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TMI Blog2020 (8) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... nk charges and provision for doubtful debts as non-operating income. The DRP held that foreign exchange fluctuations are indeed part of the revenue/expenses in so far as nexus with operations is established. Similarly, they held the bank charges and provision for doubtful debts as part of the operational revenue/expenses. Respectfully following the decision of the Tribunal in assessee s own case, we do not find any infirmity in the order of the DRP and, accordingly, the same is upheld. The ground raised by the Revenue on this issue is dismissed. - ITA No.473/Del/2016, ITA No.193/Del/2016 - - - Dated:- 25-8-2020 - Shri R.K. Panda, Accountant Member And Shri Amit Shukla, Judicial Member For the Assessee : Shri Nageshwar Rao And Shri S. Chakraborty, Advocates For the Revenue : Shri Anupam Kant Garg, CIT, DR ORDER PER R.K. PANDA, AM: These are cross appeals the first one is filed by the assessee and is directed against the order dated 24.11.2015 passed by the AO u/s 143(3) r.w. section 144C of the IT Act, 1961, for assessment year 2011-12. ITA No.193/Del/2016 filed by the Revenue is directed against the order dated 15th October, 2015 passed by the ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, accordingly booked as miscellaneous income. The provision for write back pertains to legal and professional fee incurred by the assesseee in relation to running of its business. Therefore, the same needs to be included while computing the profits and gains of business and is, therefore, eligible for deduction u/s 10A. The order of the DRP for A.Y. 2009-10 was also brought to the notice of the AO according to which, the DRP has decided the issue in favour of the assessee and has directed the AO to allow deduction u/s 10A on such income. Similarly, in A.Y. 2010-11, the AO himself has allowed such deduction u/s 10A of excess provision written back. So far as the notice pay recovery from employees of ₹ 42,87,900/- is concerned, it was submitted that the same pertains to sum received from employees who do not serve their notice period and instead pay an amount to the assesseee in compensation for non-serving their notice period. Therefore, such amount has arisen in the normal course of business of the assessee and is eligible for deduction u/s 10A of the Act. So far as other income of ₹ 1,19,768/- is concerned, it was submitted that the same largely represents re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal at para 66 onwards of the order has discussed the issue and at para 68, following the order of the Tribunal in assessee s own case for A.Y. 2010-11 based on the decision of the Hon ble High Court in the case of Riviera Home Furnishing, has allowed the deduction u/s 10A on interest earned on fixed deposits. Similarly, following the decision in the case of Birla Soft (India) Ltd. vs. DCIT, 44 SOT 664 (Del), the Tribunal has allowed the deduction u/s 10A of the Act on excess provision written back. Referring to the decision of the Hon ble Delhi High Court in the case of Riviera Home Furnishing vs. Addl. CIT (2017) 9 ITR-OL 401 (Del), he submitted that the Hon ble High Court in the said decision has held that when the fixed deposits were under the lien to the bank for facilitating letter of credit and the bank guarantee facilities, such interest on fixed deposits were profits of business and eligible for exemption. He submitted that the Hon ble Delhi High Court in the case of Riviera Home Furnishing has considered the decision of Hon ble Supreme Court in the case of Motorola India Electronics, Sterling Foods Ltd., Pandian Chemicals, Tuticorin Alkalies Chemicals, etc. Refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above income do not have a direct nexus with the business income of the assessee. While doing so, he further noted that the interest income has been held as income from other sources by the DRP in assessee s own case for A.Y. 2009- 10 and 2010-11. So far as the miscellaneous income is concerned, although the same was allowed by the DRP in assessee s own case for A.Y. 2009-10 and the AO himself has allowed the claim of deduction u/s 10A of such income for A.Y.2010-11, the AO held that principle of res judicata does not apply to income-tax proceedings. We find, the DRP upheld the action of the AO. We find, identical issue had come up before the Tribunal in assessee s own case in the immediately two preceding assessment years. We find, the Tribunal in assessee s own case for A.Y. 2009-10, vide ITA No.825/Del/2014 filed by the assessee and ITA No.419/Del/2014 filed by the Revenue, order dated 9th February, 2018, has decided an identical issue in favour of the assesseee by observing as under: 66. The AO in the draft order, available at pages 140 to 147, denied the deduction of ₹ 125,71,932/- and ₹ 22,85,957/- claimed u/s 10A of the Act being the interest on FDR a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OU occurring in Section 10B(1) was accepted by the ITAT. The ITAT noticed that unlike Section 80HHC, where there was an express exclusion of the interest earned from the 'profits of business of undertaking', there was no similar provision as far as Sections 10A and 10B were concerned. 