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TMI Blog2025 (1) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the arguments duly considered. 4. Briefly stated the facts of the case are that the assessee electronically filed its return of income on 22/11/2012 declaring total income at Rs.7,96,47,469/-. The return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee. 5. The assessee company is engaged in providing digital mapping services, marketing support services and business support services to its associated enterprises (AEs) outside India. During the year under consideration, the assessee has entered into international transactions with its AEs which exceeded Rs.15,00,00,000/-. Therefore, the international transactions of the assessee have been referred to the TPO for determination of ALP. 6. The business profile of the assessee can be classified as under:- "1.1. Overview of Production Services (Information Technology Enabled Services - 'ITES') 1.1.1. HERE India receives request from NAVTEQ North America, LLC ('NTNA') for converting source data i.e. satellite images into electronic format of maps which is done by keying in the data collected into the database provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , management, validation and delivery of NTNA Maps and associated content products; and * The group follows industry standards in design and development of software tools. The group also collaborates with other centers to build software platforms, tools and applications for building maps and content. The software built is utilized by NTNA's Production and Field teams in creation, correction and building of data for maps. Using the software tools built by development teams, various data products are extracted for automative (in car navigation), internet platform (yahoo and bing maps) and (Garmin) development customers. 1.2.4. NTNA will have the following role and responsibilities: * Developing, creating, maintaining and financing a worldwide digital geographic database, i.e. NTNA database, which includes related location-based content to be used for various purposes like vehicle navigation, route guidance, fleet management and GIS related applications etc; * NTNA is the economic owner of the NT database as well as the owner of intellectual property rights and copyrights of the same. 1.2.5. HERE India can be characterized as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparables selected by the TPO, two comparables are excluded, the assessee would not have any objection in respect of the others. The two comparables which need to be excluded are, Universal Print Systems Ltd. with margin at 52.46% and BNR Udyog Limited with margin at 41.58%. 11. We have carefully perused the orders of the authorities below vis-à-vis the judicial decisions brought to our notices. We find that the Coordinate Bench in the case of GTS e-services Private Ltd. vs. ITO Ward 15(1)(4) [ITA No. 1231/Mum/2017], had considered an identical business profile and held that Universal Print Systems Ltd., is not a good comparable. The relevant findings of the Co-ordinate Bench read as under:- "(ii) Universal Print Solutions Ltd. The Ld. AR disputed the inclusion of this entity on similar ground of functional dissimilarity by drawing our attention to the fact that this entity was an integrated print solution provider and operates in the segment of GTS e-Services Private Limited Assessment Year :2012-13 Repro, Label Printing, Offset Printing and PrePress BPO. The Ld. TPO picked up the pre-press BPO segment for the purpose of comparison. In this segm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; "C. Universal Print Systems Ltd.:- This company was selected by the TPO by obtaining information by exercising of the power vested with him under the provisions of section 133(6) of the IT Act. The TPO held that this company satisfies all the filters selected by him. However this company was objected by the assessee-company before the TPO on the grounds of functional differences as it is engaged in the business activities such as printing and allied activities, high profit making company and also fails the employee cost filter, the objections of the assessee-company were over ruled by the TPO by holding as under: "Counter to the objection on Functional Comparability: The functions of the comparable are similar in the sense that the. Pre- Press BPO unit provides back office support services. Counter to the objection on High Margins: Reliance is placed on the decisions of the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors and the Delhi Tribunal in Nokia India Pvt Ltd (ITA No. 24210/2010). Counter to the objection on Employee Cost Filter: The company operates in four major segments viz., Repro, Label Printing, Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which became the only source of power during certain periods in 2011-12. In addition, procurement cost of raw materials such as paper, film and ink rose substantially along with, market expectation regarding price reduction of printed products." From this it is very clear that this company is into the business of printers whereas the assessee-company is into the Business Process Outsourcing. Therefore by no structure of imagination these two companies can be considered to be functionally similar and therefore we direct the AO/TPO to exclude this company from the list of comparables. 