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TMI Blog2022 (12) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... d be excluded from the list of comparables, since CTIL is functionally different from that of the assessee company. Appeal of assessee allowed. - ITA No. 77/Ahd/2019 - - - Dated:- 21-11-2022 - Ms. Annapurna Gupta, Accountant Member And And Shri Siddhartha Nautiyal, Judicial Member Assessee by: Shri Dhanesh Bafna, A.R. Ms. Chandni Shah, A.R. Revenue by: Shri Atul Pandey, Sr. D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Assistant Commissioner of Income Tax, Circle-2(1)(2), Vadodara, u/s. 143(3) r.w.s. 92CA r.w.s. 144C(13) of the Act vide order dated 17/10/2018 passed for the assessment year 2008-09. 2. At the outset, the counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er under section 143(3) r.w.s. 144C of the Act, determining the total income at 2,50,34,561/- after making addition of 80,83,421/- on account of transfer pricing adjustment (as made in the draft order by the TPO). In appeal, ITAT set aside the matter of the transfer pricing adjustment of 80,83,421/- to the file of TPO. The TP additions were again confirmed by TPO and DRP and the assessee is in appeal before us against the above order. 4. The brief facts in relation to the instant appeal are that the assessee, Weatherford Drilling and Production Services (India) Private Limited operates two divisions (i) Manufacturing Division: this division is engaged in manufacturing of gas lift walls and packers (ii) Weatherford Engineered Systems Supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch assessee CTIL entered into software and e-governance space (v) there is a mismatch in recognising the revenue vis- -vis its corresponding expenditure 4.1 Considering the above, the assessee submitted that CTIL is not functionally comparable to WESS segment of the assessee and accordingly CTIL should be excluded from the comparable set. 4.2 However, DRP rejected the assessee s contention on the following grounds: (i) CTIL is engaged primarily in software development activity and the IT education and training business is only complementary to the core business of software development activity of the company. Accordingly, CTIL cannot be excluded on account of functional dissimilarity. (ii) Regarding the extraordinary event with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de novo consideration. The counsel for the assessee drew our attention to page 231 the paper book and submitted that profit and loss account of CTIL shows that during the year under consideration it had incurred software development expenses to the tune of 1,97,77,882/- and the said company had outsourced 67% of its cost to third company. Accordingly, the business model of CTIL was totally different from that of the assessee company. The counsel for the assessee further drew our attention to page 215 of the paper book and submitted that during the period under consideration, profit of CTIL had increased by 30 times from the previous year and the same clearly constituted exceptional events occurring during the year under consideration and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in-house business model of providing services, said company was not was a comparable. In the case of Aptara Technology (P.) Ltd.[2018] 92 taxmann.com 240 (Bombay), the High Court held that a company which outsourced its work to sub-vendors as against assessee carrying out its activities in-house, could not be selected as comparable. In the case of Mercer Consulting (India) (P.) Ltd.[2016] 76 taxmann.com 153 (Punjab Haryana), the High Court held that since assessee conducted its business activities itself without outsourcing any part of it, a company which outsourced substantial portion of its work, could not be accepted as comparable. In the case of New River Software Services (P.) Ltd[2017] 85 taxmann.com 302 (Delhi), the High Court he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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