABLES RAISED IN THIS GROUND ARE NOT ADJUDICAT ED AS NOT PRESSED. R SYSTEMS INTERNATIONAL LTD. THIS COMPARABLE HAS BEEN EXCLUDED BY LD.TPO, AS IT HAS A DIFFERENT ACCOUNTING PERIOD. PAGE 13 OF 26 IT(TP)A NO.77 & 110/BANG/2014 THIS TRIBUNAL HAS BEEN TAKING CONSISTENT VIEW REGARDING THIS COMPARABLE. LD.AR SUBMITTED THAT DATA FOR RELEVANT FINANCIAL YEARS CAN BE DERIVED FROM THE QUARTERLY DATA AVAILA BLE ON THE WEBSITE OF THE COMPANY AND THEREFORE THIS COMPARABL E SHOULD BE INCLUDED IN THE FINALIST. IN SUPPORT OF HIS SUBMISS ION, PLACED RELIANCE ON ORDER PASSED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR PRECEDING ASSESSMENT YEAR (SUPRA). LD. ACIT DR PLACED RELIANCE ON ORDER PASSED BY AUTH ORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. IT IS NOTED THAT THIS COMPARABLE HAS BEEN RESTORED TO LD.AO/TPO IN PRECEDING ASSESSMENT YEARS BY THIS TRIBUNAL IN ASSESSEES OWN CASE. WE DIRECT ASSESSEE TO FILE THE RELEVANT DATA FOR FINANCIAL YEAR FROM THE DATA AVAILABLE ON THE WEBSITE SO THAT LD.A O/TPO CAN EXAMINE THE DETAILS. ACCORDINGLY WE REMAND THIS COMPARABLE TO LD.AO/TPO FOR VERIFICATION AND INCLUSION THE FINALIST. ACCORDINGLY THIS GROUND STANDS PARTLY ALLOWED. 27. GROUND NO.2.3 INFOSYS BPO LTD LD. AR SUBMITTED THAT THIS COMPARABLE IS FUNCTIONAL LY DIFFERENT WITH THAT OF ASSESSEE. IT IS ALSO BEEN SUBMITTED TH AT EXTRAORDINARY EVENTS LIKE AMALGAMATION HAS TAKEN PLACE IN CASE OF THIS COMPARABLE. LD. AR SUBMITTED THAT THIS COMPARABLE I S A PAGE 14 OF 26 IT(TP)A NO.77 & 110/BANG/2014 SUBSIDIARY OF INFOSYS LTD AND POSSESSES BRAND VALUE . THIS COMPARABLE HAS BEEN SPENDING ON BRAND BUILDING AND ADVERTISEMENT SO AS TO ENHANCE IS BRAND OVER THE YE ARS. LD. AR THUS SUBMITTED THAT THIS COMPARABLE CANNOT B E COMPARED WITH A CAPTIVE SERVICE PROVIDER LIKE THAT OF ASSESS EE. ON THE CONTRARY LD. CIT DR RELIED ON ORDERS PASSED BY AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. ADMITTEDLY, THIS COMPANY HAS A HUGE BRAND VALUE. WE ALSO NOTE THAT THIS COMPANY IS A VERY HIGH TURNOVER AND VARIO US DECISIONS OF COORDINATE BENCH OF THIS TRIBUNAL HAS REJECTED THIS COMPARABLE BY APPLYING TURNOVER FILTER. WE NOTICE THAT LD. TPO HAD APPLIED COMPARABLE LESS THAN RS.1 CRORE FILTER FOR EXCLUDIN G CERTAIN COMPARABLES HOWEVER HAS NOT APPLIED THE UPPER LIMIT FOR THE FILTER. CONSISTENTLY THIS TRIBUNAL HAS BEEN EXCLUDING COMPARABLES WITH MORE THAN 200 CRORES TURNOVER AS NOT COMPARABL E WITH A CAPTIVE SERVICE PROVIDER LIKE ASSESSEE. ON PERUSAL OF THE ORDER PASSED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR PRECEDING ASSESSMENT YEAR, THIS COMPARABLE HAS BEEN EXCLUDED BY APPLYING TURNOVER FILTER. THERE HAS BEEN NO FACTUAL CHANGES FOR YEAR UNDER CONSIDERATION AND THEREFORE WE DO NOT FIND ANY REAS ON TO DEVIATE FROM THE CONSISTENT APPROACH TAKEN BY THIS TRIBUNAL IN ASSESSEES OWN CASE. ACCORDINGLY, WE DIRECT