10. In Motorola India Electronics (P.) Ltd. (supra) reference was made to the decision of the Supreme Court in Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278/129 Taxman 539 which dealt with Section 80HH and Liberty India v. CIT [2009] 317 ITR 218/183 Taxman 349 (SC), which interpreted Section 801B of the Act. Reference was also made to the decision of CIT v. Sterling Foods [1999] 237 ITR 579/104 Taxman 204 (SC), which interpreted Section 80HH and the decision of the Madras High Court in CIT v. Menon Impex (P.) Ltd. [2003] 259 ITR 403/128 Taxman 11 which interpreted Section 10A of the Act. The Karnataka High Court in Motorola India Electronics (P.) Ltd. (supra), after noticing the above decisions, held that it is clear that, what is exempted is not merely the profits and gains from the export of articles but also the income from the business of the undertaking . Specific to the question o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate in terms of Explanation (baa) for exclusion of certain income from the profits of the business which is, however, conspicuous by its absence in section 10B. On the basis of the aforesaid distinction, sub-section (4) of section 10A/10B of the Act is a complete code providing the mechanism for computing the profits of the business eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income. The CBDT Circular No. 564 dated 5th July, 1990 reported in 184 ITR (St.) 137 explained the scope and ambit of section 80HHC and the mode of determination of profits derived by an assessee from the export of goods. I.T.A.T., Special Bench in the case of International Research Park Laboratories v. ACIT, 212 ITR (AT) 1, after following the aforesaid Circular, held that straight jacket formula given in sub-section (3) has to be foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. The High Court approved the order of the ITAT in that case which held that the entire profits of the business of the undertaking should be taken into consideration while computing the eligible deduction under Section 10B of the Act by ITA 392/2015 applying the mandatory formula. 10. In the present case, the Assessee has stated that the interest on FDRs was received on margin kept in the bank for utilization of letter of credit and bank guarantee limits . In those circumstances, the decision of the ITAT that such interest bears the requisite characteristic of business income and has nexus to the business activities of the Assessee cannot be faulted. In other words, interest earned on the FDRs would form part of the profits of the business of the undertaking for the purposes of computation of the profits derived from export by applying formula under Section 10B(4) of the Act.' 13. Mr. Ashok Manchanda, learned Senior standing counsel for the Revenue, urged that none of the earlier decisions of the High Courts have considered the effect of Sections 80I, 801A and 801B of the Act which occur in Chapter VIA of the Act. He referred in particular to Section 80A(4) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n incorrect understanding of Section 80A(4) of the Act. The opening words of Section 80A(4) read 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 . . . . . . What is sought to be underscored, therefore, is that Section 80A, and the other provisions in Chapter VIA, are independent of Sections 10A and 10B of the Act. It appears that the object of Section 80A(4) was to ensure that a unit which has availed of the benefit under Section 10B will not be allowed to further claim relief under Section 80IA or 80IB read with Section 80A(4). The intention does not appear to be to deny relief under Section 10B(1) read with Section 10B(4) or to whittle down the ambit of those provisions as is sought to be suggested by Mr. Manchanda. Also, he is not right in contending that the decisions of the High Courts referred to above have not noticed the decision of the Supreme Court in Liberty India. The Karnataka High Court in Motorola India Electronics (P.) Ltd. (supra) makes a reference to the said decision. That decision of the Karnataka High Court has been cited with approval by this Court in Hritni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 10B of the Act. 68. So, following the findings returned by the coordinate Bench of the Tribunal in taxpayer's own case for AY 2010-11 based on the decision of Hon'ble High Court in Riviera Home Furnishing (supra), we are of the considered view that the taxpayer is entitled for deduction u/s 10A on the interest earned on fixed deposit receipts to the tune of ₹ 125,71,932/- and ₹ 22,85,957/-. 69. Similar view as to allowing the deduction u/s 10A of the Act on excess provision returned back amounting to ₹ 7,42,769/- has been expressed by the coordinate Bench of the Tribunal in Birlasoft (India) Ltd. vs. DCIT 44 SOT 664 (Delhi). Following the decision rendered by the coordinate Bench of the Tribunal, we are of the considered view that notice pay recoveries from the employees is also part of the business profit of the taxpayer on which the taxpayer is also eligible for deduction u/s 10A of the Act. Consequently, grounds no.11 11.1 are also determined in favour of the taxpayer. 9. Respectfully following the decision of the Tribunal in assessee s own case for the two immediately preceding assessment years, we hold that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TP study report, he noted that assessee has used TNMM as the most appropriate method with OP/TC as PLI. He noted that in the software development services, the assessee had initially selected 14 comparables with average OP/TC of 13.35%. However, at the time of hearing, the assessee updated the same with 22 comparable companies whose average OP/TC was 10.65%. The TPO rejected some of the comparables selected by the assessee and included certain more comparables and finally selected 18 comparables whose adjusted OP/TC was 20.13% and proposed an upward adjustment of ₹ 18,64,79,705/- in the software development services segment, the details of which are as under:- S. No Company Name Working capital adjusted OP/OC (%) 1 Akshay Software Technologies Ltd. 1.46 2 E-Infochips Ltd. 13.34 3 Evoke Technologies Pvt Ltd 8.21 4 E-Zest Solutions Ltd. 34.12 5 Infosys Ltd. 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Business Services Pvt Ltd 7.76 iii. Eclerx Services Ltd . 55.07 iv. ICRA Techno Analytics Limited 23.87 v. Infosys B P O Ltd. 17.88 vi. Jindal Intellicom Ltd. 10.88 vii. Microgenetic Systems Ltd. -2.42 viii. TCS E-Serve Ltd. 68.94 ix. Acropetal Technologies Ltd(Seg) 9.19 Average 24.32 13.1 The TPO accordingly computed the ALP of the international transaction related to ITES segment as under:- Total cost : ₹ 1,53,00,87,391 Arm s length price at a margin of 24.32% : ₹ 1,90,22,04,644 Price received : ₹ 1,72,89,51,279 Proposed adjustment u/s 92CA : ₹ 17,32,53, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparables which is not correct. He accordingly submitted that the comparables so selected by the TPO should be included in the final set of comparables. He further submitted that the ld. DRP is also not justified in considering forex income, bank charges and provision for doubtful debts as operating in nature. He accordingly submitted that the order of the AO/TPO be restored. 18. The ld. Counsel for the assessee, on the other hand, strongly supported the order of the DRP. He submitted that the main issue raised in the grounds raised by the Revenue is basically relating to the exclusion of certain comparables by the DRP in the software segment and ITES segment. So far as the deletion of seven comparables from the software segment is concerned, the ld. Counsel for the assessee drew the attention of the Bench to the detailed discussion made by the DRP. So far as E-Infochips Ltd., is concerned, he submitted that this company was rejected by the DRP as comparable for A.Y. 2010-11 in assessee s own case since it is functionally dissimilar and there is insufficient segmental information. Further, this company is engaged in sale of software products and has super normal profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is company was rejected on account of unavailability of segmental data between software services and software products. 23. So far as Wipro Technology Services Ltd. is concerned, he submitted that this company cannot be included in the list of comparables since it failed related party filter by virtue of section 92B(2) of the Act. It earns its entire income from City group companies for which the contractual terms were entered into by its parent company (Wipro Limited) with City Group Inc. Further, insufficient segmental information was given. The company is engaged in providing software services and infrastructure support services. No information is available regarding the nature of business in the annual report. Referring to the decision of the Tribunal in the case of Global Logic India Ltd., vide ITA No.1690/Del/2016 for A.Y. 2011-12 and in the case of Cadence Design System (I) P. Ltd. (supra), he submitted that this company was excluded from the list of comparables for the above reasons. 24. So far as Acropetal Technologies Ltd., is concerned, he submitted that this company fails 25% employee cost filter since the employee cost to total cost constitutes only 13.74%. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also has to be excluded in view of the distinctive features due to its sheer size which are not available to the assessee. Further, it has got TCS brand value. It fails the export turnover filter as applied by the AO and there is insufficient segmental information. Further, the ITAT in assessee s own case has rejected this company as a comparable on account of being functionally non-comparable. 28. Referring to the decision of the Tribunal in the case of Cadence Design Systems (I) Ltd., vide ITA No.6315/Del/2015, order dated 02.04.2018 for A.Y. 2011-12, he submitted that the Tribunal in the said decision has discussed thoroughly about the exclusion of E-Infochips Ltd., E-Zest Solutions Ltd., Infosys Ltd., Wipro Technology Services Ltd., Acropetal Technologies Ltd. and has directed the TPO to include the following comparables:- i) CG VAK Software Exports Ltd., ii) Goldstone Technologies Ltd., iii) Thinksoft Global Services Ltd., iv) Cat Technologies Ltd., v) LGS Global Ltd., vi) R. Systems International Ltd., and vii) Blue Star Infotech Ltd. 29. He submitted that the Revenue challenged the order of the Tribunal and the Hon ble High Court, vide ITA 333/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, no interference is called for. 33. We have considered the rival arguments made by both the sides, perused the orders of the AO/TPO/DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We do not find any infirmity in the order of the DRP in excluding the seven comparables from the software segment and three comparables from the ITES segment. They have thoroughly discussed the comparables before directing to exclude the same. 34. So far as Infosys Technologies Ltd. is concerned, we find the Tribunal in assessee s own case for A.Y. 2009-10 has directed to exclude this comparable by observing as under:- INFOSYS TECHNOLOGIES LIMITED (INFOSYS) 13. The taxpayer sought exclusion of Infosys on grounds inter alia that it is functionally dissimilar and incurring significant R D expenses having significant intangibles and a giant company having fully risk bearing profile and relied upon the decision rendered by the coordinate Bench of the Tribunal in taxpayer's ITA No.419/Del/2014 own case in ITA No.6312/Del/2012 for AY 2008-09 order dated 28.08.2014. 14. However, on the other hand, ld. DR for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable. Accordingly, we uphold the order of the DRP in excluding this company from the list of comparables. 36. So far as Persistent Systems Ltd. is concerned, we find the Tribunal in assessee s own case has restored the issue to the file of the TPO with certain directions. The relevant operative para of the order of the Tribunal reads as under:- PERSISTENT SYSTEMS LTD. (PERSISTENT) 18. The taxpayer sought exclusion of Persistent on the grounds inter alia that it is outsourcing its services; that it is also engaged in development of products with no segmental data available; and that it is expending around 1% of its total income of ₹ 56.1 million on R D activities. Undisputedly, Persistent has not been contested by the taxpayer before ld. TPO as well as ld. DRP. In the given ITA No.419/Del/2014 circumstances, we are of the considered view that if something new is to be examined let it be examined by the ld. TPO first as the taxpayer has preferred not to contest Persistent before the ld. TPO as well as DRP. So, this issue is set aside to the ld. TPO to examine afresh after providing an opportunity of being heard to the taxpayer. 37. Following the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of earning high profits. 14. In addition to the reiteration of the contentions raised before the authorities below, learned AR brought it to our notice that in assessee s own case for AY 2009-10 in ITA No.2074/Del/2014, it was found that Infosys Ltd. is not comparable to the assessee. Learned DR placed reliance on the orders of the authorities below and the reason for including this company in the list of comparables. 15. Financials of Infosys lends any amount of support to the argument of the assessee referred to above. Further, vide paragraph No.7 to 7.4 in the order in ITA 2074/Del/2014, a coordinate Bench of this Tribunal considered in assessee s own case for the AY 2009-10 the comparability of Infosys with the assessee in detail, and while placing reliance on the decision of the Hon ble jurisdictional High Court in CIT vs. Agnity India Technologies P. Ltd. in ITA No.1204/2011 (Del) held that Infosys Ltd .cannot be compared with the assessee company and the observations of the bench needs to be extracted hereunder. Wipro Technologies Services (P) Ltd.: 17. Assessee objected the inclusion of this company on the ground of drawing huge revenues from the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce agreement with the Citi Group Inc. for a delivery of technology infrastructure services and application development and maintenance service for six years providing delivery of at least $500 million in service revenue over this period. This fact cannot be ignored. Nextly, he submitted that though the learned DR argued that the Mumbai Tribunal in Ness Technologies (supra) has not properly followed the decision in Saxo (supra) which relates to earlier years, it cannot be denied that for AY 2011-12 the Delhi Tribunal in Orange Business Service Solutions, under very similar circumstances found that Wipro Technologies Services is not a good comparable inasmuch as this company is a subsidiary to Wipro Ltd. and the entire revenue during the year is covered by a master service agreement entered into by break through with Citi Group services. 22. We have gone through the material available before us. From page no.294 of the paper book which consists of the submissions of the assessee before the ld. TPO, the assessee brought to the notice of TPO that in the annual report of the Wipro Technologies Services Ltd. it was mentioned that Wipro signed a master service agreement with Citi Group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... segment wise breakup of the revenue is also available. For these reasons, ld. DRP recorded that it is a good comparable. 27. Ld. AR brought to our notice that the salaries and consultancy charges including bonus incurred by Acropetal was ₹ 13.51 crores whereas the technical sub contract expense was ₹ 55.77 crores which accounts for only 13.74% and accordingly it does not pass through the filter proposed by the ld. TPO. 28. Ld. DR justified the orders of the authorities below basing on the observations of the ld. TPO and considered by the learned DRP to the effect that it is only a matter of difference in classification of expense and the financials of subsequent years ratify the same 29. Per contra, ld. AR submitted that when the matter relates to the FY 2010- 11 and the annual report is available in the public domain, the audited reports of this year are to be considered but not the financials of the next year. 30. On a perusal of page No.45 46 of the annual report of Acropetal, we find that the submission of the ld. AR is justified. We, therefore, direct the ld. AO to verify the employee cost percentage to the total cost and if it does not pass the filte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even the assessee is having income from software development and ITES services. He submitted that for all practical purposes this company has only one segment that is software development and the revenue from this is about 86%, satisfying the filter. 