Excellence Data Research Pvt Ltd.,, Hyderabad v. ITO,Ward 2(1),, Hyderabad

ITA 159/HYD/2014 | 2009-2010
Pronouncement Date: 31-07-2014 | Result: Partly Allowed

Appeal Details

RSA Number 15922514 RSA 2014
Assessee PAN AABCE4933C
Bench Hyderabad
Appeal Number ITA 159/HYD/2014
Duration Of Justice 5 month(s) 27 day(s)
Appellant Excellence Data Research Pvt Ltd.,, Hyderabad
Respondent ITO,Ward 2(1),, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-07-2014
Date Of Final Hearing 15-05-2014
Next Hearing Date 15-05-2014
Assessment Year 2009-2010
Appeal Filed On 03-02-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI B.RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO.159/HYD/2014 : ASSESSMENT YEAR 2009-10 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD (PAN AABCE 4933 C) V/S. INCOME TAX OFFICER WARD 2(1) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY MR. H.SRINIVASULU REVENUE BY MR. P.SOMASEKHARA REDDY DATE OF HEARING 17.6 .201 4 DATE OF PRONOUNCEMENT 31.7.2014 O R D E R PER B.RAMAKOTAIAH ACCOUNTANT MEMBER: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDERS OF THE ASSESSING OFFICER UNDER S.143(3) READ WITH ORDER UNDER S.92CA(2) OF THE INCOME TAX ACT 1961 ON THE DIRECTIONS OF THE DISPUTES RESOLUTION PANEL HYDERA BAD VIDE ORDER UNDER S.144C(5) DATED 27.11.2013. 2. THE ASSESSEE RAISED SIX GROUNDS INVOLVING VARIOUS SUB-GROUNDS OUT OF WHICH GROUND NO.1 GROUN D NO.2.1.1 2.1.3 AND GROUNDS NO.5 AND 6 ARE GENERAL IN NATURE. IN THE COURSE OF ARGUMENTS THE LEARNED CO UNSEL HAS NOT PRESSED THE GROUNDS NO.2 2.1(A) AND 2.2.1.(C) 2.2.3 2.2.4 2.3.5 2.3.6 AND 2.4.1. THESE SUB-GROUNDS AR E ON SOME OF THE FILTERS AND REJECTION OF ASSESSEES TP STUDY AND ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 2 MULTIPLE YEAR DATA ETC. ISSUES IN THESE APPEALS AR E WITH REFERENCE TO TRANSFER PRICING ADJUSTMENTS MADE BY T HE ASSESSING OFFICER/TPO. IN THE COURSE OF ARGUMENTS THE LEARNED COUNSEL CONFINED HIS ARGUMENTS TO THE SELEC TION OF COMPARABLES ON VARIOUS FILTERS AND THE ARGUMENTS AR E ACCORDINGLY SUBMITTED. EVEN THOUGH THE ASSESSEE HAS RAISED THE GROUND FOR INCLUSION OF COMPARABLES IN ITS TRAN SFER PRICING STUDY WHICH WERE REJECTED BY THE TPO IN TH E COURSE OF ARGUMENTS THE GROUNDS NO.2.3.5 WHICH SEEKS INCLU SION OF COMPARABLES SELECTED IN ITS TRANSFER PRICING STUDY WAS NOT PRESSED. THEREFORE THE MAIN ARGUMENTS RELATE TO EX CLUSION OF SEVEN COMPARABLES INCLUDED BY THE TPO IN HIS TRA NSFER PRICING ORDER. 3. IN ADDITION TO THE ISSUE OF TRANSFER PRICING ADJUSTMENT GROUND NO.3 PERTAINS TO EXCLUSION OF IN TERNET EXPENSES FROM THE EXPORT TURNOVER WHILE COMPUTING T HE DEDUCTION UNDER S.10A AND GROUND NO.4 PERTAINS TO S ETTING OFF OF BROUGHT FORWARD BUSINESS LOSSES. 4. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AND THE LEARNED DEPARTMENTAL REPRESE NTATIVE IN DETAIL PERUSED THE PAPER-BOOKS PLACED ON RECORD ALONG WITH THE SUMMARY OF THE CHARTS PREPARED ABOUT STAT EMENTS OF VARIOUS COMPARABLES. IN THE COURSE OF ARGUMENTS THE LEARNED COUNSEL RELIED ON VARIOUS DECISIONS OF THE COORDINATE BENCHES FOR EXCLUSION OF CERTAIN COMPARABLES. WHAT WE NOTICE IS THAT MANY OF THE ORDERS PERTAINED TO EAR LIER YEARS AND NOT FOR THE ASSESSMENT YEAR INVOLVED IN THIS AP PEAL. TRANSFER PRICING ISSUES MAINLY RELY ON THE FACTUAL MATRIX OF EACH CASE IN EACH ASSESSMENT YEAR. THEREFORE WHIL E ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 3 CONSIDERING SOME OF THE PRINCIPLES ESTABLISHED IN V ARIOUS DECISIONS OF THE COORDINATE BENCHES OF EARLIER YEAR S WE COULD NOT COMPLETELY RELY ON THE FINDINGS THEREON. SUFFICE TO SAY THAT WE HAVE CONSIDERED ALL CASE-LAW WHILE DECI DING THE ISSUES PARTICULARLY OF THE HYDERABAD BENCHES OF T HE TRIBUNAL IN HYUNDAI MOTORS INDIA ENGINEERING P. LT D. HYDERABAD V/S. ITO WARD 2(2) HYDERABAD (ITA NO.1850/HYD/2012 FOR ASSESSMENT YEAR 2008-09 DATED 21.2.2014); IN CAPITAL IQ INFORMATION SYSTEMS (INDI A) PVT. LTD. HYDERABAD V/S. DY. CIT (ITA NO.1961/HYD/2011 FOR ASSESSMENT YEAR 2007-08 DATED 23.11.2012) AND M/S. ZAVATA INDIA PRIVATE LTD. HYDERABAD V/S. ITO WARD 3(2) HYDERABAD (ITA NO.628/HYD/2008 FOR ASSESSMENT YEAR 2004-05 DATED 13.1.2013) AND OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING (IT( TP)A NO.1316/BANG/2012 DATED 14.8.2013) WHICH BASICALLY PERTAIN TO EARLIER ASSESSMENT YEARS AND NOT FOR THE YEAR UNDER APPEAL IN THIS CASE. 5. BRIEFLY STATED M/S. EXCELLENCE DATA RESEARCH P. LTD. IS RENDERING BACK OFFICE DATA CREATION CONTEN T DEVELOPMENT AND SUPPORT SERVICES IN RELATION TO ANA LYSIS CONTENT SEARCH AND PROJECTIONS FOR ALL TYPES OF BUS INESS INFORMATION. IT IS A WHOLLY OWNED SUBSIDIARY OF DAT A MONITOR LTD. UK. AND THE AE IN TURN WAS OWNED BY INFORMA PLC UK. ASSESSEES ACTIVITIES COMPRISE OF PROVISION OF BUSI NESS (DATA CREATION CONTENT DEVELOPMENT IN RELATION TO CONTEN T SEARCH AND ANALYSIS TO THE VARIOUS BUSINESS UNITS WITHIN T HE GROUP); TO BUILD AND DEVELOP SOFTWARE TOOLS AND SYSTEMS TO FACILITATE DELIVERY OF GROUP COMPANIES REPORTS AND DATA BASE ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 4 SUBSCRIPTION SERVICES; AND PROVISION OF DATA PROCE SSING AND AUTOMATIC SUPPORT TO POPULATE THE GROUPS SUBSCRIPT ION DATABASES. 6. FOR THE ASSESSMENT YEAR 2009-10 ASSESSEE FILED RETURN OF INCOME ON 30.9.2009 DECLARING AN INCOME O F RS.14 19 335 UNDER NORMAL PROVISIONS OF THE ACT AND RS.4 68 35 769 UNDER S.115JB OF THE ACT. THE ASSES SING OFFICER VIDE HIS DRAFT ASSESSMENT ORDER ENHANCED T HE TOTAL INCOME OF ASSESSEE TO RS.4 07 62 951 ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT OF RS.4 85 12 912 IN AC CORDANCE WITH THE TRANSFER PRICING ORDER PASSED UNDER S.92CA (3) BY THE DY. COMMISSIONER OF INCOME-TAX (TRANSFER PRICIN G) II HYDERABAD(TPO). ASSESSEE HAS REPORTED OPERATING REV ENUE OF RS.42 06 39 815 AND AN OPERATING COST OF RS.37 42 14 507 RESULTING IN OPERATING PROFIT OF RS.4 64 25 308. THE OP/OC WAS ARRIVED AT 12.41%. T HE ENTIRE TURNOVER OF ASSESSEE IS RECEIPTS FROM ITS AE AS ITES PROVIDER. 