TO EXCLUDED THIS COMPARABLE. PAGE 15 OF 26 IT(TP)A NO.77 & 110/BANG/2014 ACCENTIA TECHNOLOGIES LTD. LD.AR SUBMITTED THAT, THIS COMPARABLE IS FUNCTIONAL LY DIFFERENT WITH THAT OF ASSESSEE AS IT IS ENGAGED IN MEDICAL T RANSCRIPTION, MEDICAL CODING, BILLING AND ENGAGED IN HEALTHCARE A CTIVITIES. HE ALSO SUBMITTED THAT, THERE HAS BEEN EXTRAORDINARY E VENT DURING THE YEARS UNDER CONSIDERATION BEING ACQUISITION OF 96% STAKE IN M/S OAK TECHNOLOGIES INC.. IT HAS BEEN SUBMITTED BY LD. AR THAT THIS COMPARABLE IS ALSO INTO SOFTWARE PRODUCT DEVEL OPMENT. FOR ALL THE RELEVANT SEGMENTS UNDER WHICH THIS COMPARAB LE IS GENERATING REVENUE, THERE IS NO SEGMENTAL DETAILS A VAILABLE. LD.AR POINTED OUT FROM THE ANNUAL REPORT PLACED AT PAGE 3 2-40 AND 60 OF PAPER BOOK THAT THIS COMPANY HAS MADE INVESTMENT S AND OTHER COMPANIES AND HAS ENTERED INTO STRATEGY TIE U PS FOR RAISING LONG-TERM FUNDS FOR EXPANSION OF THE COMPANY. ON THE CONTRARY, LD.CIT.DR RELIED ON ORDERS PASSED BY AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. WE NOTE THAT FOR ASSESSME NT YEAR 2011- 12, THIS TRIBUNAL EXCLUDED THIS COMPARABLE BY OBSERVING THAT IT OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIR ING COMPANIES FOR INORGANIC GROWTH. NO DOUBT THAT THIS COMPARABLE HAS BEEN ACQUIRING VARIOUS COMPANIES AS A MATTER OF ITS INTE RNAL STRATEGY FOR EXPANSION THEREBY CAUSING AN EXTRAORDINARY EVEN T WHICH IMPACTS PROFITS OF THIS COMPANY. PAGE 16 OF 26 IT(TP)A NO.77 & 110/BANG/2014 FOLLOWING CONSISTENT APPROACH TAKEN IN ASSESSEES O WN CASE, WE DIRECT LD.AO/TPO TO EXCLUDE THIS COMPARABLE FROM THE FINALIST. COSMIC GLOBAL LTD. THIS COMPARABLE HAS BEEN SELECTED BY LD.AO/TPO, HOW EVER LD.AR SUBMITTED THAT IT IS ENGAGED IN PROVIDING SERVICES OF MEDICAL TRANSCRIPTION AND CONSULTANCY, TRANSLATION SERVICES AND ACCOUNTS BPO. THE LD.AR SUBMITTED THAT THIS COMPARABLE HAS E ARNED MAJOR REVENUE THROUGH TRANSLATION SERVICES. THE LD. AR FURTHER SUBMITTED THAT THIS COMPARABLE DOES NOT SATISFY THE EMPLOYEE COST TO SALES RATIO FILTER WHICH WAS CONSIDERED BY LD.TPO IN SELECTING THE COMPARABLES. HE SUBMITTED THAT, MINIM UM THRESHOLD OF EMPLOYEE COST FILTER SHOULD BE AT LEAS T 25% OF SALES, HOWEVER IN THE PRESENT COMPARABLE IT IS ONLY 21.95% . ON THE CONTRARY LD. CIT DR SUBMITTED THAT IN THE PR ECEDING YEARS THIS COMPARABLE WAS NEVER OBJECTED BY ASSESSE E FOR EXCLUSION. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. THOUGH ASSESSEE HAS SUBMITTED IN THE CHART THAT THI S COMPARABLE IS SUBMITTED TO BE FUNCTIONALLY DIFFERENT, HOWEVER, BEFORE US LDAR COULD NOT DEMONSTRATE HOW THE FUNCTIONS ARE NOT SIM ILAR. IN OUR VIEW, SEGMENT THAT NEEDS TO BE CONSIDERED IN PRESEN T FACTS IS THE BPO SEGMENT, THAT HAS TURNOVER OF RS. 27.76 LAKHS. THE TURNOVER OF ASSESSEE IN THE PRESENT CASE IS 68.28 LACS. WE N OTE THAT LD.AR PAGE 17 OF 26 IT(TP)A NO.77 & 110/BANG/2014 HAS PLACED RELIANCE ON DECISION OF E4E BUSINESS SOLUTIONS INDIA PVT. LTD VS DCIT REPORTED IN (2016) 67 TAXMANN.COM 68 , WHEREIN, THIS COMPARABLE WAS EXCLUDED BY RELYING ON DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF LAM RESEARCH (INDIA) (P) LTD VS DCIT IN ITA NO. 1437/B/2014 DATED 30/04/ 2014 : 11.4 COSMIC GLOBAL LTD. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE RAISED OBJECTION AGAINST INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLES BEFORE THE TPO ON THE GROUND THAT THIS COMPANY HAS MAJOR R EVENUE FROM TRANSLATION SERVICES. THEREFORE, THIS COMPANY IS FU NCTIONALLY DIFFERENT FROM THE SERVICES PROVIDED BY THE ASSESSEE TO ITS AE. TH E LEARNED AR OF THE ASSESSEE HAS REFERRED TO THE ANNUAL REPORT OF THIS COMPANY AND SUBMITTED THAT THAT OUT OF THE TOTAL REVENUE OF RS. 7,37,02,5 84/-, THIS COMPANY HAS EARNED REVENUE FROM TRANSLATION CHARGES TO THE TUNE OF RS. 6,99,35,756/-. THEREFORE, SUBSTANTIAL PART OF THE REVENUE HAS BEEN EARNED FROM THE ACTIVITY OF TRANSLATION. THE LEARNED AR OF THE ASSESSEE HAS FURTHER POINTED OUT THAT EVEN OTHERWISE THIS COMPANY IS OUTSOURCING THE WORK OF TRANSLATION AS IT IS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT OF THIS CO MPANY THAT AN AMOUNT OF RS. 3,00,25,326/- HAS BEEN PAID ON ACCOUNT OF TRANS LATION CHARGES. THUS, LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THIS COMPANY CANNOT BE CONSIDERED AS FUNCTIONALLY COMPARABLE WITH THE ASSE SSEE FOR THE PURPOSE OF DETERMINING THE ALP. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF LAM RESEARCH (INDIA) (P.) LTD. V. DY. CIT IN ITA NO. 14 37/BANG/2014 DATED 30/4/2015. (I) ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTAT IVE HAS SUBMITTED THAT THE COMPARABILITY OF THIS COMPANY HA S BEEN EXAMINED BY THE TPO AS WELL AS BY THE DRP. THE TPO HAS REJEC TED THE OBJECTIONS RAISED BY THE ASSESSEE IN RESPECT OF THIS COMPANY B Y H OLDING THAT THE TRANSLATION SERVICE ARE IN THE NATURE OF ITES AND T HEREFORE, IT QUALIFIES ALL THE FILTERS APPLIED BY THE TPO. HE HAS RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW. (II) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT M ATERIAL ON RECORD. THERE IS NO DISPUTE THAT THIS CO MPANY IS IN THE BUSINESS OF PROVIDING SERVICE OF MEDICAL TRANSCRIPTION AND CONSULTANCY SERVICES, TRANSLATIONS SERVICES AND ACC OUNTS BPO. THE SEGMENTAL REVENUE FROM THE OPERATIONS ARE GIVEN IN SCHEDULE 8 TO THE PAGE 18 OF 26 IT(TP)A NO.77 & 110/BANG/2014 PROFIT & LOSS ACCOUNT WHICH REVEALS THAT MAJOR REVE NUE OF RS. 6,99,35,756/- OUT OF TOTAL REVENUE OF RS. 7.37 CRORES HAS BEEN EA RNED BY THIS COMPANY FROM THE ACTIVITY OF TRANSLATION SE RVICES. WE FURTHER NOTE THAT THE COMPANY HAS DEBITED AN EXPENDITURE OF MORE THAN RS. 3 CRORE ON ACCOUNT OF TRANSLATIONS CHARGES PAID. THUS IT IS CLEAR THAT THIS COMPANY IS OUTSOURCING ITS SERVICES OF TRANSLATION