9911796707
TMI Blog2017 (9) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... Reimbursement of expenses received 1,39,52,326/- Thus there are three segments in which the assessee has entered into international transactions and benchmark the same by using TNMM as MAM. The TPO selected a fresh set of comparables in each of the segments and accordingly proposed the adjustment under Section 92CA in each of the segment as under : (i) Provision for software development services : Rs. 9,71,97,173 (ii) Provision for ITES : Rs. 10,66,562 (iii) Provision of marketing support services : Rs. 1,89,10,349 The assessee challenged the action of the Assessing Officer / TPO before the CIT (Appeals). The CIT (Appeals) applied turnover filter and accordingly excluded some of the comparables and retained the balance comparables selected by the TPO. Thus the assessee as well as revenue are aggrieved by the impugned order of the CIT (Appeals) and raised the following grounds : Revenue's Grounds : 1. The order of the learned CIT (A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT (A) erred in law in directing the AO to exclude the reimbursement of expenses incurred in foreign currency both from the expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment by using this filter. 9. On the facts and in the circumstances of the case the learned CIT (A) has erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 10. On the facts and in the circumstances of the case the learned CIT (A) failed to appreciate that the different year ending filter applied by the TPO is necessary to exclude companies which do not have the same or comparable financial cycle as the tested party. 11. On the facts and in the circumstances of the case the learned CIT (A) has erred in holding that M/s Avani Cimcon Technologies, cannot be taken as comparable as the segmental details are not available when the company itself has accepted that it is a pure Software Development Provider . 12. On the facts and in the circumstances of the case the learned CIT (A) has erred in excluding M/s Celestial Biolabs Ltd. from the final list of comparables of Software Segment ignoring the fact that the annual report clearly provides that primary segment of the company has been Software development and it qualifies all the qualitative and quantitative filters applied by the TPO. 13. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m's length price. 2. That the learned CIT (A) erred in upholding the learned TPO's approach of disregarding application of multiple year/ prior year data as used by the Respondent in the TP documentation and holding that current year (i.e. Financial Year 2007-08) data for companies should be used for comparability. 3. That the learned CIT (A) erred in upholding the learned TPO's approach of using data as at the time of assessment proceedings, instead of that available as on the date of preparing the TP documentation for comparable companies while determining the arm's length price, ignoring the fact that this data was not available to the Respondent at the time of complying with the TP documentation requirements. 4. That the learned CIT (A) erred in upholding the learned TPO's approach of collecting selective information of the companies by exercising powers granted to him under section 133(6) of the Act that was not available to the Respondent in the public domain and relying on the same for comparability purposes. 5. That the learned CIT (A) erred in upholding the TPO's approach of ignoring the limited risk nature of the services provided by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar to the Appellant. Information Technology Enabled Services: 14. That the learned CIT (A) ought to have held that certain companies (Coral Hub Limited, Eclerx Services Ltd., Jindal Intellicom Pvt. Ltd., Mold-Tek Technologies Ltd.) fail the test of comparability, even apart from having abnormal profits or losses and thus not comparable to the Respondent in respect of its information technology enabled services. 15. That the learned CIT (A) ought to have held that certain companies (Infosys BPO Limited and Wipro Limited) fail the test of comparability, even apart from having a turnover > INR 200 crores and thus not comparable to the Respondent in respect of its information technology enabled services. 16. That the CIT (A) ought to have held that Accentia Technologies Ltd. fails the test of comparability, even apart from the fact that there were mergers and acquisitions affecting its margins and is thus not comparable to the Respondent. 17. That the learned CIT (A) erred in upholding the learned TPO's approach of using the export revenue filter for the exclusion of (Ask Me Info Hubs Limited, TSR Darashaw Limited, In House Productions Limited (Vans Information)-Healthc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn exchange loss / gain for the relevant year, as the case may be, on the basis that such gains or losses are operating in nature. 26. That the contention of the learned AO is bad in law and on facts while stating that the order of the learned CIT (A) is prejudicial to the interest of revenue and is opposed to law and the facts and circumstances of the case. Claim of Deduction under section 10A of the Act 27. That the learned CIT (A) failed to appreciate that telecommunication expenses/ expenditure in foreign currency incurred in the previous year should not have been reduced from the 'export turnover' in the first place for the purposes of computation of deduction under Section 10A of the Act." 3. Ground No.1 of the Revenue's appeal is general in nature and do not require any specific adjudication. 