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TMI Blog2018 (4) TMI 1614X X X X Extracts X X X X X X X X Extracts X X X X ..... l as from total turnover for the purpose of computation of deduction - Held that:- This issue is no longer res integra as the Hon'ble jurisdictional High Court in the case of CIT v. Tata Elxsi (2011 (8) TMI 782 - KARNATAKA HIGH COURT) held that such expenditure incurred in foreign currency should be deducted from export turnover as well as total turnover. Hence, this ground of appeal filed by the revenue is dismissed. Benefit u/s. 80JJA in respect of salaries paid to newly employed employees - AO denied the claim on the ground that software engineers are not workmen - Held that:- Once an assessee's claim is allowed under section 10A, 10AA, 10B or 10BA, then to the extent such deduction has been allowed, no other deduction could be allowed under any other provision of the Act. Assessee had claimed deduction of its income u/s. 10A in respect of its units 2, 3 and 4. As per the assessee even if deduction under section 10A is allowed for these units, a further deduction u/s. 80JJA, is also allowable. Argument of the assessee's counsel is that the limitation put in by Section 80A(4), would apply only to profit linked deductions. There can be no dispute that deduction under Section 10A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iations in foreign exchange currency is operating in nature - Held that:- Foreign exchange gain earned by the assessee in relation to sale/purchase emanating from international transactions should be treated as operating in nature. Re-allocation of rent expenses relating to non-10A unit - Held that:- There was no shifting of bonded warehouse from unit II to unit I. No addition can be made based on presumptions/assumptions. Thus, we allow this ground of appeal. Companies functionally dissimilar with that of assessee software development services need to be deselected from final list. X X X X Extracts X X X X X X X X Extracts X X X X ..... applied the following filters: i. Companies having export sales less than 75% of the sales were excluded. ii. Companies with onsite revenue greater than 755 of the export revenues from software are excluded. By applying the above filters, the TPO finally selected the following 20 comparables: 6. The TPO computed average profit margin of the comparables finally selected at 23.65% after giving working capital adjustment of 1.7%, adjusted margin of 21.95%. On the above basis, the TPO made the TP adjustment as follows: 7. The AO passed draft assessment order dated 23/12/2011 incorporating the TP adjustment suggested by the TPO and sent to the assessee. After receipt of draft assessment order the assessee filed objections before the Hon'ble DRP belatedly. Hence, the AO proceeded to pass final assessment order u/s. 143(3) r.w.s 144(C) on 27/02/2012 after making the following disallowances: 1) TP adjustment as suggested by the TPO. 2) Disallowing: (i) ₹ 18,07,31,409/- u/s. 80JJAA (ii) Interest of ₹ 2,99,06,766/- on a loan and (iii) rent of ₹ 4,72,94,681/- 3) reducing from the appellant's export turnover telecommunication and foreign currency ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A units without appreciating the fact that the software engineers cannot be equated with 'workmen' as envisaged under Rule 2(s) of Industrial Disputes Act 1947. 5. On the facts and in the circumstances of the case the learned CIT(A) erred in holding that the assessee company is entitled to claim deduction u/s. 10A in respect of profits derived from the units acquired under slump sale without appreciating the fact that there is split up in the existing business of the assessee on account of such slump sale. 6. On the facts and in the circumstances of the case the learned CIT(A) erred in holding that the size and turnover of the company are deciding factors for treating a company as a comparable, and accordingly erred in excluding M/s. Avani Cimcom technologies Ltd. M/s. Bodhtree Consulting Ltd., M/s. e-Zest Solutions Ltd. M/s. Infosys Technologies Ltd. M/s. Kals Information Systems Ltd. MVs LGS Global Ltd. M/s. Lucid Software Ltd. M/s. Quintegra Solution Ltd. M/s. R. Systems International Ltd. M/s. RS Software (I) Ltd. M/s. Softsol I Ltd. M/s. Thirdware Solutions Ltd. and M/s. Wipro Ltd., in Software development segment as comparables. 7. On the facts and in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) granting benefit u/s. 80JJA of the Act in respect of salaries paid to newly employed employees. AO denied the claim on the ground that software engineers are not workmen. On appeal before the ld. CIT(A), the ld. CIT(A) directed the AO to grant the benefit of deduction u/s. 80JJ following this Tribunal's decision in the Texas Instruments Ltd. reported in 115 TTJ 976, wherein it was held that software engineers, who are not in supervisory position, were eligible to be considered as workmen. However, the ld. CIT(A) had restricted the deduction to non-10A unit. 13. Before us the ld. CIT(DR) vehemently contended that software engineers cannot be treated as a workmen and therefore, assessee-company is not entitled to make a claim u/s. 80JJA of the Act. 14. On the other hand, learned counsel for assessee contended that software engineers are 'workmen' as defined under the Industrial Disputes Act and thus are eligible for deduction u/s. 80JJA of the Act. He further contended that 80JJA claim can be allowed even in respect of 10A unit. 15. We heard rival submissions and perused material on record. The issue in the ground of appeal is covered by the decision of the coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s. 80JJAA in the asst. yr. 2001-02. As such the appellant will be entitled for relief under s. 80JJAA of ₹ 1,09,52,012 being 30 per cent of the additional wages of ₹ 3,65,06,707 (Rs. 8,52,70,736 ₹ 4,87,64,029) in respect