WORK WHICH IS THE MAIN ACTIVITY OF THIS COMPANY YIELDING MAJOR REVENU E EARNED DURING THE YEAR. THUS IT IS MANIFE ST FROM THE RECORD THAT THIS COMPANY IS IN THE ENTIRELY DIFFERENT NATURE OF ACTIVITY AND CANNOT BE COMPARED WITH THE ACTIVITY OF PROVIDING CONTACT CENTRE OF THE ASSESSE E TO ITS AE. IN THE CASE OF LAM RESEARCH (INDIA) (P.) LTD. (SUPRA) THE CO- ORDINATE BENC H OF THIS TRIBUNAL HAD OCCASION TO EXAMINE THE COMPARABI LITY OF THIS COMPANY IN PARA. 34 AS UNDER: '34. WITH RESPECT TO COSMIC GLOBAL LTD., HYDERABAD BENCH OF ITAT IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) P. LTD., IN PARA 19 OF ITS ORDER, HAD HELD AS UNDER: COSMIC GLOBAL LTD. 19. THE MAIN OBJECTION OF ASSESSEE WITH REFERENCE T O THE INCLUSION OF THIS COMPANY IS WITH REFERENCE TO OUTSOURCING OF IT S MAIN ACTIVITY. EVEN THOUGH THIS COMPANY IS IN ASSESSEE'S TP STUDY, IT HAS RAISED OBJECT ION BEFORE THE TPO THAT THIS COMPANY'S EMPLOYEE COS T IS LESS THAN 21.30% AND MOST OF THE COST IS WITH REFERENCE TO THE OUTSOURCING CHARGES OR TRANSLATION CHARGES, AND AS SUCH THIS IS NOT A COMPARABLE COMPANY. THE TPO, THOUGH CONSIDERED TH ESE SUBMISSIONS, R EJECTED THE SAME, ON THE REASON THAT THIS DOES NOT IMPACT THE PROFIT MARGIN OF THE COMPANY. OPPOSING T HE VIEW TAKEN BY THE TPO, IT IS SUBMITTED THAT THIS COMPANY CANNO T BE SELECTED AS COMPARABLE, AS M/S. CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD., HY DERABAD SIMILAR ISSUE WAS DISCUSSED BY THE COORDINA TE BENCH OF THE TRIBUNAL(DELHI) IN THE CASE OF MERCER CONSULTING (INDIA) P. LTD. ( SUPRA ), VIDE PARAS 13.2 TO 13.3 WHICH READ AS UNDER - 13.2. NOW COMING TO THE FACTUAL MATRIX OF THIS CASE , WE FIND FROM THE MATERIAL ON RECORD THAT OUTSOURCING CHARGES OF THIS CASE CONSTITUTE 57.31% OF THE TOTAL OPERATING COSTS. THI S DOES NOT APPEAR TO US TO BE A VALID REASON FOR ELIMINATING THIS CAS E FROM THE LIST OF COMPARABLES. ON GOING THROUGH THE ANNUAL ACCOUNTS O F COS MIC GLOBAL LIMITED, A COPY OF WHICH HAS BEEN PLACED ON RECORD, WE FIND THAT ITS TOTAL REVENUE FROM OPERATIONS ARE AT RS. 7 .37 CRORE DIVIDED INTO THREE SEGMENTS, NAMELY, MEDICAL TRANSCRIPTION AND CONSULTANCY SERVICES AT RS. 9.90 LACS, TRANSLATION CHARGES AT RS. 6.99 CRORE AND ACCOUNTS BPO AT RS. 27.76 LAC. THE ID. AR HAS MADE OUT A CASE THAT PAGE 19 OF 26 IT(TP)A NO.77 & 110/BANG/2014 OUTSOURCING ACTIVITY CARRIED OUT BY THIS COMPANY CO NSTITUTES 57% OF TOTAL EXPENSES. THE REASON FOR WHICH WE ARE NOT AGR EEABLE WITH THE ID. AR IS THAT WE HAVE TO EXAMINE THE REVENUE OF THIS CASE ONLY FROM ACCOUNTS BPO SEGMENT AND NOT ON THE ENTITY LEVEL, B EING ALSO FROM MEDICAL TRANSCRIPTION AND TRANSLATION CHARGES. WHEN WE ARE EXAMINING THE RESULTS OF THIS COMPANY FROM THE ACCO UNTS BPO SEGMENT ALONE, THERE IS NO NEED TO E XAMINE THE POSITION UNDER OTHER SEGMENTS. THE ENTIRE OUTSOURCING IS CONFINED TO TRA NSLATION