4. Ground Nos.2 to 4 are regarding exclusion of expenses incurred in foreign currency from export turnover as well as total turnover for the purpose of computing the deduction under Section 10A of the Income Tax Act, 1961 (in short 'the Act'). 5. Having considered the rival submissions as well as the material on record, we find that the issue of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Wipro Limited (Seg) Apart from these 8 companies the CIT (Appeals) has also excluded four companies on functional dissimilarity as under : (i) Avani Cincom Technologies Ltd. (ii) Bodhtree Consulting Ltd. (iii) Celestial Biolabs Ltd. (iv) Kals Information Systems Ltd. 9. The revenue is now seeking inclusion of these 12 companies in the set of comparables whereas the assessee is seeking exclusion of total 13 companies out of the set of 20 companies selected by the TPO on fucntional dissimilarity. As regards 8 companies which were excluded by the CIT (Appeals) on turnover filter and high profit margin, the learned Authorised Representative of the assessee has staed at Bar that so far as the filter applied by the CIT (Appeals) as turnover and high profit margin, the assessee has no objection against these grounds of the revenue's appeal and to that extent the grounds of revenue's appeal may be allowed by reversing the order of the CIT (Appeals). However the learned Authorised Representative has submitted that out of these 8 companies the assessee is also seeking exclusion of 4 companies on functional dissimilarities. Therefore in fact the assessee has no objection i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional comparability of Bodhtree Consulting Limited while passing the said order in the case of Telelogic India (P.) Ltd. (supra). The Tribunal has dealt with the objections of the assessee only regarding fluctuating margin and not the functional comparability or dissimilarity. The learned Authorised Representative submitted that the functional comparability of this company has been examined by the Tribunal in the case of Autodesk India (P.) Ltd. v. DCIT in IT(TP)A No.1369/Bang/2014 for the Assessment Year 2009-10. He has referred to the Annual Report of the said company to show that the functions are same for this year as reproduced by the Tribunal for the Assessment Year 2009-10. The learned Authorised Representative has relied upon the decision dt.13.5.2016 of the co-ordinate Bench of this Tribunal in the case of Autodesk India (P.) Ltd. and submitted that in the said decision the Tribunal examined the functional comparability of the said company and found that this company is not functionally comparable with the assessee which is providing software development services to its AE. Thus he has contended that in view of the decisions of the co-ordinate Bench of this Tribunal (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 E-Zest Solutions Ltd 5 Infosys Technologies Ltd 6 KALS Information Systems Ltd (Seg.) 7 Lucid Software Ltd 8 Persistent Systems Ltd 9 Quintegra Solutions Ltd 10 Softsole India Ltd 11 Tata Elxsi Ltd (Seg.) 12 Thirdware Solutions Ltd (Seg 13 Wipro Ltd (Seg.) 22. We note that the comparability of these 13 companies have been examined by this Tribunal in series of decision as referred by the ld. AR. In the case of M/s 3DPLM Software Solutions Ltd (supra), the co-ordinate Bench of this Tribunal has considered the comparability of these companies in paras 7 to 19.3 of the order which have been reproduced below: "7.0 Avani Cincom Technologies Ltd. 7.1 This company was selected by the TPO as a comparable. The assessee objects to the inclusion of this company as a comparable on the ground that this company is not functionally comparable to the assessee as it is into software products whereas the assessee offers software development services to its AEs. The TPO had rejected the objections of the assessee on the ground that this comparable company has categorized itself as a pure software develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer / TPO to examine the comparability of this company afresh, by making the following observations at paras 9.5.2 and 9.5.3 thereof :- "9.5.2 As regards the submission of the learned Authorised Representative, we are unable to agree that this company has to be deleted from the list of comparables only because it has been deleted from the set of comparables in the case of Triology E-Business Software India Pvt. Ltd. (supra). No doubt this company has been deleted as a comparable in the case of Triology E-Business Software India Pvt. Ltd. (supra) and this can be a good guidance to decide on the comparability in the case on hand also. This alone, however, will not suffice for the following reasons :- (i) The assessee needs to demonstrate that the FAR analysis and other relevant facts of the Triology case are equally applicable to the facts of the assessee's case also. Unless the facts and the FAR analysis of Triology case is comparable to that of the assessee in the case on hand, comparison between the two is not tenable. (ii) After demonstrating the similarity and the comparability between the assessee and the Triology case, the assessee also needs to demonstrate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier year i.e. Assessment Year 2007-08 and for this year and contended that the selection of this company as a comparable violates the principle enunciated in Curram Software International Pvt. Ltd. (supra) that a company can be selected as a comparable only on the basis of FAR analysis conducted for that year and therefore pleaded for its exclusion. The learned Authorised Representative also submitted that he has brought on record sufficient evidence to show that the functional profile of this company remains unchanged from the earlier year and hence the findings rendered by the coordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) and in other cases like Triology E-Business Software India Pvt. Ltd. (supra) are applicable to the year under consideration as well. 7.5 Per contra, the learned Departmental Representative supported the order of the TPO / DRP for inclusion of this company Avani Cincom Technologies Ltd. in the final set of comparables. 7.6.1 We have heard both parties and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the final set of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclusion of this company as a comparable for the following reasons : (i) This company has reported abnormally fluctuating margins in the period from 2005 to 2011, which indicate abnormal business factors and abnormal profit margins and hence should not be considered as comparable to the assessee. (ii) The abnormally fluctuating margins indicate that this company bears higher risk in contrast to the assessee who has earned consistent margins over the years, indicating difference in the risk profile between this company and the assessee. (iii) This company has registered exponential growth of 67% in terms of revenue and 41% in terms of profits over the immediately preceding year which can be attributed to the development of a software application, MIDAS (Multi Industry Data Anomaly) which was made available for customers as SaaS (Software as a Service). 8.3 Per contra, the learned Departmental Representative opposed the exclusion of this company from the list of comparable companies. The learned Departmental Representative contended that since the assessee had accepted the TPO's proposal for inclusion of this company in the set of comparables and had not objected to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eak up is not provided. It was submitted that :- (i) This company is engaged in the development of products in the field of bio- technology, pharmaceuticals, etc. and therefore is not functionally comparable to the assessee; (ii) This company has been held to be functionally incomparable to software service providers by the decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra); (iii) The co-ordinate bench of this Tribunal in its order in the case of Triology E-Business Software India Pvt. Ltd. (supra) at para 43 thereof had observed about this company that- " ..... As explained earlier, it is a diversified company and therefore cannot be considered as comparable functionally with the assessee. There has been no attempt to identify, eliminate and make adjustment of the profit margins so that the difference in functional comparability can be eliminated. By not resorting to such a process of making adjustments, the TPO has rendered this company as not qualifying for comparability. We therefore accept the plea of the assessee in this regard." (iv) The rejection/exclusion of this company as a comparable for Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs i.e. Assessment Year 2007-08 is applicable for this year also. We agree with the submissions of the assessee that this company is functionally different from the assessee. It has also been so held by co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) as well as in the case of Triology E-Business Software India (P.) Ltd. (supra). In view of the fact that the functional profile of and other parameters of this company have not changed in this year under consideration, which fact has also been demonstrated by the assessee, following the decision of the co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 and Triology E-Business Software India Pvt. Ltd. in ITA No.1054/Bang/2011, we hold that this company ought to be omitted form the list of comparables. The A.O./TPO are accordingly directed. 10. KALS Information Systems Ltd. 10.1 This is a comparable selected by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the set of comparables on grounds of functional differences and that the segmental details have not been provided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raining segment which does not have any product revenues. 10.3 Per contra, the learned Departmental Representative contended that the decision of the co-ordinate bench of the Tribunal in the case of Triology E- Business Software India (P.) Ltd. (supra) was rendered with respect to F.Y.2006- 07 and therefore there cannot be an assumption that it would continue to be applicable to the year under consideration i.e. A.Y. 2008-09. To this, the counter argument of the learned Authorised Representative is that the functional profile of this company continues to remain the same for the year under consideration also and the same is evident from the details culled out from the Annual Report and quoted above (supra). 10.4 We have heard both parties and perused and carefully considered the material on record. We find from the record that the TPO has drawn conclusions as to the comparability of this company to the assessee based on information obtained u/s.133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as pointed out by the learned Authorised Representative. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e compared to a low risk captive service provider who does not own any intangible and hence does not have an additional advantage in the market. It is submitted that this decision is applicable to the assessee's case, as the assessee does not own any intangibles and hence Infosys Technologies Ltd. cannot be comparable to the assessee ; (ii) the observation of the ITAT, Delhi Bench in the case of Agnity India Technologies (P.) Ltd. in ITA No.3856 (Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and market leader assuming all risks leading to higher profits cannot be considered as comparable to captive service providers assuming limited risk ; (iii) the company has generated several inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the break up of such revenues is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition of IPRs in 'AUTOLAY', a commercial application product used in designing high performance structural systems. In view of the above reasons, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the case of Agnity India Technologies Pvt. Ltd. in ITA No.3856(Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and a market leader assuming all risks leading to higher profits, cannot be considered as comparable to captive service providers assuming limited risk; (iii) the co-ordinate bench of the ITAT, Mumbai in the case of Telecordia Technologies India Pvt. Ltd. (ITA No.7821/Mum/2011) has held that Wipro Ltd. is not functionally comparable to a software service provider. (iv) this company has acquired new companies pursuant to a scheme of amalgamation in the last two years. (v) Wipro Ltd. is engaged in both software development and product development services. No information is available on the segmental bifurcation of revenue from sale of products and software services. (vi) the TPO has adopted consolidated financial statements for comparability purposes and for computing the margins, which is in contradiction to the TPO's own filter of rejecting companies with consolidated financial statements. 12.3 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) product design, (b) innovation design engineering and (c) visual computing labs as is reflected in the annual report of the company. The learned Authorised Representative submitted that, (i) The co-ordinate bench of the Mumbai Tribunal in the case of Telcordia Technologies (P.) Ltd. (supra) has held that Tata Elxsi Ltd. is not a functionally comparable for a software development service provider. (ii) The facts pertaining to Tata Elxsi Ltd. have not changed from the earlier year i.e. Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09 and therefore this company cannot be considered as a comparable to the assessee in the case on hand. (iii) Tata Elxsi Ltd. is predominantly engaged in product designing services and is not purely a software development service provider. In the Annual Report of this company the description of the segment ' software development services' relates to design services and are not to software services provided by the assessee. (iv) Tata Elxsi Ltd. invests substantial funds in research and development activities which has resulted in the 'Embedded Product Design Services Segment' of the company to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected by the TPO as a comparable. Before the TPO, the assessee had objected to the inclusion of this company as a comparable on the ground that it was functionally different from the assessee. The TPO had rejected the objections raised by the assessee on the ground that as per the information received in response to notice under section 133(6) of the Act, this company is engaged in software development services and satisfies all the filters. 14.2 Before us, the learned Authorised Representative contended that this company ought to be excluded from the list of comparables on the ground that it is functionally different to the assessee. It is submitted by the learned Authorised Representative that this company is engaged in 'e-Business Consulting Services', consisting of Web Strategy Services, I T design services and in Technology Consulting Services including product development consulting services. These services, the learned Authorised Representative contends, are high end ITES normally categorised as knowledge process Outsourcing ('KPO') services. It is further submitted that this company has not provided segmental data in its Annual Report. The learned Authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.1 This company was proposed for inclusion in the list of comparables by the TPO. Before the TPO, the assessee objected to the inclusion of this company in the list of comparables on the ground that its turnover was in excess of Rs. 500 Crores. Before us, the assessee has objected to the inclusion of this company as a comparable for the reason that apart from software development services, it is in the business of product development and trading in software and giving licenses for use of software. In this regard, the learned Authorised Representative submitted that :- (i) This company is engaged in product development and earns revenue from sale of licences and subscription. It has been pointed out from the Annual Report that the company has not provided any separate segmental profit and loss account for software development services and product development services. (ii) In the case of E-Gain Communications (P.) Ltd. v. ITO [2009] 118 ITD 243/[2008] 23 SOT 385 (Pune), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Transwitch India (P.) Ltd. (supra). (ITA No.6083/Del/2010) (iv) The factual position and circumstances pertaining to this company has not changed from the earlier Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09 and therefore on this basis, this company cannot be considered as a comparable in the case on hand. (v) The relevant portion of the Annual Report of this company evidences that it is in the business of product development. The learned Authorised Representative prays that in view of the factual position as laid out above and the decisions of the co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 and other cases cited above, it is clear that this company being into product development cannot be considered as a comparable to the assessee in the case on hand who is a software service provider and therefore this company i.e. Lucid software Ltd., ought to be omitted from the list of comparables. 