of the new workmen employed during the previous year relevant to the asst. yr. 2001-02. Similarly, for asst. yr. 2002-03 the appellant has claimed deduction of ₹ 4,78,05,176 being 30 per cent of the wages of ₹ 1,59,30,588 which also included the wages of ₹ 4,38,68,182 pertaining to the new workers employed in the previous year 1999- 2000. For the reasons mentioned above the appellant is not entitled for relief under s. 80JJAA in respect of the wages pertaining to the workers employed in the previous year 1999-2000. As such the appellant would be eligible for relief of ₹ 3,46,44,722 being 30 per cent of the additional wages of ₹ 11,54,82,406 (Rs. 15,93,50,588 ₹ 4,38,68,182) in respect of the workmen employed in previous years 2000-01 and 2001-02. The learned Authorised Representatives of the appellant vide order-sheet noting dt. 24th Aug., 2004 agreed that the relief under s. 80JJAA in respect of the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in any valid materials. The order of the CIT(A) is confirmed. It is ordered accordingly. There is no case for the Revenue that assessee had failed to file details of software engineers employed by it. In our opinion software engineers newly employed by it fell within the meaning of the word 'workmen'. 25. However coming to the second limb of the reasoning given by the lower authorities, which is section 80A(4), the said section is reproduced hereunder : '(4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading "C-Deductions in respect of certain incomes", where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve decision of the co-ordinate bench in the assessee's own case, we do not find any fallacy in the order of the ld. CIT(A). Therefore, the ground of appeal raised by the revenue is dismissed. 16. Ground No. 5 challenges the direction of the ld. CIT(A) directing the AO to allow deduction u/s. 10A of the Act with respect to the unit acquired viz. Virsa Systems Pvt. Ltd. which had STP unit in Chandigarh after obtaining necessary approval from STPI. This unit was acquired by the assessee-company as part of global acquisition on a slump sale basis. Thereafter, the assessee-company had applied to STPI for transfer of this undertaking from Versa Systems Pvt. Ltd., to the assessee-company. In the light of this approval, the assessee made a claim u/s. 10A in respect of profits earned by that unit. However, the AO had disallowed the claim placing reliance on the provisions of sub-section (7A) of section 10A of the Act. On appeal before the ld. CIT(A), the claim came to be allowed after placing reliance on CBDT circular No. 1 of 2013 : dated 17/01/2013 wherein it was clarified that the benefit u/s. 10A will be continued in case of slump sale. 17. Being aggrieved, the revenue is in appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f exemption under section 15C on the ground that the assessee was formed by the reconstruction of the business already in existence. The Appellate Commissioner took a different view which was affirmed by the Tribunal. The Division Bench of this court held that the reconstruction of a business connotes that the original business is not to cease functioning and the undertaking must continue to carry on the same business in an altered form. On the other hand, if the ownership of a business or an undertaking is transferred that would not constitute a reconstruction. The Division Bench held as follows (page 669) : "The reconstruction of a business or an industrial undertaking must necessarily involve the concept that the original business or undertaking is not to cease functioning, and its identity is not to be lost or abandoned. The concept essentially rests on changes but the changes must be constructive and not destructive. There must be something positive about the whole matter as opposed to negative. The underlying idea of a reconstruction evidently must be--and this is brought out by the section itself--of a 'business already in existence'. There must be a continuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n existence. The Supreme Court observed that in order to be entitled to the benefit of section 15C the following facts would have to be established by the assessee (page 206) : "(1) investment of substantial fresh capital in the industrial under taking set up; (2) employment of requisite labour therein; (3) manufacture or production of articles in the said undertaking; (4) earning of profits clearly attributable to the said new under taking; and IT(TP)A. 1006/Bang/2011 Page - 57 (5) above all, a separate and distinct identity of the industrial unit set up." 10. The Supreme Court was of the view that the new undertaking must not be substantially the same old existing business. Even if a new business is carried on but by piercing the veil of the new business it is found that there is employment of the assets of the old business, the benefit will not be available. From this perspective the court held that a substantial investment of new capital is imperative. 11. The Tribunal, in the present case, has come to the conclusion that where a running business is transferred lock, stock and barrel by one assessee to another assessee the principle of reconstruction, splitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed for statistical purpose." Respectfully following the decision of the co-ordinate bench for earlier year, this ground of appeal filed by the revenue is dismissed. 19. Ground No. 6 challenges the direction of the ld. CIT(A) excluding the following companies applying the turnover range for ₹ 200 to ₹ 2000 cr.: i. M/s. Avani Cimcom Technologies, ii. M/s. Bodhtree Consulting Limited, iii. M/s. E-zest Solutions Limited, iv. M/s. Infosys Technologies Ltd., v. M/s. Kals Information Systems Limited (Seg.), vi. M/s. LGS Global Ltd., vii. M/s. Lucid Software Limited, viii. M/s. Quintegra Solution Limited, ix. M/s. R Systems International Ltd., x. M/s. R.S. Software (I) Ltd., xi. M/s. Softsol India Ltd., xii. M/s. Thirdware Solution Limited and xiii. M/s. Wipro Ltd. (Seg.). 