CHARGES PAID AT RS. 3.00 CRORE, WHICH IS STRICTLY IN THE RE ALM OF THE TRANSLATION SEGMENT, REVENUES FROM WHICH ARE TO THE TUNE OF RS. 6.99 CRORE. IF THIS SEGMENT OF TRANSLATION IS NOT UNDER CONSIDERATION FOR DECIDING AS TO WHETHER THIS CASE IS COMPARABLE OR NOT, WE CANNOT TAKE RECOURSE TO THE FIGURES WHICH ARE RELEVANT FOR SEGMENTS OTHER THAN ACCOUNTS BPO. THUS IT IS HELD THAT THIS CASE C ANNOT BE EXCLUDED ON THE STRE NGTH OF OUTSOURCING ACTIVITY, WHICH IS ALIEN TO THE RELEVANT SEGMENT. 13.3 HOWEVER, WE FIND THIS CASE TO INCOMPARABLE ON THE ALTERNATIVE ARGUMENT ADVANCED BY THE ID. AR TO THE EFFECT THAT TOTAL REVENUE OF THE ACCOUNTS BPO SEGMENT OF COSMIC GLOBAL LIMIT ED IS VERY LOW AT RS. 27. 76 LACS. WE HAVE DISCUSSED THIS ASPECT ABOV E IN THE CONTEXT OF CG- VAK'S CASE AND HELD THAT A CAPTIVE UNIT CANNOT BE C OMPARED WITH A GIANT CASE AND THUS EXCLUDED CG- VAK WITH TURNOVER FROM ACCOUNTS BPO SEGMENT AT RS. 86.10 LACS. AS THE SEGMENTAL REVENUE OF BPO SEGMENT OF COSMIC GLOBAL LIMITED AT RS. 27. 76 LAC IS STILL ON MUCH LOWER SIDE, THE REASONS GIVEN ABOVE WOULD FULL Y APPLY TO HOLD COSMIC GLOBAL LIMITED AS INCOMPARABLE. THIS CASE IS , THEREFORE, DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLE S. IN VIEW OF THE DETAILED ANALYSIS OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ABOVE REFERRED CASE, IN THIS CASE ALSO WE AC CEPT THE CONTENTIONS OF ASSESSEE AND DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPARABLE FOR THE SA ME REASONS. ACCORDINGLY, WE DIRECT THAT COSMIC GLOBAL LTD., ALSO BE EXCLUDED FROM THE LIST OF COMPARABLES.' RESPECTFULLY FOLLOWING THE SAME WE DIRECT LD. AO/TP O TO EXCLUDE THIS COMPARABLE FROM THE FINAL LIST. ECLERX SERVICES LTD. PAGE 20 OF 26 IT(TP)A NO.77 & 110/BANG/2014 THIS COMPARABLE WAS SELECTED BY LD.TPO. HOWEVER LD. AR SUBMITTED THAT THIS COMPARABLE IS FUNCTIONALLY DIFF ERENT AS IT IS ENGAGED IN HIGH-END SERVICES AND THEREFORE IS NOT C OMPARABLE WITH A CAPTIVE SERVICE PROVIDER LIKE THAT OF ASSESS EE. HE SUBMITTED THAT THIS COMPARABLE IS BASICALLY PROVIDES SERVICES INTO KNOWLEDGE PROCESS SEGMENTS AND NOT A BACK-OFFICE SERVICE PROV IDER LIKE THAT OF ASSESSEE. HE PLACED RELIANCE ON OBSERVATIONS OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF E4E BUSINESS SOLUTIONS INDIA PVT.LTD VS DCIT (SUPRA) . ON THE CONTRARY LEARN CIT DR PLACED RELIANCE ON ORD ERS PASSED BY AUTHORITIES BELOW. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. WE NOTE THAT COORDINATE BENCH OF THIS TRIBUNAL IN R ESPECT OF THIS COMPARABLE OBSERVED AS UNDER: 11.2ECLERX SERVICES LTD. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT T HIS COMPANY IS ENGAGED IN THE HIGH-END SERVICES AND THEREFORE, THIS COMPAN Y IS BASICALLY A KPO AND NOT A BPO. HE HAS REFERRED TO ANNUAL REPORT OF THIS COMPANY AT PAGE 26 OF THE PAPER BOOK -II AND SUBMITTED THAT AS IT IS CLEAR FR OM THE ANNUAL REPORT THAT THIS COMPANY IS A KNOWLEDGE PROCESS OUTSOURCING (K. P. O) PROVIDING DATA ANALYTICS AND DATA PROCESS SOLUTIONS TO GLOBAL ENTE RPRISE CLIENTS. THIS COMPANY SUPPORTS CORE AND COMPLEX ACTIVITIES FOR IT S CLIENTS USING PROPRIETARY PROCESSES AND A SCALABLE OFFSHORE DELIVERY MODEL. T HIS COMPANY HAS ACCESS TO THE CAPITAL MARKET AND THEREFORE, THIS COMPANY IS A PUBLIC LISTED KPO COMPANY IN INDIA. THE COMPANY IS ALSO ENGAGED IN CONSULTING SERVICES AND PROCESS OUTSOURCING AS WELL AS IN THE ACTIVITY OF PROCESS R E- ENGINEERING AND AUTOMATION APART FROM MIDDLE OFFICE AND BACK OFFICE SUPPORT TO CAPITAL MARKET. THEREFORE, KEEPING IN THE DIVERSIFIED HIGH-END SERV ICES, THIS COMPANY CANNOT BE CONSIDERED AS FUNCTIONALLY COMPARABLE WITH THE A SSESSEE. IN SUPPORT OF HIS PAGE 21 OF 26 IT(TP)A NO.77 & 110/BANG/2014 CONTENTION, HE HAS RELIED UPON THE DECISION OF THE SPECIAL BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF MAERSK GLOBAL CENTRES (INDI A) (P.) LTD. V. ASSTT. CIT [2014] 43 TAXMANN.COM 100/147 ITD 83. (I) ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTAT IVE HAS SUBMITTED THAT THIS COMPANY IS UNDISPUTEDLY IN THE BUSINESS OF ITES AND THEREFORE, THE NOMENCLATURE THAT OF KPO WILL NO T MAKE IT FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. (II) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. WE FIND THAT THE COMPANY ECLERX SERVICES LTD . IS ENGAGED IN DIVERSIFIED ACTIVITY OF PROVIDING SERVICES INCLUDING ANALYTIC SERVICES AND DATA PROCESS SOLUTIONS TO ITS GLOBAL CLIENTS. THE SERVICE PROVIDED BY ECLERX SERVICES LTD ., IS IN VARIOUS AREAS INCLUDING CAPITAL MARKET AND THEREFORE, THE SERVICE S ARE IN THE NATURE OF CONSULTANCY AND END TO END SUPPORT THROUGH TRADE CENTRE INCLUDING TRADE CONFIRMATION, SETTLEMENT, TRANSACTI ON, MAINTENANCE AND ANALYTIC AND REPORTING. THUS IT IS APPARENT FRO M THE NATURE OF THE ACTIVITY OF THIS COMPANY THAT IT IS NOT PROVIDI NG A SIMPLE SERVICE OF DATA PRO CESSING BUT IT IS ENGAGED IN THE ACTIVITY OF PROVID ING HIGH- END SERVICES INVOLVING DECISION MAKING ANALYSIS WHI CH REQUIRES THOUGHT PROCESS AND EVALUATION OF VARIOUS FACTS AND FACTORS. FUNCTIONAL COMPARABILITY OF THIS COMPANY W ITH THAT OF SIMPLE BPO'S SERVI CE PROVIDING COMPANY HAS BEEN EXAMINED BY THE SPECIAL BENCH IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA ) (P.) LTD. (SUPRA) IN PARAS.82 & 83 AS UNDER : 82. IN SO FAR AS M/S ECLERX SERVICES LIMITED IS CON CERNED, THE RELEVANT INFORMATION IS AVAILABLE IN T HE FORM OF ANNUAL REPORT FOR FINANCIAL YEAR 2007- 08 PLACED AT PAGE 166 TO 183 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE SAID COM PANY PROVIDES DATA ANALYTICS AND DATA PROCESS SOLUTIONS TO SOME OF THE LARGEST BRANDS IN THE WORLD AND IS RECOGNIZ ED AS EXPERTS IN CHOSEN MARKETS- FINANCIAL SERVICES AND RETAIL AND MANUFACTURING. IT IS CLAIMED TO BE