35. We have gone through the annual report of this company for FY 2010-11 and found that the revenue from software development was 19, 21, 09, 661/-, revenue from hardware maintenance was ₹ 3,92,48,562/-and revenue from information technology consultancy was ₹ 2,90,26,028/-. Ld. DR asks as to club all these items of revenue under the head revenue from information technology services. We find it difficult to accept this plea of the Ld. DR and to hold that the information technology consultancy service also falls under the head software development so as to bundle it under that head. 36. In Rampgreen Solutions Pvt. Ltd. Vs. CIT on the aspect of employee cost it was held as under:- 38. ...even Vishal could not be considered as a comparable, as admittedly, its business model was completely different. Admittedly, Vishal s expenditure on employment cost during the relevant period was a small fraction of the proport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclusion of this company in the set of comparables mainly on the ground that this company is engaged into diversified range of software activities and its annual report shows that this company is an SEICMMi level III and ISO 9001:2008 certified product engineering and software development company, having special expertise in emerging technologies such as cloud, SAAS, business intelligence and mobility, and predicate it has been serving clients in more than eight industries across the globe with over 2000 software professionals on-board. The product engineering services/outsourced product development services of this company include the product design and development, product feature enhancement, product platform migration, software product testing, product maintenance and support, product release and license management, SAAS/SOA services, web 2.0 services etc ; enterprise application development services include customer relationship management, enterprise resource planning, business intelligence, knowledge management, enterprise application integration, consulting etc; ID services include global onsite/ offshore software development, custom software development/bespoke software d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal are very much relevant for the purpose of this case also. While paragraph number 8 a coordinate bench of this tribunal held as follows:- 8. We heard the rival submissions, perused the material on record and judicial decisions. The comparables company is engaged in product engineering services in the nature of High end knowledge process outsourcing and also in product engineering software Development Company having expertise in emerging technologies cloud Saas, Business Intelligence and mobility for more than 10 years and serving 8 industries across the globe with over 200 software professionals. Whereas, the assessee company is in the software development and also ITES services and cannot be considered as the functionally comparable and we rely on the decision of Bangalore Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) at Para 14.4: 14. E-Zest Solutions Ltd. 14.1 This company was selected 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s company are similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services. It has been held by the coordinate bench of this Tribunal in the case of Capital I-Q Information Systems (India) (P) Ltd. Supra) that KPO services are not comparable to software development services and are therefore not comparable. Following the aforesaid decision of the co-ordinate bench of the Hyderabad Tribunal in the aforesaid case, we hold that this company, i.e. e-Zest Solutions Ltd. be omitted from the set of comparables for the period under consideration in the case on hand. The A.O. / TPO is accordingly directed. Considering these facts and the decision of the Tribunal, we direct the Ld. TPO to exclude the E-Zest Solutions Limited from the list of the comparables. 45. It is clear from the above that the e-Zest solutions Ltd is a rendering product development services and high-end technical services which come under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observing as under:- 4.10 Sasken Communication Technologies Ltd. The Ld. AR submitted that as regards this company there is non-availability of data wise information of segments with respect to software development services in the annual report. The Ld. AR relied upon the case of Saxo India Pvt. Ltd Vs. ACIT (ITA No. 6148/del/2015) whereby Tribunal directed to exclude the aforesaid company on account of unavailability of segmental data with respect to software development segment, as under:- 15.2 Considering the rival submissions, we find from page 58 of the TPO s order that he has recognized sale of software products to the tune of ₹ 37 crore and odd. Though the break-up of revenue from software services products is available, but, the break-up of operating costs and revenues from these