20. This issue is covered in favour of the revenue by the decision of the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) (P.)Ltd. v. DCIT (376 ITR 183)(Delhi) wherein it was held that unless it is demonstrated that turnover has got an impact on the profitability of a concern, turnover cannot be relevant criteria to decide the comparabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue and persistent losses filters is that the filters are designed to eliminate companies which are not in line with the trend of growth witnessed in the software industry. However, use of these fitters depends cm "trends" over a period of time" and is contrary to the TPO's own stand that only current year's data are required to be used. 114. Growth of the Indian software industry cannot be attributed solely to existing companies, but also to new companies being set up, which in turn depends upon the entry and exit barriers that characterise an industry. Moreover, revenue may not always 'be a true indicator of a company's performance, 'which may also depend on its own business cycle. A company with increasing revenues over a period, of time does not necessarily reflect better performance, as increase in expenses in the corresponding period can be higher than that in 'revenues and consequently, the company may still incur losses. Conversely, a company with diminishing revenues over a period of time may not necessarily be performing badly, if it still has a good profit margin achieved through cost efficiency. I therefore, disapprove of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of the ld. CIT(A). Hence, the ground of appeal raised by the revenue is dismissed. 26. In the result, the appeal filed by the revenue is partly allowed. 27. The assessee raised the following grounds of appeal: e grounds mentioned herein are without prejudice to one another. That the order passed by the Ld. Commissioner of Income-Tax (Appeals) ['CIT (Appeals)'] under section 250 of the Income-tax Act, 1961 ('Act'), to the extent prejudicial to the Appellant, is bad in law and liable to be quashed. (a) That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) and the learned AO erred in not allowing full deduction under section 80JJAA of the Act amounting to ₹ 180,731,409. (b) That the learned AO and the learned CIT (Appeals) erred in invoking the provisions of section 80A(4) in respect of deduction claimed under section 80JJAA for 10A units. (c) That the learned AO and the learned CIT (Appeals) erred in not appreciating the Appellant's contention that, deduction under section 80JJAA is computed based on the expenditure incurred by the Appellant on salary/wages paid to "new workmen" and therefore section 80JJAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal: Transfer Pricing Matters 7. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) - IV ('CIT(A)') erred in confirming the action of the Ld. Assessing Officer ('AO')/Transfer Pricing Officer (TPO') in making an adjustment to the extent of ₹ 48,61,77,068/- to the provision of contract software development and related services provided to its associated enterprises. 8. On the fact and in the circumstances of the case and in law, the Ld. CIT(A)/AO/TPO erred in: 8.1. Rejecting the Transfer Pricing ('TP') documentation maintained by the Appellant under Section 92D of the Act in good faith and with due diligence; 8.2. Using data, which was not contemporaneous and which was not available in the public domain at the time of preparing the TP documentation; 8.3. Disregarding application of multiple year/prior year data as used by the Appellant in the TP documentation; 8.4. Disregarding certain filters as applied by the Appellant in selection of the comparable companies at the time of TP documentation; 8.5. Applying/modifying certain filters while undertaking comparability analysis; 8.6. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at RMZ nxt in Block 2B fourth & fifth floor and Block 2C fourth floor for business operations of Unit-1 (non 10A). Accordingly, the rent paid for the same was claimed as deduction by the Company from Unit-1 (non 10A). Details of the premises held by Unit-1 (non-10A) as on 1st April 2007, premises bonded & de-bonded during FY 2007-08 for Unit-1 (non-10A) is placed at Page 1216 to 1218 of the Paper Book. Also, Unit-2 (10A) was carrying on its activities from various rented premises approved as private bonded warehouse by Customs and STPI. On October 23, 2007, Unit-2 (10A) de-bonded premises at Salarpuria GR Tech Park, RMZ nxt in Block 2A fourth floor and ITPL. The floors de-bonded from Unit-2(10A) are not in control of the Company after de-bonding and none of its units were using these premises after de-bonding. Resources of the de-bonded premises were shifted to newly bonded premises at Phase-3 and RMZ Block 2B ground, first, second third floor & Block 2C fifth floor. Details of the premises held by Unit-2(10A) as on 1st April 2007, premises bonded & de-bonded during FY 2007-08 for Unit-2(10A) is placed at Page 1219 to 1221 of the Paper Book. However, the AO reallocated the rent e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Solutions, Insurance Solutions, Customer Appreciation & Relationship Management Application (CARMA), Content Management systems etc. The website of the company indicates that it has developed a software product by name 'Dxchange' and no segmental information is available. Reliance in this regard was placed on the decision of the coordinate bench of Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd. v. Asst. CIT in IT(TP)A No. 1682/Bang/2012 dated 26/08/2015. 