PROVIDING COMPLETE BUSINESSSOLUTIONS BY COMBINING PEOPLE, PROCESS IMPROVEMENT AND AUTOMATION. IT IS CLAIMED TO HAVE E MPLOYED OVER 1500 DOMAIN SPECIALISTS W ORKING FOR THE CLIENTS. IT IS CLAIMED THAT ECLERX IS A DIFFERENT COMPANY WITH IND USTRY PAGE 22 OF 26 IT(TP)A NO.77 & 110/BANG/2014 SPECIALIZED SERVICES FOR MEETING COMPLEX CLIENT NEE DS, DATA ANALYTICS KPO SERVICE PROVIDER SPECIALIZING IN TWO BUSINESS VERTICALS FINANCIAL SERVICES AND RETAIL AND MANUF ACTURING. IT IS CLAIMED TO BE ENGAGED IN PROVIDING SOLUTIONS THAT DO NOT JUST REDUCE COST, BUT HELP THE CLIENTS INCREASE SALES AND REDUCE RISK BY ENHANCING EFFICIENCIES AND BY PROVIDING VALUABLE INSIGHTS THAT EMPOWER BET TER DECISIONS. M/S ECLERX SERVICES PVT. LTD . IS ALSO CLAIMED TO HAVE A SCALABLE DELIVERY MODEL AND SOLUTIONS OFFERED THAT INCLUDE DATA ANALYTICS, OPERATIONS MANAGEMENT, AUDITS AND RECONCILIATION, METRICS MANAGEMENT AND REPORTING SE RVICES. IT ALSO PROVIDES TAILORED PROCESS OUTSOURCING AND MAN AGEMENT SERVICES ALONG WITH A MULTITUDE OF DATA AGGREGATION , MINING AND MAINTENANCE SERVICES. IT IS CLAIMED THAT THE CO MPANY HAS A TEAM DEDICATED TO DEVELOPING AUTOMATION TOOLS TO SUPPORT SERVICE DELIVERY. THESE SOFTWARE AUTOMATION TOOLS I NCREASE PRODUCTIV ITY, ALLOWING CUSTOMERS TO BENEFIT FROM FURTHER COS T SAVING AND OUTPUT GAINS WITH BETTER CONTROL OVER QU ALITY. KEEPING IN VIEW THE NATURE OF SERVICES RENDERED BY M/S ECLERX SERVICES PVT. LTD . AND ITS FUNCTIONAL PROFILE, WE ARE OF THE VIEW THAT THIS COMPANY IS ALSO MAINLY ENGAGED IN PROVIDI NG HIGH- END SERVICES INVOLVING SPECIALIZED KNOWLEDGE AND DOMAIN EXPERTISE IN THE FIELD AND THE SAME CANNOT BE COMPARED WITH T HE ASSESSEE COMPANY WHICH IS MAINLY ENGAGED IN PROVIDI NG LOW- END SERVICES TO THE GROUP CONCERNS. 83. FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THAT IF THE FUNCTIONS ACTUALLY PERFORMED BY THE ASSESSEE COMPAN Y FOR ITS AES ARE COMPARED WITH THE FUNCTIONAL PROFILE OF M/S ECLERX SERVICES PVT. LTD. AND MOLD-TEC TECHNOLOGIES LTD ., IT IS DIFFICULT T O FIND OUT ANY RELATIVELY EQUAL DEGREE OF COMPARABI LITY AND THE SAID ENTITIES CANNOT BE TAKEN AS COMPARABLES FOR TH E PURPOSE OF DETERMINING ALP OF THE TRANSACTIONS OF THE ASSESSEE COMPANY WITH ITS AES. WE, THEREFORE, DIRECT THAT THESE TWO ENTITIES BE EXCLU DED FROM THE LIST OF 10 COMPARABLES FINALLY TAKEN B Y THE AO/TPO AS PER THE DIRECTION OF THE DRP. FROM THE ABOVE IT IS CLEAR THAT THIS COMPARABLE HAS HELD TO BE NOT COMPARABLE WITH A LOW END BPO COMPANY LIKE THAT OF ASSESSEE. PAGE 23 OF 26 IT(TP)A NO.77 & 110/BANG/2014 ACCORDINGLY WE DIRECT LD. AO/TPO TO EXCLUDE THIS COMPARABLE FROM FINAL LIST. ACCORDINGLY THIS GROUND STANDS ALLOWED. 