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TMI Blog2022 (12) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated Enterprises (AEs). The TPO vide his order u/s 92CA of the I.T.Act dated 27.01.2021 determined the TP adjustment of Rs.12,63,71,153. The details of the TP adjustment made by the TPO reads as follows:- Sl.No. Segments Amount (Rs.) 1. Software Development (SWD) 11,89,55,025 2. Market Support Service (MSS) 74,16,128 Total 12,63,71,153 3. Pursuant to the TPO's order, the draft assessment order was passed on 07.04.2021 by incorporating the TP adjustment proposed by the TPO. 4. Aggrieved by the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP) on 28.05.2021. The DRP vide order dated 24.01.2022 rejected the objections raised by the assessee. However, the DRP in its order directed the TPO to verify certain issues. Pursuant to the DRP's directions, final assessment order was passed on 18.02.2022 incorporating the same transfer pricing adjustment proposed in the TPO's order. 5. Aggrieved by the final assessment order, the assessee has filed the present appeal before the Tribunal. The assessee has filed a concise ground raising therein 11 grounds and various sub-grounds. However, the learned AR during the course of hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Private Limited (supra) and Autodesk India (P) Ltd. (2018) 96 taxmann.com 263. It was further submitted that in several cases where turnover was between Rs.100 crore and 200 crore, the ITAT had directed the companies having turnover exceeding Rs.200 crore to be excluded from comparable list on account of turnover filter. The details of the said case are as follows:- Sl.No. Citation Turnover of thetested party(Rs.) 1. Autodesk India (P.) Ltd. v. DCIT (2018) 96taxmann.com 263 (Bang-Trib.) 2. Tavant Technologies India (P.) Ltd. v. DCIT (2020) 120 taxmann.com 122 (Bang-Trib.) 100,18,13,973 3 . Micro Focus Software India (P.) Ltd. v. ACIT (2020) 113 taxmann.com 244 (Bang- Trib.) 154,06,39,918 4. Dell International Services India (P.) Ltd. v.DCIT (2018) 89 taxmann.com 44 (Bang-Trib) 109,98,69,000 5. Zynga Game Network India (P.) Ltd. v.DCIT (2020) 119 taxmann.com 403 (Bang-Trib) 109,99,71,917 6. Sami - Sabinsa Group Ltd. (TS-183-ITAT-2022 (Bang)-TP) 165,58,22,100 11. We have heard rival submissions and perused the material on record. At the outset, we notice that the TPO/DRP have erred in not applying the upper turnover filter to reject high turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opetal Technologies 494,399,332 389706574 26.86% 3. Cosmic Global Ltd. 62,496,615 5,69,15,360 9.81% 4. e4e Healthcare (capitaline) 613,160,587 54,56,25,872 12.38% 5. ICRA Online Ltd. (seg.) 156,691,000 11,67,49,267 34.21% 6. Jeevan scientific Technology Ltd. 1,721,400,000 1,00,86,52,592 70.66% 7 Infosys B PO Ltd. 11,291,147,909 9,57,73,24,546 17.89% 8. Jindal Intellicom (capitaline) 390,358,799 35,12,69,641 11.13% 9. Mindtree Ltd. (seg.) 5,653,000,000 5,10,39,05,999 10.76% 10 iGate Global Solutions Ltd. 11,845,540,000 9,47,11,65,000 25.07% He submitted that if such criterion is applied, then that would be the proper basis for excluding companies for the purpose of comparability based on turnover. 16. The ld. Counsel for the assessee, on the other hand, submitted that the Hon'ble High Court of Karnataka in the case of Acusis Software (I) P. Ltd. (supra) merely dismissed the appeal of assessee on the ground that no substantial question of law arises for consideration. In particular, he drew our attention to the following paragraphs of the judgment of Hon'ble High Court:- "14. The findings of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 25.08.2018 on Softbrands case (supra), which we find it appropriate to quote hereunder to its relevant extent:-" 17. He submitted that the question of law which the assessee sought to raise before the Hon'ble High Court was justification for excluding Mercury Outsourcing Management Ltd. as a comparable company. It is in that context that the aforesaid decision was rendered by the Hon'ble High Court. He pointed out that the Tribunal in excluding Mercury Outsourcing Management Ltd., had taken a view that its turnover was small compared to the assessee's turnover and therefore not comparable, even if the tolerance range of turnover of 10 times on both the sides of