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TMI Blog2015 (9) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. (2011 (1) TMI 933 - ITAT NEW DELHI) exclusion of comparables showing supernormal profits as compared to other comparable is fully justified. We, therefore set aside the impugned order of the ld. CIT(A) on this issue and restore the matter to the file of the A.O. with a direction to decide the same afresh after taking into consideration the submissions made by the assessee before the learned CIT(A) Vishal Information Technologies Ltd - their annual accounts that the company outsourced a considerable portion of their business. As the assessee carried out entire operations by itself, in our considered opinion, rightly excluded. Re computation of the claim of deduction u/s. 10A - Held that:- Since as already directed that reallocation of HO expenditure in between various segments are to be done before comparing the results of the assessee with that of the comparables, while making the TP study, we prefer to keep this issue open. AO can consider the claim of the assessee that deduction u/s. 10A of the Act, has to be given to it after the TP adjustments, if any required for the ITES. - Additional ground allowed for statistical purposes. - IT (TP) APPEAL NO. 1090 (BANG.) OF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s own case for A.Y. 2009-10 in Digital Juice Animations (P.) Ltd. v. Dy. CIT (IT (TP) APPEAL NO. 138 (BANG.) OF 2014, Dated:- 05-09-2014) had considered similar ground regarding wrong allocation of expenditure and directed the matter to be considered afresh by the TPO. The findings of this Tribunal as appearing at paragraphs 9 to 11 of its order is reproduced hereunder: '9. We have perused the order and heard the rival contentions. The directions of the DRP with regard to the claim of assessee for re-allocation of cost between its packaging unit and ITES unit, in our opinion, unambiguous. The DRP has directed the AO to verify actual segmented cost base and compute the ALP. Pursuant to such directions dated 29-11-2013, assessee had on 20-12-2013, filed a letter dated 19-12- 2013, before the TPO wherein it had given the heads of expenditure which were subject to re-allocation. The change in the net result between the original segmental working and the revised segmental working of margin is clear from the table below; Original margins submitted as per letter dated 19-07-2011 Amount in INR AY: 2009-10 Particulars IT/ITES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% of the PLI worked out by the TPO himself. Then the issue regarding exclusion and/or inclusion of comparables may not arise at all. We therefore, set aside the orders of the authorities below and remit the issue back to the file of the AO/TPO for consideration afresh in accordance with law. Right of the assessee to challenge all other aspects of the assessment and conditions are kept open. In the result, ground no. 1 of the assessee is allowed for statistical purposes.' However, before giving the directions in this regard, it would be necessary for us to go into the other grounds raised by the assessee on the TP matters. 5. In so far as additional ground no. 30 is concerned, it is consequential in nature, once additional ground no. 29 is admitted. We, therefore, admit the additional grounds raised by the assessee. 6. Grounds 1 to 8 are general needing no specific adjudication, since the assessee's counsel agreed that these are not required to be adjudicated now. Grounds 9 to 20 are on the TP adjustments done on software development services segment, whereas 21 to 26 are on similar adjustments made on the ITES segment. Vis-a-vis, software development services s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us at para 04 above, the coordinate bench in assessee's own case for A.Y. 2009-10, had directed the TPO to consider the revised segmental results, after verification. Accordingly, for impugned year also, we direct the AO/TPO to redo the analysis considering the segments, including the allocated HO expenditure between various segments, and proceed in accordance with law. 11. Vis- -vis the ITES segment, Ld. AR submitted that though allocation of HO expenditure would have a bearing on the PLI of the assessee, the comparables considered by the TPO. were inappropriate. According to him, out of the 28 comparables considered by the TPO M/s. Eclerx Services Ltd, Mold-Tek Technologies Ltd. (Seg), and Vishal Information Technologies Ltd, were required to be excluded by virtue of the decision of Hyderabad Bench of this Tribunal in the case of Capital IQ Information Systems (India) (P.) Ltd. v. Dy. CIT (ITA No.1961/Hyd/2011, Dated:- 23-11-2012). 12. Per contra Ld. DR submitted that out of the above three companies for which the assessee was seeking exclusion, Mold-Tek Technologies Ltd (seg) and Vishal Information Technologies Ltd, were in assessee's list and hence could not be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the Special Bench in the case of Dy. CIT v. Quark Systems (P.) Ltd.( ITA No. 100/CHD/2009, Dated:- 22-10-2009), we are of the opinion that the taxpayer is not stopped from pointing out a mistake, though such result is a mistake of the evidence adduced by the taxpayer itself. In other words, adjustment that could be made on ALP being an evolving one, to oust an assessee from raising a claim just because it had included a comparable by error of understanding of facts, would in our opinion be unfair. 15. For seeking exclusion of these three companies mentioned above, assessee has placed reliance on the decision of Hyderabad Bench of this Tribunal in Capital IQ Information Systems India (P.) Ltd's case (supra ), which was also for the very same assessment year. The said company was also providing ITES service and while considering the said segment, this Tribunal had held as under at paras 14 and 15 of its order dt 23.11.2012 : Eclerx Services Ltd: 14. The assessee has objected for this company being taken as comparable mainly on the ground that it was having a supernormal profit of 89%, and as such it cannot be taken as a comparable in view of the decision of the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supernormal profit at 113%. Therefore, it cannot be taken as a comparable. In support of his contentions, learned Authorised Representative ITA No.l961/Hyd/2011 M/s. Capital IQ Information Systems (India) Pvt. Ltd., Hyderabad 18 for the assessee has relied upon the orders of the DRP for the assessment year 2008-09 and the orders of the ITAT Mumbai Bench in the case of M/s Teva India P. Ltd. v. DCIT - 2011-TII-28-ITAT-MUM-TP. 13. On careful consideration of the submissions of the assessee we find that the DRP, as already stated earlier, in the proceedings for the assessment year 2008-09 has accepted the assessee's contention that this company cannot be treated as comparable because of exceptional financial result due to merger/de-merger. In view of the aforesaid, we accept the assessee's contention that this company cannot be treated as comparable. That apart, it is also a fact that this company has shown super normal profit working out to 113%. The Income-tax Appellate Tribunal, Mumbai Bench in the case of Teva India Pvt. Ltd. (supra ) has observed that companies showing supernormal profit cannot be treated as comparable. The relevant observations of the Tribunal in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal Mumbai Bench in the case of ACTT v. M/s. Maersk Global Service Centre(India) Pvt. Ltd. (supra ), a copy of which is submitted before us, has also directed for the exclusion of the aforesaid company since it has outsourced a considerable portion of its business. 17. After considering the submissions of the learned Authorised Representative for the assessee, we find that the DRP, in the proceedings for the assessment year 2008- 09 in assessee's own case, after taking note of the composition of the vendor payments of Coral Hub for the last three years, and the fact that it has also commenced a new line of business of Printing on Demand(POD), wherein it prints upon clients request, concluded as follows- 18.4. In view of this major difference in functionality and the business model, this Panel is of the view that 'Coral Hub' is not a suitable comparable to the taxpayer and hence needs to be dropped form the final list of comparables. In case of ACIT v. M/s. Maersk Global Service Centre (supra ), the ITAT Mumbai Bench has also directed for exclusion of the aforesaid company, by observing in the following manner- Insofar as the cases of Tulsyan Technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X
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