28. ADDITIONAL GROUND NO.7: ASSESSEE RAISED ADDITIONAL GROUND NO.7, VIDE APPLIC ATION DATED AUGUST 2016 WHEREIN, IT IS SUBMITTED THAT, ASSESSEE S ASSETS DEPRECIATES AT HIGHER RATE, AND THEREFORE NECESSARY ADJUSTMENT NEEDS TO BE PROVIDED IN RESPECT OF DEPRECIATION COS T IN CASE OF COMPARABLES, TO BRIDGE DISPARITIES BETWEEN FINAL SE T OF COMPARABLES AND ASSESSEE. ADMITTEDLY, THIS ISSUE HA S BEEN RAISED BEFORE THIS TRIBUNAL FOR 1 ST TIME. ASSESSEE SUBMITTED THAT, THERE IS A SIGNIFICANT DIFFERENCE IN THE RATE OF DEPRECIATIO N COST BETWEEN ASSESSEE AND THE COMPARABLES. IT HAS BEEN SUBMITTED BY LD.AR THAT THIS ISSUE HAS BEEN CONSIDERED BY COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN IT(TP) NO.443/BANG/2016, BY ORDER DATED 31/10/2017 HAS REMANDED THE ISSUE TO LD.TPO/AO FOR RE-EXAMINAT ION BASED ON DETAILS FILED BY ASSESSEE REGARDING DIFFERENCE I N DEPRECIATION. THIS TRIBUNAL ALSO OBSERVED THAT, ADJUSTMENT ON ACCOUNT OF ACCELERATED DEPRECIATION HAS BEEN GRANTED TO ASSESS EE IN THE PRECEDING YEARS. LD.AR THUS PRAYED FOR ADMISSION OF THE GROUND. ON THE CONTRARY, LD.CIT DR SUBMITTED THAT THIS ISSU E WAS NEVER CONSIDERED BY AUTHORITIES BELOW AND NO NEW GROUND C OULD BE RAISED BEFORE THIS TRIBUNAL NOW. PAGE 24 OF 26 IT(TP)A NO.77 & 110/BANG/2014 WE HAVE PERUSED THE RECORDS AND ORDERS PASSED BY TH IS TRIBUNAL . ALP NEEDS TO BE COMPUTED BY REMOVING DIFFERENCES BE TWEEN ASSESSEE AND COMPARABLES, THAT COULD HAVE A BARING ON THE COST. IN PRECEDING YEARS, ADJUSTMENT ON ACCELERATED DEPRE CIATION HAD BEEN GRANTED TO ASSESSEE SUBJECT TO VERIFICATION. WE THEREFORE ARE OF THE OPINION THAT THOUGH THIS ISSUE HAS BEEN RAIS ED FOR THE FIRST TIME, IT NEEDS TO BE CONSIDERED. WE ARE THEREFORE A DMITTING THIS GROUND. WE REMIT THIS ISSUE FOR BEING CONSIDERED BY LD.AO/T PO. ASSESSEE SHALL DEMONSTRATE THE DIFFERENCE IN RATE OF DEPRECI ATION CHARGED IN CASE OF ASSESSEE AS WELL AS THE COMPARABLES. THI S SHALL BE EXAMINED BY LD.AO/TPO AND IF IT IS FOUND THAT THE R ATES OF DEPRECIATION ARE DIFFERENT BETWEEN ASSESSEE AND COM PARABLES, REASONABLE DEPRECIATION ADJUSTMENT SHOULD BE GRANTE D. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HE ARD MUST BE GRANTED TO ASSESSEE. ACCORDINGLY, ADDITIONAL GROUND NO.7 RAISED BY ASSES SEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOV, 2020 SD/- SD/- (B.R BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 27 TH NOV, 2020. /VMS/ PAGE 25 OF 26 IT(TP)A NO.77 & 110/BANG/2014 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 26 OF 26 IT(TP)A NO.77 & 110/BANG/2014 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -11-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -11-2020 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -11-2020 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -11-2020 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -11-2020 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -11-2020 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -11-2020 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS
