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TMI Blog2018 (8) TMI 2021X X X X Extracts X X X X X X X X Extracts X X X X ..... r taking into consideration the functional profile of the assessee company and the comparables as well as taking into account the decision of the Tribunal in case of sister concern. Calculating the PLI of the comparables - Export filter (excluding companies having export less than 75% of total income) adopted by the TPO is a reasonable filter as the assessee earns predominantly from exports and thus its business model is different from the companies earning in domestic market - HELD THAT:- TPO has taken 'miscellaneous income as operating in nature. As per the Ld. AR s submission in the absence of details and nature of miscellaneous income received by comparables, it should not be taken to be an operating item. This is mentioned in TPO s order itself wherein calculations of PLI of comparables is stated. Hence, the Ld. AR submitted that miscellaneous income should be non-operating as details are not known. Prima facie this appears to be true, but the TPO/AO has not made any effort to look upon this aspect. Therefore, it will be appropriate to remand back this issue to the file of the TPO/Assessing Officer for fresh adjudication. We therefore restore this issue to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. Therefore, we direct the Assessing Officer to delete this addition as per the directions given by the DRP. Brought forward losses and unabsorbed depreciation - HELD THAT:- It is pertinent to note that from the records it appears that brought forward losses and unabsorbed depreciation have already been adjusted in the last year i.e. 2007-08, but the Assessing Officer has not taken into consideration the same. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer to verify the brought forward losses and unabsorbed depreciation which was adjusted in the earlier year and make the additions as per the facts of the case and the law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. - I.T.A .No. 1466/DEL/2015, I.T.A .No. 6310/DEL/2012 - - - Dated:- 3-8-2018 - SHRI R. K. PANDA AND MS SUCHITRA KAMBLE, JJ. Appellant by: Ms. Ananya Kapoor, Sh. Salil Kapoor, Adv Respondent by: Sh. Kumar Pranav, Sr. DR ORDER SUCHITRA KAMBLE, J. ITA No. 6310/Del/2012 is filed by the assessee against the Assessment Order dated 17/11/2012 passed by Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and research focused on global mutual funds and equities. Essentially, it involves tracking the performance of specific stocks and mutual funds and analyzing it. The background data is compiled and provided to the clients that include mainly investment banks. The work is customized according to the requirements of the clients and specific requests received by them. d) Market Research: This involves voice-based support for conducting telephonic customer surveys in different parts of the world and formulation of preliminary hypothesis bases on the surveys. EVS India has extensive primary research capabilities, including the ability to conduct research in multiple languages. 3. The international transactions entered into are tabulated below:- Sr. No. Nature of transaction Arm s Length price as per taxpayer (i) Provision of Services Back Office Operations (Research Services) 1,19,40,56,308 (ii) Cost Reimbursement 4,38,77,908 4. The assessee filed its return of income on 01.10.2010 declaring income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O suffers from jurisdictional error as the Ld. AO has not recorded any reasons in the assessment order based on which he reached the conclusion that it was expedient and necessary to refer the matter to the Ld. TPO for computation of the arm's length price, as is required under section 92CA(1) of the Act. 4. That the Ld. AO/ Ld. TPO/ Ld. DRP erred on facts and in law in the assessment of the arm's length price of the Appellant's international transactions with associated enterprises by- 4.1. Rejecting on the basis of subjective grounds and presumptions, the comparability analysis conducted by the Appellant for determining the arm's length price in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ( Rules ) as well as fresh search. Further, the Ld. AO/ Ld. TPO/ Ld. DRP erred in modifying the comparable companies set adopted by the Appellant on the basis of additional/ modified quantitative filters selected by him and arbitrary statements which lacked valid and sufficient reasoning 4.1.1. Rejecting companies whose