36.2 We heard rival submissions and perused the material on record. The comparability of Avani Cimcon Technologies Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: "19. Vis-a-vis Avani Cimcon Technologies Ltd., findings of the Tribunal in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 5 of the order which is reproduced hereunder : 5. Avani Cincom Technologies Ltd. 5.1 This company was selected by the TPO as a comparable in spite of the objections of the assessee to the exclusion of this compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company as a comparable. 7.6.2 We also find substantial merit in the contention of the learned Authorised Representative that this company has been selected by the TPO as an additional comparable only on the ground that this company was selected in the earlier year. Even in the earlier year, it is seen that this company was not selected on the basis on any search process carried out by the TPO but only on the basis of information collected under section 133(6) of the Act. Apart from placing reliance on the judicial decision cited above, including the assessee's own case for Assessment Year 2007-08, the assessee has brought on record evidence that this company is functionally dis-similar and different from the assessee and hence is not comparable. Therefore the finding excluding it from the list of comparables rendered in the immediately preceding year is applicable in this year also. Since the functional profile and other parameters by this company have not undergone any change during the year under consideration which fact has been demonstrated by the assessee, following the decisions of the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation P. Ltd. v. Asst. CIT in IT(TP)A No. 1682/Bang/2012 dated 26/08/2015. 37.3 We heard rival submissions and perused the material on record. The comparability of M/s. Bodhtree Consulting Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: "20. Vis-a-vis M/s. Bodhtree Consulting Ltd., findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 6 which is reproduced hereunder : 6. Bodhtree Consulting Ltd. 6.1.1 This company has been selected as a comparable by the TPO. The assessee objected to the inclusion of this company in the list of comparables both before the DRP and also before us on the grounds that it is functionally different as it is a product oriented company into software consulting, web services integration, data management, data clearing services, etc. 6.1.2 Before us, the learned Authorised Representative placed reliance on the decision of a co-ordinate bench of this Tribunal in the case of NXP Semi-Conductors India P. Ltd. (supra) for A.Y. 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record, including the judicial decisions cited by the ld. A.R. We find that this company has been excluded from the set of comparables for software development service companies in both the aforesaid decisions cited by the assessee. In Mindtech (India) Ltd., the relevant portion of the order at para 16 thereof it has been held as under :- "16. We have considered the rival submissions. The Special Bench of the ITAT in the case of Maersk Global Centres (supra) had an occasion to deal with the question as to whether high profit margin making companies should be excluded as a comparable. The Special Bench after considering several aspects held in para 88 of its order that the potential comparable companies cannot be excluded merely on the ground that their profit is abnormally high. The Special bench held that in such cases it would require further investigation to ascertain the reasons for unusually high profit and in order to establish whether the entities with such high profits can be taken as comparable or not. In the light of the aforesaid decision of the Special Bench and in view of the admitted position that the assessee follows Fixed Price Project model where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. The comparability of M/s. E-Zest Solutions Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: "22. Vis-a-vis M/s. e-Zest Solutions Ltd., findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 8 which is reproduced hereunder : 8. e-Zest Solutions Ltd. 8.1 This company was selected by the TPO as a comparable inspite of the assessee's objections to its inclusion as a comparable on the ground that it was functionally different from the assessee. The TPO rejected the assessee's objections on the ground that as per the information received under Section 133(6) of the Act this company is engaged in software development services and qualifies all the filters applied. 8.2 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 was submitted that a co-ordinate bench of this Tribunal in the case of 3DPLM Software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of 3DPLM Software Solutions Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand." Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude E-Zest Solutions Ltd., from the list of comparables. Infosys Technologies Ltd. 39. This company was selected by the TPO, which was contested by the assessee-company. 39.1 On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of ₹ 200 crores to ₹ 2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No. 1070/Bang/2013 wherein we held that turnover is not an appropriate filter. 39.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company provides end-to-end business solutions that leverage technology thereby enabling its client to enhance business performance including technical consulting, design, development, re-engineering, maintenance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record; including the judicial pronouncement relied on by the assessee. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables as it has huge revenue's from software product development, Owned IPR's and was not purely a provider of software services by observing at paras 11.4 thereof as under :- "11.