two segments have not been given. It is further observed that the TPO has taken entity level figures for the purposes of making comparison. Since such entity level figures contain revenue from both software services and software products, as against the assessee only providing software services, we are disinclined to treat this company as comparable. The assessee s contention is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oroughly discussed the issue and has directed to exclude this company from the list of comparables by observing as under:- E-CLERX SERVICES (E-CLERX) 47. The taxpayer sought to exclude E-Clerx for benchmarking its international transaction on the grounds inter alia that it is functionally dis-similar; that it has only one segment and has ordered to be excluded in taxpayer's own case for AY 2008-09 and also relied upon Ameriprise India Pvt. Ltd. vs. ACIT in ITA No.2010/Del/2014 for AY 2009-10, Capital IQ Information Systems vs. ACIT in ITA No.124/Hyd/2014 for AY 2009-10 and Macquarie Global Services Pvt. Ltd. vs. DCIT in ITA No.6803/Del/2013 for AY 2009-10. 48. A perusal of pages 715 716 of the annual report compendium shows that E-Clerx is Knowledge Process Outsourcing (KPO) providing data analytics and data process solutions to global enterprise clients, providing end to end support through trade lifecycle including trade confirmation, settlements, transaction, maintenance, risk analytic and reporting over the last year and also providing unique blend of services, process reengineering and automation. Furthermore, perusal of page 763 of annual report compendium sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the list of comparables has observed as under:- 24. TCS E Serve. Limited TPO included this comparable, which has a margin of 63.42%. The Id DRP has also held that the far profile of the company is similar. Before us, Id. AR submitted that the company is dissimilar functionally. In addition to BPO services, it is also engaged in technical services such as software testing, verification and validation. It has also developed software such as transport management software. It does not have segmental reporting too. It was further submitted that the company owns substantial intangible assets in form of software licenses and it makes a payment for Tata Brand and therefore it gets the benefit use brand value of Tata. Ld. DR relied on the orders of lower authorities and submitted that all the above reasons for selection of this comparable has been considered by the TPO. We have also considered the rival contention for exclusion of TCS e- service Ltd. It is mainly involved in transaction processing and technology services. It carries on business of providing technology service such as software testing, verification and validation. It is also developed a software such as transp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company which is placed at page No, 207 of the paper book we find that it is not a consolidated annual accounts but standalone annual accounts of comparable. Therefore in the financial results of the Infosys BPO Ltd there is no impact of the amalgamation or acquisition of shares of the other companies. A separate statement as required under section 212 of the Companies Act has been annexed with the annual accounts. Though assessee has contested in this year about the exclusion of the above company as comparable however we have perused decision of coordinate bench in ITA No. 6312/del/2012 for assessment year 2008-2009 dated 28/08/2014 in assessee s own case. On perusal of above decision we have come to know that at page No. 3 of such decision where ITES segment is considered at serial No.8 Infosys BPO Ltd was considered as a comparable for that/year. It is noticed that assessee has not contested that Infosys BPO should be excluded for assessment year 2008- 2009 therefore for the current year we reject the argument of the assessee that it is functionally dissimilar in absence of any contrary material brought to our notice. Furthermore merely because company has higher profits, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi in case cited as Pr. CIT-02 VS. M/s. Cashedge India Pvt. Ltd. in ITA 279/2016 order dated 04.05.2016 while upholding the decision rendered by the Tribunal held that Safe Harbour Rule is not applicable to AY 2008-09 as it came into force w.e.f. 18.09.2013 since the ld. DRP has primarily relied upon Safe Harbour Rule while upholding the decision of ld. DRP in treating the foreign exchange fluctuation gain/loss as non- operating item, the findings are not sustainable. 60. The coordinate Bench of the Tribunal decided the identical issue in case of Westfalia Separator India Pvt. Ltd. vs. ACIT in ITA No.4446/Del/2002 for AY 2003-04 by returning following findings :- We have heard the rival submissions and perused the relevant material on record. The forex gain or loss is the difference between the price at which an import or export transaction was recorded in the books of account on the basis of rate of foreign exchange then prevailing and the amount actually paid or received at the rate of foreign exchange prevailing at the time of actual payment or receipt. Since such forex loss or gain is a direct outcome of the purchase or sale transaction, it partakes of the same characte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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