export revenues are less than 75 percent of the total revenues without taking cognizance of the Appellant's su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Appeals ( CIT(A) ) had accepted the arm's length nature of the international transactions in FY 2004-05 and FY 2006-07 9. The Ld. AO/ Ld. TPO/ Ld. DRP has erred in not appreciating the fact that the Appellant is a company incorporated under the provisions of the Companies Act, 1956 and enjoying the tax holiday benefits conferred under Section 10A of the Act as per the Software Technology Park of India ( STPI ) Scheme. Thus, there is no motive on the part of the Appellant to shift the profits to any other jurisdiction. Hence the case of the Appellant falls squarely within the ambit of aforementioned principle. 10.1. That, on the facts and in law, the order of the Ld. AO is erroneous to the extent of not incorporating the binding directions of the Hon'ble DRP while finalizing the order section 143(3) read with section 144C of the Act on the disallowances made by the Ld. AO of ₹ 13,90,576/- as prior period expense. 10.2. Without prejudice to Ground 10 and 11, the Ld. AO failed to understand that the appellant has computed the taxable income before giving any effect to prior period item in the profit and loss statement. The Ld. AO erred in appreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertook the selection of external comparables, using a scientific screening process involving various quantitative and qualitative filters, to arrive at independent companies with a comparable functional profile. Accordingly, the Assessee has rejected companies that do not meet any of the specified quantitative criteria as well as companies that are engaged in a different product line or have related party transactions or have an incomparable asset base. The assessee, in order to arrive at a set of due comparable companies, was solely guided by the parameters of functional comparability and therefore, the assessee in the TP documentation of F.Y. 2009-10 has not rejected companies on the basis of margins earned, whether profits or losses. The assessee also expressed its disagreement with the use of current year data by the TPO. 9. In respect of provision of IT enabled services, the Ld. AR submitted that the additional/ modified quantitative filters used by the TPO for rejecting the comparables were subjective, and the quantitative threshold limits that were considered for these filters do not provide a rational basis for using such limits. Further, the TPO rejected the compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the perusal of the above services it is evident that the assessee is providing High End domain specific KPO Services and not low-end BPO Services. The ITAT in case of assessee for the AY 2006-07 (ITA No. 4001 /del/2013) dated 11.05.2017 has restored the identical issue of transfer pricing adjustment back to the file of AO/ TPO for ascertaining the correct functional profile of the assessee. The operating para of the above judgment is given below:- 34. On reading of the above decision it is apparent that coordinate bench in its order for AY 2007-08 while reading the orders for AY 2005-06 of the coordinate bench in case of the assessee, has entered in to an error by not looking at the para no 43 of the order, where findings are contained, where in it has been held that assessee is high end ITES services provider in its T P Study report because the assessee conducts research activity and provides knowledge management services to its AEs. The coordinate bench has looked at the reference and finding in case of Maersk Global Centers (India ) Pvt. Ltd. (ITA 7466/Mum/2012) in para no 38 and 39 of that judgment and has held that assessee is a low end ITES service provider. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside the whole issue of transfer pricing adjustment back to the file of Ld AO/ TPO for ascertaining the correct functional profile of the assessee for this year without being influenced by the order of the coordinate bench for AY 2007-08, then carry out examination of comparability analysis and then determine ALP of the International transactions. Needless to say that assessee shall be duty bound to provide correct functional profile of the assessee and its complete search process and its stepwise results to the Id TPO/ AO along with its justification for claim of working capital adjustments or capacity utilization for examination by the Id AO/ TPO. In the result ground no 3, 4, 5 