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assessee has brought on record sufficient evidence to establish that this company is functionally dis-similar and different from the assessee and hence is not comparable and the finding rendered in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) for Assessment Year 2007-08 is applicable to this year also. We are inclined to concur with the argument put forth by the assessee that Infosys Technologies Ltd. is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 10 which is reproduced hereunder : 10. KALS Information Systems Ltd. 10.1 This is a comparable selected by the TPO inspite of the assessee's objections to its inclusion in the list of comparables on the grounds that it is functionally different and that the segment details were inconsistent with respect to software services revenue and software products revenue. The TPO, however, rejected the assessee's objections and included this company in the list of comparables by relying on the information received in reply to notice under Section 133(6) of the Act. 10.2 Before us, the learned Authorised Representative contended that this company ought to be excluded from the list of comparables as it is functionally different, being into software products, whereas the assessee in the case on hand is merely into provision of software development services. It was submitted that the rejection of this company as a comparable to providers of software development services has been upheld by a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra). 10.3 Per contra, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this company from the list of comparables in the case on hand." Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Kals Information Systems Ltd., from the list of comparables. Persistent Systems Ltd. 41. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it functionally different. 41.2 On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of ₹ 200 crores to ₹ 2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No. 1070/Bang/2013 wherein we held that turnover is not an appropriate filter. 41.3 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company is engaged in providing 'Outsourced Product Development Services' to independent software vendors and enterprises. The company offers complete product life cycle services from end to end. No bifurcation is available between the two activities of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables as it is functionally different from a provider of software development services, being engaged in product development and product design services. At para 17.3 of this order the co-ordinate bench has held as under :- "17.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that this company i.e. Persistent Systems Ltd., is engaged in product development and product design services while the assessee is a software development services provider. We find that, as submitted by the assessee, the segmental details are not given separately. Therefore, following the principle enunciated in the decision of the Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. (supra) that in the absence of segmental details/information a company cannot be taken into account for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T in IT(TP)A No. 1682/Bang/2012 dated 26/08/2015. 42.4 We heard rival submissions and perused the material on record. The comparability of Quintegra Solutions Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: "26. Vis-a-vis M/s. Quintegra Solutions Ltd., findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 13 which is reproduced hereunder : 13. Quintegra Solutions Ltd. 13.1 This company was selected as a comparable by the TPO inspite of the objection of the assessee to its inclusion in the list of comparables on the ground that there were peculiar economic circumstances in the form of acquisitions made during the year. The TPO rejected the assessee's objections holding that this company qualifies all the filters applied. 13.2 Before us, the assessee objected to the inclusion of this company as a comparable on the ground that it is functionally different as it is engaged in product engineering services and not in software development services. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been acquisitions made by it in the period under consideration. It is settled principle that where extraordinary events have taken place, which has an effect on the performance of the company, then that company shall be removed from the list of comparables. 18.3.3 Respectfully following the decision of the co-ordinate bench of the Tribunal in the case of 24/7 Customer Com. Pvt. Ltd. (supra), we direct that this company i.e. Quintegra Solutions Ltd. be excluded from the list of comparables in the case on hand 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." 13.4.2 Following the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand. Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Quintegra Solutions Ltd. from the list of comparables. Tata Elxsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (supra), appears at para 15 which is reproduced hereunder : 15. Tata Elxsi Ltd. (Seg) 15.1 This company was a comparable selected by the TPO inspite of the assessee's objections to its inclusion in the set of comparables on the ground that it is a product company which has significant R&D activity, IPR's, etc and is therefore functionally dis-similar from the assessee who is a provider of software development services. The TPO, however, rejected the contentions put forth by the assessee and included this company in the set of comparables on the ground that he has taken only the software development and services segment for comparability purposes. 