16.2 per contra, the learned Departmental Representative supported the action and finding of the TPO in including this company in the list of comparables. 16.3 We have heard the riva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this company as a comparable submitting that this company is functionally different and also that there are several other factors on which this company cannot be taken as a comparable. In this regard, the learned Authorised Representative submitted that : (i) This company is engaged in software designing services and analytic services and therefore it is not purely a software development service provider as is the assessee in the case on hand. (ii) Page 60 of the Annual Report of the company for F.Y. 2007-08 indicates that this company, is predominantly engaged in 'Outsourced software Product Development Services' for independent software vendors and enterprises. (iii) Website extracts indicate that this company is in the business of product design services. (iv) The ITAT, Mumbai Bench in the case of Telcordia Technologies India (P.) Ltd. (supra) while discussing the comparability of another company, namely Lucid Software Ltd. had rendered a finding that in the absence of segmental information, a company be taken into account for comparability analysis. This principle is squarely applicable to the company presently under consideration, which is into product developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and is therefore not similar to the assessee in the case on hand. (ii) In its Annual Report, the services rendered by the company are described as under : "Leveraging its proven global model, Quintegra provides a full range of custom IT Solution (such as development, testing, maintenance, SAP, product engineering and infrastructure management services), proprietary software products and consultancy services in IT on various platforms and technologies." (iii) This company is also engaged in research and development activities which resulted in the creation of Intellectual Proprietary Rights (IPRs) as can be evidenced from the statements made in the Annual Report of the company for the period under consideration, which is as under : "Quintegra has taken various measures to preserve its intelectual property. Accordingly, some of the products developed by the company ............... have been covered by the patent rights. The company has also applied for trade mark registration for one of its products, viz. Investor Protection Index Fund (IPIF). These measures will help the company enhance its products value and also mitigate risks." (iv) The TPO has applied the filter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd since it is engaged in proprietary software products and owns its own intangibles unlike the assessee in the case on hand who is a software service provider. 19. Softsol India Ltd. 19.1 This company was selected by the TPO as a comparable. The assessee objected to the inclusion of this company as a comparable on the grounds that this company is functionally different and dis-similar from it. The TPO rejected the assessee's objections on the ground that as per the company's reply to the notice under section 133(6) of the Act, the company has categorized itself as a pure software developer and therefore included this company as a comparable as the assessee was also a provider of software development services. Before us, in addition to the plea that the company was functionally different, the assessee submitted that this company was excluded from the list of comparables by the order of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (ITA No. 845/Bang./2011) on the ground that the 'Related Party Transactions ('RPT') is in excess of 15%. The learned Authorised Representative submitted that for the current perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e excluded from the list of comparables for determining the ALP. Accordingly, we direct the TPO/AO to exclude the following companies from the set of comparables and recomputed the ALP after considering the claim of risk adjustment as well as working capital adjustment: S. No. Name of the Company 1 Avani Cimcon Technologies Ltd 2 Celestial Biolabs Ltd 3 E-Zest Solutions Ltd 4 Infosys Technologies Ltd 5 KALS Information Systems Ltd (Seg.) 6 Lucid Software Ltd 7 Persistent Systems Ltd 8 Quintegra Solutions Ltd 9 Softsole India Ltd 10 Tata Elxsi Ltd (Seg.) 11 Thirdware Solutions Ltd (Seg 12 Wipro Ltd (Seg.) " As regards the additional grounds raised by the assessee, the co-ordinate bench of the Tribunal also dealt with an identical issue in para 24 (supra) and therefore when the functional comparability of these two companies have been examined by the Tribunal and it was found that these companies are not comparable with the software development services provider because of different activities as well as engaged in the software products, R&D activities and resulting in creation of Intellectual Property Rights (IPRs) then, even if these companies are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to the Directors Report and submitted that this company is following the method of revenue recognition from software development based on software developed and billed to client whereas the expenditure is recognized when it is incurred towards software development. Therefore, there is no match between the expenditure and the revenue from software development segment. Thus once this company is in the software development, the same cannot be compared with the assessee being software development services provided to its AEs. 5.2 On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below and further submitted that the co-ordinate bench of this Tribunal in the case of Ariba Technologies India Pvt. Ltd. v. ITO in IT (TP) A Nos.441 & 442/Bang/2012 Dt.2.2.2016 has found this company to be comparable with software development service provider. 