and additional ground are remitted back to the file of Id AO/ TPO to decide the whole issue afresh and hence these grounds of appeal of the assessee are allowed with above directions. The order of the ITAT in case of Evalueserve SEZ (Gurgaon) Pvt. Ltd. for the AY 2010-11 (ITA No. 1467/Del/2017) is not applicable (as argued by the Ld. AR) as in the above case the ITAT has held that Evalueserve SEZ (Gurgaon) Pvt. Ltd. is not a KPO and is providing only ITeS Services which fall in the realm of BP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch [2010] 122 ITD 216 (Mumbai) (SB) v) Emission AB- Delhi ITAT- 20/56 SOT 177 vi) ITO vs. Anant Y. Chavan [2009] 126 TTJ (Pune) 984 vii) American Express (India) (P.) Ltd. vs. DCIT- [2017] 83 taxmann.com 345 (Delhi - Trib.) viii) Mckinsey Knowledge Centre (P.) Ltd. vs. DCIT [2017] 82 taxmann.com 25 (Delhi Trib) The Ld. AR pointed out that in the recent decisions in case of American Express and Mckinsey (supra), the Ld. DR raised this very issue stating that those companies are KPOs and hence matter should be remanded. However, ITAT did not entertain such plea for the reason that this was not the case of the TPO and classification is not mandatory in law. The Ld. AR submitted that classification to BPO/KPO is not mandatory. The Hon ble Delhi High Court in Rampgreen Solutions 377 ITR 533 held that classification is not mandatory. Furthermore, the concept of BPO and KPO is not mentioned in Rule 10B of the Income Tax Rules, 1962 ( the Rules ). On examination of the Act and the Rules, it is evident that for comparability analysis, information technology enabled services are not bifurcated in strict compass of BPO/KPO. The basic rule is contained in Rule 10B and that sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both entities are identical. Hence, Revenue is bound to take same stand when looking at both the entities. As TP Study and TPO order of both entities are identical, and Ld. DR did not challenge the functional profile when case of Evalueserve (SEZ) was heard in ITAT and did not take a stand that Evalueserve (SEZ) is a KPO, in view of the fact that TP Study and TPO order of both entities is identical, Ld. DR now cannot take a different stance qua both the entities. Further, even ITAT in its order at para 8 has stated that the FAR analysis shall be the basis to determine comparability. Further, ITAT has also mentioned that TPO has not disputed the functional profile of the assesse. The Ld. AR relied upon the Hon ble Delhi High Court s decision in assessee s own case for AY 2007-08. More importantly, Department appealed against the ITAT order for AY 2007-08 in Delhi High Court and vide order dated 31.10.2017, Department s appeal in Delhi High Court has been dismissed. For AY 2007-08, ITAT had ruled in favour of the assesse. Delhi High Court order has now settled this issue in assessee s own case. The Ld. AR submitted that in the order for AY 2007-08, DR did raise this issue disputing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chtel India Private Limited vs. DCIT- Delhi High Court order dated 25.07.2017 Alcatel -lucent India Ltd. Vs. DCIT - Delhi High Court order dated 08.05.2017 Voith Hydro Private Ltd. vs. PCIT- Delhi High Court order dated 25.09.2017 15. The Ld. AR pointed out that Ld. DR for the first time is taking up the issue of functional profile of the assessee during the course of the hearing proceedings before the Tribunal. This was never an issue taken up by the TPO/DRP and also the Department/Revenue was not in appeal before the Tribunal. Furthermore, only the assessee is in appeal before the Tribunal. The Ld. AR relied upon the following decisions: Assam Co-Operative Apex Bank Ltd. v. Commissioner of Income tax [1978] 112 ITR 257 (Gauhati) V. Ramaswamy Iyengar v. Commissioner of Income-tax [1960] 40 ITR 377 (Madras) In New India Life Assurance Co. Ltd. v. Commissioner of Income-tax [1957] 31 ITR 844(Bom.)