15.2 Before us, it was submitted that this company is not functionally comparable to the assessee as it performs a variety of activities under the software development and services segment, namely, product design, innovation design engineering and visual computing labs, as is reflected in the Annual Report of the company and therefore it is not purely a provider of software development services like the assessee. The learned Authorised Representative also submitted that the co-ordinate bench of this Tribunal in the case of 3DP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able portion." As can be seen from the extracts of the Annual Report of this company produced before us, the facts pertaining to Tata Elxsi have not changed from Assessment Year 2007-08 to Assessment Year 2008-09. We, therefore, hold that this company is not to be considered for inclusion in the set of comparables in the case on hand. It is ordered accordingly." 15.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand." Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Tata Elxsi Ltd. from the list of comparables. Thirdware Solutions Ltd. 44. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it its turnover is more than ₹ 500 crores. 44.1 On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from the list of comparables for providers of software development services. 16.3 Per contra, the learned Departmental Representative supported the orders of the TPO in including this company in the list of comparables. 16.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision relied upon. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 had held that since this company is engaged in product development and earns revenue from sale of licenses it is to be omitted from the list of comparables for software development services, holding as under at para 15.3 of the order :- "15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om sale of product and services. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd. v. Asst. CIT in IT(TP)A No. 1682/Bang/2012 dated 26/08/2015. 45.3 We heard rival submissions and perused the material on record. The comparability of Wipro Ltd. (seg.) had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra). The relevant portion is extracted hereunder: "29. Vis-a-vis M/s. Wipro Ltd. (seg), findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd. (supra), appears at para 17 which is reproduced hereunder : 17. Wipro Ltd. 17.1 This company was selected as a comparable by the TPO inspite of the assessee's several objections to its inclusion in the list of comparables on the grounds of functional dis-similarity, brand value, size, etc. 17.2 Before us, the learned Authorised Representative contended that this company i.e. Wipro Ltd. is not functionally comparable to the assessee as it owns significant intangibles; both in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case on hand does not own any intangibles, following the aforesaid decision of the co-ordinate bench of the Tribunal i.e. 24/7 Customer Com Pvt. Ltd. (supra), we hold that this company cannot be considered as a comparable to the assessee. We, therefore, direct the Assessing Officer/TPO to omit this company from the set of comparable companies in the case on hand for the year under consideration." 17.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra), we direct the Assessing Officer/TPO to omit this company from telecommunication expenses list of comparable companies." Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s. Hewlett-Packard (India) Software Operation P. Ltd (supra) we direct the AO/TPO to exclude Wipro Ltd., from the list of comparables. Softsol India Ltd. 46. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it is functionally different. 46.1 On appeal, the ld. CIT(A) deleted this company from the list of comparables by applying turnover filter of range of ₹ 200 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the set of comparables observing/holding as under at para 19.3 of the order :- "19.3 We have heard both parties and perused and carefully considered the material on record. We find that the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No. 845/Bang/2011 has excluded this company from the set of comparables for the reason that RPT is in excess of 15% following the decision of another bench of this Tribunal in the case of 24/7 Customer. Com Pvt. Ltd. in ITA No. 227/Bang/2011. As the facts for this year are similar and material on record also indicates that RPT is 18.3%, following the afore cited decisions of the co-ordinate benches (supra), we hold that this company is to be omitted from the list of comparables to the assessee in the case on hand." 14.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to exclude this company from the list of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the inclusion of this company as a comparable on the grounds that it is into software product development and is therefore functionally different from the assessee in the case on hand. In this context, the learned Authorised Representative submitted that the coordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has omitted this company form the list of comparables on the ground that it is into development of software products and therefore is functionally different from provider of software development services. 11.3 Per contra, the learned Departmental Representative supported the orders of the authorities below in including this company as a comparable. 11.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the decision relied on by the assessee. We find that the co-ordinate bench in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 excluded this company from the list of comparables observing that this company, being into development of software products, is functionally different from a provider of software develop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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