assessee's turnover is applied. There is no positive finding by the Tribunal that the company can be excluded for the purpose of comparability on the basis of turnover, only if the turnover is 10 times on both the sides of assessee's turnover. On the conclusions of the Tribunal, the Hon'ble High Court only held that it is reasonable and deserves to be accepted. In para 16, the Hon'ble High Court has clearly observed that the decisions rendered in other cases referred to by the ld. Counsel for the assessee would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isys Integrating (supra) by the ITAT Bangalore Bench should continue to be followed. Since arguments were advanced on the correctness of the decisions rendered by the ITAT Mumbai and Bangalore Benches taking a view contrary to that taken in the case of Genisys Integrating (supra), we proceed to examine the said issue also. On this issue, the first aspect which we notice is that the decision rendered in the case of Genisys Integrating (supra) was the earliest decision rendered on the issue of comparability of companies on the basis of turnover in Transfer Pricing cases. The decision was rendered as early as 5.8.2011. The decisions rendered by the ITAT Mumbai Benches cited by the learned DR before us in the case of Willis Processing Services (supra) and Capegemini India Pvt.Ltd. (supra) are to be regarded as per incurium as these decisions ignore a binding co-ordinate bench decision. In this regard the decisions referred to by the learned counsel for the Assessee supports the plea of the learned counsel for the Assessee. The decisions rendered in the case of M/S.NTT Data (supra), Societe Generale Global Solutions (supra) and LSI Technologies (supra) were rendered later in point of ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2017-2018). 15. The learned Departmental Representative was duly heard. 16. We have heard rival submissions and perused the material on record. The issue is restored to the files of the AO / TPO. The AO / TPO is directed to exclude M/s R Systems International Limited, if it is found the said company has prepared financials for the year ending December 2016. It is ordered accordingly. 17. Since we have adjudicated ground 8.5.1, the other ground raised with regard to software development services segment is left open. TP Adjustment of Rs.74,16,128 (Grounds 9.1 to 9.8) 18. The other grounds for adjudication is with regard to the TP adjustment of Rs.74,16,128 in respect of MSS segment. The learned AR submitted that the TPO and the DRP had erred in characterizing the assessee's activities as Marketing Support Services (MSS), when the nature of work carried out by the assessee falls into Information Technology Enabled Services (ITES) segment. It was stated that objection of the assessee as regards re-characterisation of segment into MSS instead of ITES, was not considered by the TPO nor by the DRP. Therefore, it was prayed the matter may be restored to the files of the TPO to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tem provides post sales support to customers on remote basis in the back office. 5.11 It is submitted that revenue of over 86% is arising from carrying on back office function. This satisfies the core service filter of 75%. 5.12 Upon perusal of the aforesaid functions, it is submitted that the Assessee is providing low end back office support services which are classifiable as back office services and sales & marketing services. 5.13 It is submitted that even the sales & marketing services provided are routine support services. 5.14 Hence, it is submitted that the aforesaid nature of support services provided by the Assessee is to be regarded as Information Technology Enabled Services (ITES)." 22. From the above reply of the assessee it is clear, it was contended that the activities in support service segment falls under the activities of "back office operation", "call centre or contract centre services" and "for remote maintenance and support centres" under Rule 10TA(e) that defines ITES. The TPO in his order dated 27.01.2021 has not conducted any study with respect to support services. In page 23 of the TPO's order, he had listed 11 companies (6 companies rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X
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