- 16. The Ld. AR submitted that the Ld. DR cannot argue that assesse is a KPO and cannot go beyond the TPO s order. The Ld. DR cannot be permitted to go beyond the TPO s order. Once TPO expressly accepts the functional profile of the Appellant, then Revenue canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in software development and Assessee is not, the Ld. AR submitted that igate global Solutions Ltd should be excluded. Page 56 of the Annual Report clearly mentions that the company is engaged in software development. igate global Solutions Ltd. is engaged in software products and services. This is mentioned in page 67, 29 and 73 of the Annual Report. The Assessee is not engaged in sale of any products. Hence it is not comparable with the Assessee. At page 73, it uses the words products and then writes 'Software Engineering . At Page 56, 67, 51 of the Annual Report, stated that the company is engaged in IT services, contract centre services and IT enabled services. It is a known fact that IT services pertain to software industry and is different from IT enabled services. There are plethora of case-laws which state that software development is different from IT enabled services. At Page 56, 67, 51 of the Annual Report, it is stated that the company has only 1 segment. Hence income from software development, contract centre services and IT enabled services is reported as one segment- hence there is lack of segmental information. The Tribunal in para 11 and 18 have exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sister concern. Needless to say, the assessee be given proper opportunity of hearing by following principles of natural justice. Accordingly, Ground No. 4.1 is partly allowed for statistical purpose. 20. As regards Ground Nos. 4 and more specifically Ground No. 4.4, the Ld. AR submitted that the TPO erred in calculating the PLI of the comparables. TPO has taken 'miscellaneous income as operating in nature. The Ld. AR submitted that in the absence of details and nature of miscellaneous income received by comparables, it should not be taken to be an operating item. This is mentioned in TPO s order itself wherein calculations of PLI of comparables is stated. Hence, the Ld. AR submitted that miscellaneous income should be non-operating as details are not known. In the case of BNY Mellon International Operations (India) (P.) Ltd. [2014] 52 taxmann.com,,306 (Pune - Trib.), Pune ITAT has held that miscellaneous income is non-operating in nature. Further, the Ld. AR submitted that in case of Interglobe Technologies Pvt. Ltd, reimbursement of expenses are taken as operating. It is humbly submitted that in the absence of details and nature of expenses which have been reimbur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ameriprise India (P.) Ltd. v. Assistant Commissioner of Income- tax, Circle-1 (1), New Delhi[2015] 62 taxmann.com 237 (Delhi - Trib.) that - If tested party has March year ending, then comparables must also have data relating to financial year ending 31st March itself and if such a data is not available, then a company albeit functionally comparable, disqualifies. However, if the relevant data for the concerned financial year can be deducted from the information available from its annual report, then, there can be no objection to its inclusion in the list of comparables with the adjusted data for the relevant financial year itself. 23. The Ld. DR submitted that since data for the relevant financial year was not available hence the TPO correctly excluded those comparables. The Ld. DR further submitted that excluding companies having Service Income less than 75% while keeping in view the fact that the assessee is a 100% EOU and predominantly earns service income in forex from providing services to its AE. Thus the above filter was correctly applied at 75% to exclude the companies having different business model (predominantly manufacturing company). 24. We have heard both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax, Circle-3, Noida [2015] 63 taxmann.com 114 (Delhi - Trib.) has held that provision for doubtful debt is operating in nature. 27. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the TPO himself while calculating PLI of comparables has taken donation and provision for doubtful debt to be non operating in nature. The TPO has not made out the interlink between the donations and provisions for doubtful debt while concluding that it is operating in nature. No direct connectivity was made out by the TPO while arriving at the said conclusion. Therefore, the order of the TPO/AO is not sustainable on this account while making additions to that extent. Ground No. 5 of the Assessee s appeal is allowed. 