9. Therefore respectfully following the decision of the coordinate Bench of Bangalore Tribunal in the aforesaid case, we direct the AO/TPO to exclude the Universal Print System Ltd from the list of comparables with regard to the assessee herein." 14. Finding parity of facts, we direct for the exclusion of Universal Print Systems Limited from the list of comparables. 15. Insofar as, the inclusion/exclusion of BNR Udyog Limited is concerned, the Hon'ble High Court of Delhi in the case of Omniglobe Information Technologies (India) Pvt. Ltd. vs. Pr. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical transcription, medical billing and coding services there is no separate segment. In the case of Evalueserve SEZ, the Tribunal after detail analysis has excluded the said comparable. The finding of the Tribunal now stands confirmed by the Hon'ble Delhi High Court (supra). Accordingly, respectfully following the same, this comparable is also directed to be excluded." 15.2. Respectfully following the decisions of the Hon'ble High Court (supra), we direct for the exclusion of BNR Udyog Limited from the final set of comparable. 16. We will now address to the TP adjustment on account of receipt from software development services. 17. The assessee has adopted TNMM as the MAM with PLI being operating profit to operating cost treating the assessee as a tested party. As per the TP study report, the assessee has used the following comparables:- [***This space has been left blank intentionally. P.T.O.***] Sr.No Name of the Company NCP 2011-12(%) 1 Akshay Software Technologies Ltd. 9.87 2 Evoke Technologies Pvt Ltd 11.61 3 E-Zest Solutions Ltd 18.79 4 Goldstone Technologies Ltd. 11.01 5 Mindtree Ltd.** 14.43 6 Persistent System ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee itself and hence it cannot be allowed to resile from its own stand. 4. We are disinclined to sustain the preliminary objection taken by the ld. DR that the assessee should be prohibited from taking a stand contrary to the one which was taken at the stage of the T.P. study or during the course of proceedings before the AO/TPO. It goes without saying that the object of assessment is to determine the income in respect of which the assessee is rightly chargeable to tax. As the income not originally offered for taxation, if otherwise chargeable, is required to be included in the total income, in the same breath, any income wrongly included in the total income, which is otherwise not chargeable, should be excluded. There can be no estoppel against the provisions of the Act. Extending this proposition further to the context of the transfer pricing, if an assessee fails to report an otherwise comparable case, then the TPO is obliged to include it in the list of comparables, and in the same manner, if the assessee wrongly reported an incomparable case as comparable in its TP documentation and then later on claims that it should be excluded, then, there should be nothing to for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 crore. Bifurcation of such revenues is available in Note no. 20 as Sale of products (Domestic - Rs.9,55,70,528/- & Export - Rs. Nil) at Rs.9,55,70,528/- and Other operating revenues (Domestic - Rs.1,17,40,234/- & Export - Rs.3,28,66,174/-) at Rs.4,46,06,408/-. Further bifurcation of `Other operating revenues' from export is given in Note No.33 which shows revenue from export of Engineering services at Rs.3.22 crore and revenues from software development services at Rs.6.02 lakh. The segmental information of this company has been given at page 50, which deciphers revenues from `Software development services' at Rs.3.28 crore, revenue from `Hardware sales and services' at Rs.10.21 crore and revenue from `Metals and minerals' at Rs.51.19 lakh leading to total consolidated revenue of Rs.14.01 crore. Thus, it is clear that the revenue from `Software development service' segment, which has been considered for the purposes of comparison with the assessee's only international transaction of rending software development services, stands at Rs.3.28 crore. On perusal of Note no.33 to the annual accounts of this company as referred to above containing break-up of rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also from I.T. enabled services as well. It goes without saying that I.T. services and I.T. enabled services are as distinct in connotation and nature as north pole is from the south pole. Whereas IT services include software development services, IT enabled services means services rendered with the already developed software. As IT and ITeS services are not comparable, the assessee rendering only IT services cannot be compared with a company which renders both IT and ITeS. In view of the foregoing discussion, we are satisfied that Vama Industries Ltd. is not a functionally comparable company and the same should be excluded from the list of comparables." 20. Respectfully following the decision of the Co-ordinate Bench, we direct for the exclusion of this comparable from the final set of comparables. 21. The ld. A/R submitted that if Vama Industries is excluded, then its profit margin would fall within (+)/(-) 5% range and there would be no need examine other comparables challenged in the instant appeal. Considering this concession, we do not deem it appropriate to delve into other companies from the angle of comparability. 22. Insofar as, the inclusion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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