5.3 We have considered the rival submissions and the relevant material on record. In case of Ariba Technologies India Pvt. Ltd. (supra), the objections against this company was on the ground of extra-ordinary profit and therefore the Tribunal has no occasion to examine the functional comparabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al profile of the company as we note from the segment-wise and product-wise performance of the said company was given at page No.12 of the Annual Report for the year under consideration. Accordingly, this company is directed to be excluded from the set of comparables. Hence we direct the TPO/A.O. to exclude all these 13 companies from the set of comparables as under : (i) Avanicin Cincom Technologies Ltd. (ii) Bodhtree Consutling Limited (iii) Celestial Bio-labs Limited (iv) e-Zest Solutions Limited (v) Infosys Limited (vi) Kals Information Systems Limited (Seg.) (vii) Persistent Systems Limited (viii) Quintegra Solution Limited (ix) Tata Elxsi Limited (Seg.) (x) Thirdware Solution Limited (xi) Wipro Limited (Seg.) (xii) Softsol India Limited (xiii) Lucid Software Limited. 13. The revenue has also challenged the decision of the CIT (Appeals) in respect of the company Indus Network Limited which was excluded by the TPO by applying the employee cost filter. 14. We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. This company was selected by the assessee in its TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited. 16. The assessee challenged the selection of this company by the TPO on the ground that this company was mainly engaged in the area of Geographical Information System (GIS) Services. Even the information provided in response to Notice under Section 133(6), this company stated that it provides high end GIS Services which includes the generation, processing, management and maintenance of data or GIS. Thus the assessee contended that functions performed by this company are not functionally comparable with the assessee which is providing only ITES to its AE. The CIT (Appeals) accepted this contention of the assessee and directed the Assessing Officer to exclude this company from the set of comparables. 17. We have heard the learned Departmental Representative as well as learned Authorised Representative and considered the relevant material on record. At the outset, we find that the co-ordinate Bench of this Tribunal vide decision dt.14.08.2013 in the case of Symphony Marketing Solutions India (P.) Ltd. v. ITO [2013] 38 taxmann.com 55 (Bang. - Trib.) for the same assessment year has examined the functional comparability of this company in paras 22 and 23 as under : 'Genes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kable and as complicated as insurance/market transaction processing services. He, therefore, rejected the contention of the assessee and treated the BPO as equivalent to KPO services. 40. We have to now consider whether a BPO and KPO are functionally similar and are comparable to each other. BPO is a sub- set of outscoring and involves the contracting of the operations and responsibilities of specific business functions or process to a third party services provider. Often business processes outsourcing are information technology based and referred to as ITES-BPO. KPO is one of the sub-segment of the BPO industry. It involves outsourcing of core information related business activities which are competitively important or form an integral part of a company's value chain. It thus requires advanced analytical and technical skills as well as a high degree of specialist expertise. The KPO services include all kinds of research and information gathering. Thus it can be seen that even though both BPO and KPO are offering information Technology based services, the skill and expertise and may be even the tools required are different which may result in different economic results of bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see with ICC International Agencies Ltd. If ICC International Agencies Ltd. is not taken as a comparable, then the margin of the assessee would be well within the OP/Cost PLI of the other comparable companies chosen by the TPO. We accordingly hold that in respect of the international transactions of rendering marketing support services, the price received by the assessee is at arm's length and no adjustment is called for. Ground No.5 raised by the assessee is accordingly allowed." We find that there is no change in the functional profile of this company for the year under consideration. Accordingly, by following the earlier decision of this Tribunal, we do not find any reason to interfere with the order of the CIT (Appeals) qua this issue. 20. As regards the functional comparability of Priya International we find that the co-ordinate Bench of Delhi Tribunal in the case of Metso Minerals (India) (P.) Ltd. v. Dy. CIT [2015] 62 taxmann.com 306 (Delhi - Trib.) has considered the functional comparability of this company at page 22 of the order as under : " (ii) Priya International This company was selected as comparable by the Transfer Pricing Officer. It is seen from the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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