28. As relates to Ground No. 6, the Ld. AR submitted that TPO has erred in re-calculating Assessee s PLI from 20.17% to 16.17%. The same is not acceptable to the assesse as per the Ld. AR. The Ld. AR submitted that assesse in its TP Study at page 499, 485 of PB Vol. 2 has stated that ₹ 3,06,71,861/- was incurred on NOIDA unit where no operation was done but fixed cost had to be incurred. Hence, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of services to the AE. The Ld. AR submitted that it specifically refers to expenses incurred in course of normal operations and excludes extraordinary expenses and other expenses not relating to normal operations of the assesse. Thus, a bare reading of Safe Harbour Rules states that the intent is to exclude such extra-ordinary expenses which have no corelation with day-to day operations. Further, the Ld. AR pointed out that TPO at page 29 states that these Safe Harbour Rules are applicable and applies them when determining the PLI of the comparables. Hence, the Ld. AR submitted that TPO must apply these Safe Harbour Rules when determining the PLI of the Assessee also. The Ld. AR relied upon the following judgments- Marubeni India (P.) Ltd. v. DIT 120131 354 ITR 638/215 Taxman 122 (Maq.)/33 taxmann.com 100 (Delhi)- Delhi High Court CIT vs. Transwitch India (P.) Ltd ITA No. 678/2012- Delhi High Court HOV Services Ltd. vs. JCIT [2016] 73 taxmann.com 311 (Pune - Trib.) HCL Technologies BPO Services Ltd. v. Asstt. CIT 120151 60 taxmann.com 186/69 SOT 571 (Delhi-Trib) Dy. CIT v. Exxon Mobil Gas (India) (P.) Ltd. [20151 152 ITD 220/120141 51 taxmann.com 256 (Delhi-Trib) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the same into consideration, decide the issue as per fact and law. Needless to the say, the assessee be given the opportunity of hearing by following principles of natural justice. Ground No. 6 is partly allowed for statistical purpose. 32. As relates to Ground No. 9, the Ld. AR submitted that the assessee has claimed deduction under Section 10A of the Income Tax Act, 1961 as allowable after setting off brought forward losses of the previous years. The Ld. AR submitted that the issue is squarely covered in favour of the assessee by the decision of the Hon ble Supreme Court and therefore the issue needs to be decided in favour of the assessee. 33. The Ld. DR submitted regarding Ground No. 9 that the ITAT Delhi held in case of Interra Information Technologies (India) (P.) Ltd. [2012] 27 taxmann.com 1 (Delhi - Trib.) that the contention of the assessee that the transfer pricing adjustment should not be made for the reason that its income is exempt under section 10A and hence there is no motive to divert profit has to be rejected applying the judgment of the Special Bench of the Tribunal rendered in the case of Aztec Software Technology Services Ltd. v. Asstt. CIT [2007] 15 SOT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits and gains from business in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001-02 on completion of the period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any reference to deduction under Section 10A in Chapter VI of the Act can be understand by acknowledging that any such reference or mention would have been a repetition of what has already been provided in Section 10A. The provisions of Sections 80HHC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under Section 10A were to be made at the stage of operation of Chapter VI of the Act. The retention of the said provisions of the Act i.e. Section 80HHC and 80HHE, despite the amendment of Section 10A, in our view, indicates that some additional benefits to eligible Section 10A units, not contemplated by Sections 80HHC and 80HHE, was intended by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding the expression total income of the assessee in Section 10A as total income of the undertaking . 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. Thus, the Hon ble Apex Court held that the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The expression total income of the assessee in Section 10A has to be understood as total income of the undertaking . Thus, there was no motive of the assessee to divert the profit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding the issue of comparables. Therefore, Ground Nos. 7 and 8 are partly allowed for statistical purpose. 39. Ground No. 11 is regarding charging and computing interest under section 234B, 234D and 244A of the Income Tax Act, 1961. Since, no specific arguments were raised before us and since charging of interest is consequential to the computation of total income of the assessee, therefore, ground No. 11 is dismissed. 40. Ground No. 12 is regarding initiation of penalty proceedings under the provisions of section 271 (1)(c) of the Income Tax Act, 1961. The same is dismissed being premature at this juncture. 41. In result, ITA No. 1466/DEL/2015 for A.Y. 2010-11 i.e. appeal of the assessee is partly allowed for statistical purpose. 42. Now we are taking up the Appeal for A.Y. 2008-09 Grounds are as follows: 1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Assessing Officer ( AO ) is bad in law and void ab-initio. 2. That on facts and circumstances of the case and in law, the Ld. AO/Ld. Transfer Pricing Officer ( TPO )/ Ld. Dispute Resolution Panel ( DRP ) erred in making an addition of ₹ 186,687,657/-to the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gth margin applicable to the Appellant and also erred by rejecting certain companies which were comparable by way of functions and assets in order to determine the arm's length margin applicable to the Appellant 4.4. The Ld. AO/ Ld. TPO/ Ld. DRP has erred in incorrectly computing margins of several comparable companies selected in the final comparable set 5. The Ld. AO/Ld. TPO/ Ld. DRP erred in treating provision for doubtful debts and donation expenses as an operating item instead of treating them as non-operating while computing the operating margin of the Appellant 6. The Ld.AO/Ld. TPO/ Ld. DRP erred in reclassifying expenses related to the non- unit of the Appellant which had been taken as non-operating by the Appellant to be operating expenses. Further, the Ld. AO/Ld. TPO/ Ld. DRP also erred in not considering the documentary evidence submitted to substantiate the non-operations in the said unit of the Appellant. 7. The Ld.AO/ Ld. TPO/ Ld. DRP erred in disregarding the multiple year data selected by the Appellant in the TP Documentation and in selecting the current year (i.e. financial year 2009-10) data for comparability despite the fact that at the time of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,189/- on 30-09-2009. However, tax was paid u/s 115JB on book profit of ₹ 1,78,14,537/-. The case was selected for scrutiny. Notice u/s 143(2) of the I T Act was issued and served upon the assessee on 06.08.2009. In response to the notice, Chartered Accountant and Authorized Representative of the assessee attended the proceedings and filed required details. In this case, a reference was made to the Addl.CIT,TPO-1(2), New Delhi; for determining arm s length price u/s 92CA(3) in respect of international transaction entered into by the assessee during financial year 2007-08. The issue was examined by the Addl.CIT,TPO-1(2), New Delhi, who vide his order dated 28.10.2011 determined the difference in arm s length price of the international transactions of the assessee with its Associated Enterprises at ₹ 1,43,47,80,664/-. The Transfer Pricing Officer passed an order u/s 92CA(3) of the Act on 28.10.2011 wherein the TPO proposed an adjustment of ₹ 18,91,35,772/-. The TPO computed the arm s length price of the IT enabled services rendered by assessee as under:- Arithmetic mean PLI : 29.16% Less: Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court in case of Rampgreen Solutions (2015) 377 ITR 533 for this very Assessment Year. It has significant outsourcing cost and vendor payment are almost 87% and employee cost is about only 4.39%. The assessee company, on the other hand, has significant employee cost whereby cost of assessee is ₹ 85,34,53,827/-. Recently in case of CIT vs. New River Software Services Ltd. (ITA No. 924/2016 order dated 22.08.2017, the Hon ble Delhi High Court held that this company cannot be taken as a comparable as it has a different business model. The Ld. AR further submitted that this comparable is functionally dissimilar as it is engaged in Digital Library and Print on demand. It is in the field of data digitization, conversion and publishing. 44.2 The Ld. DR relied upon the order of the TPO/AO and the directions of the DRP. 44.3 We have heard both the parties and perused all the relevant material available on record. The assessee company is engaged in the business of providing IT enabled services to its AEs and mainly having segment relating to Business Information, Intellectual Property, Investment Research and Financial Analytics and Market Research. But Coral Hub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44.7 Wipro Ltd.: The Ld. AR submitted that the turnover of the assessee is ₹ 143 crores whereas turnover of Wipro is ₹ 176,581 million. The Ld. AR relied upon the decision of the ITAT in case of Samsung Heavy Industries India P. Ltd. vs. DCIT (2017) 84 taxmann.com 154 wherein it is held that turnover is a important factor to determine comparability. The Ld. AR submitted that this comparable is having its own significant tangible which is not in the case of the assessee company. The Ld. AR further submitted that there is significant R D activities in this comparable. Besides this, the Ld. AR submitted that this comparable fails TPO s own 75% revenue income filter. Income from this segment is ₹ 10,58,10,000 and total is ₹ 176,58,10,000. It fails the TPO s filter because BPO segment income figure is approximately 11,572 whereas IT/software segment income figure is 112,762 which is less than 75% filter. Thus, the Ld. AR submitted that this comparable has to be excluded. 44.8 The Ld. DR relied upon the order of the TPO/AO and the directions of the DRP. 44.9 We have heard both the parties and perused all the relevant material available on record. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This company provides tailored process outsourcing and management services in addition to multitude of the data aggregation and mining and maintenance services. There is extraordinary events during A.Y. 2008-09 that of acquisition. Eclerx Services Ltd. has been acquired UK based Igentica Travel Solutions Ltd. which gave it a new customer base. The Ld. AR relied upon the decision of the Hon ble Delhi High Court in case of PCIT vs. Amerirprise India Pvt. Ltd. (ITA No. 461/2016). 44.14 The Ld. DR relied upon the order of the TPO/AO and the directions of the DRP. 44.15 We have heard both the parties and perused all the relevant material available on record. Eclerx Services Ltd. is engaged in providing data analysis and data process solutions. Pricing analytics, bundling optimization, content operations, sales and marketing support, product data management, revenue management are some of its functions. It is engaged in data analytics and financial services and this position for this comparable has been accepted by the Hon ble Delhi High Court in Rampgreen Solutions for A.Y. 2008-09. There is extraordinary events during A.Y. 2008-09 that of acquisition. Therefore, it will be app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy, data conversion, related computer based services and other related services. Thus the function of this comparable company is different from the function of the assessee company. There is an extraordinary event in this year. Therefore, it will be appropriate to exclude this comparable. Therefore, we direct the TPO/AP to exclude this comparable from the final list of the comparables. 44.22 Datamatics Financial Services P. Ltd.: The Ld. AR submitted that this comparable company s ITES segment does not pass the TPO s filter of income more than 75% from the ITES segment as total income is ₹ 16,72,43,518 and income from ITES segment is only ₹ 6,05,96,243/-. Thus, the income from ITES is ₹ 13,28,776/- out of total income of ₹ 6,19,25,019/-. There is discrepancy in the data provided u/s 133(6) quoted in TPO order and what is reported in Annual Report as regards turnover of the company in each segment, hence data is not reliable. The Ld. AR relied upon the Tribunal decision in case of Baxter India vs. ACIT (ITA No. 6158/2016) wherein it is held that in case of discrepancy in the information in Annual Report and in 133(6) reply, the company cannot be taken as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon the order of the TPO/AO and the directions of the DRP. 44.30 We have heard both the parties and perused all the relevant material available on record. The ITES activities, in HCL Comnet includes data centre management services, end user computing services, managed security services which is not functionally similar to that of assessee company. Therefore, it will be appropriate to exclude this comparable. Therefore, we direct the TPO/AP to exclude this comparable from the final list of the comparables. 45. As regards Ground No. 1 and 2 of the appeal, the same are general in nature. Hence Ground No. 1 and 2 are dismissed. As regards Ground No. 3, the same has not been contested by the Assessee, therefore, Ground No. 3 is dismissed. As regards Ground No. 4, 4.1, 4.2, 4.2.1, 4.2.2, 4.2.3, 4.2.4 and 4.3 as well as Ground No. 5, 6, 7 and 8 are relating to comparables which is dealt in the above paras and the TPO/AO has to follow the directions given by us. Thus, Ground No. 4, 4.1, 4.2, 4.2.1, 4.2.2, 4.2.3, 4.2.4 and 4.3 as well as Ground No. 5, 6, 7 and 8 are partly allowed for statistical purpose. 46. As regards Ground No. 9, the same is identical to the Ground No. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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