7. ASSESSEE IN ITS TRANSFER PRICING STUDY SELECTED TNMM AS THE MOST APPROPRIATE METHOD AND THE SEARCH FOR UNCONTROLLED COMPARABLES WAS DONE USING PROWESS AND CAPITALINE PLUS DATABASE. ASSESSEE AFTER APPLYING C ERTAIN FILTERS SHORT LISTED AROUND ELEVEN COMPARABLES FO R ARRIVING AT ALP UNDER THE SEGMENT ITES AND ARITHMETIC MEAN PLI WAS COMPUTED AT 12.55% AS AGAINST THE PLI OF THE AS SESSEE WORKING OUT TO 15.21%. THEREFORE ASSESSEE SUBMITTE D THAT ITS INTERNATIONAL TRANSACTIONS ARE AT ARMS LENGTH PRICE. ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 5 8. EVEN THOUGH THERE IS NO DISPUTE WITH REFERENCE TO THE METHOD ADOPTED THE TPO REJECTED THE DOCUMENTAT ION MAINTAINED BY ASSESSEE ON THE REASONS THAT MULTIPLE YEAR DATA WAS USED; HAS NOT APPLIED EXPORT FILTERS PROPE RLY; AND ALSO SELECTED SOME OF THE COMPANIES WHICH ARE NOT FUNCTIONALLY SIMILAR. AFTER ANALYZING THE REASONS THE TPO UNDERTOOK FRESH SEARCH OF COMPARABLES AND AFTER DET AILED ANALYSIS GAVE A SHOW CAUSE NOTICE TO ASSESSEE FOR ITS OBJECTIONS TO THE SELECTION OF 14 COMPARABLES. ULT IMATELY THE TPO DETERMINED THE FOLLOWING TWELVE COMPANIES A S COMPARABLES AND ARRIVED AT THE AVERAGE PROFIT LEVEL INDICATOR (PLI) OF 27.42% AS PER THE DETAILS TABULATED HEREU NDER- SL. NO. COMPANY NAME OPERATING REVENUE RS.(IN CRORES) PBIT/COST % 1. ACCENTIA TECHNOLOGIES LIMITED 78.73 49.40 2. ACROPETAL TECHNOLOGIES LTD. (SEG.) 33.13 25.01 3. ADITYA BIRLA MINACS WORLDWIDE LTD. 231.57 0.53 4. COSMIC GLOBAL LTD. 7.76 48.20 5. CROSSDOMAIN SOLUTIONS P. LTD 33.76 29.38 6. ECLERX SERVICES LTD. 187.98 53.44 7. INFOSYS B P O LTD. 101.62 16.90 8. JEEVAN SOFTECH TECHNOLOGY LTD. 1.79 16.56 9. MICROLAND LIMITED 144.05 2.35 10. MICROGENETIC SYSTEMS LTD. 1.27 10.11 11. R.SYSTEMS INTERNATIONAL LTD.(SEG.) 26.55 5.77 12. GENESYS INTERNATIONAL LTD. 83.18 71.50 ARITHMETIC MEAN 27.42 ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 6 9. HAVING ARRIVED AT THE ARITHMETIC MEAN PLI AT 27.42% THE TPO ALLOWED WORKING CAPITAL ADJUSTMENT AT 2.05%. THE ARITHMETIC MEAN PLI WAS DETERMINED AT 25 .37% AND TAKING THE OPERATING COST OF RS.37.42 CRORES T HE TPO SUGGESTED ADJUSTMENT OF RS.4 85 12 912 UNDER S.92 CA. 10. THE ASSESSING OFFICER ISSUED A DRAFT ASSESSMEN T ORDER PROPOSING TO MAKE THE ADJUSTMENT AND ASSESSEE FILED ITS OBJECTIONS BEFORE THE DRP. THE DRP VIDE ITS ORD ER RUNNING INTO 16 PAGES REJECTED ALL GROUNDS RAISED BY THE AS SESSEE. AS THE DRP CONFIRMED THE TRANSFER PRICING ADJUSTMEN T MADE BY THE ASSESSING OFFICER AND THE TPO ASSESSEE IS I N APPEAL BEFORE US. 11. ASSESSEE HAS RAISED GROUNDS ON VARIOUS ASPECT S OF TRANSFER PRICING ADJUSTMENTS LIKE REJECTION OF ASSESSEES TP STUDY USE OF FILTERS OBTAINING DATA UNDER S.13 3(6) OF THE ACT WHICH IS NOT AVAILABLE IN PUBLIC DOMAIN SELECT ION OF COMPARABLES AND RISK PROFILE OF ASSESSEE COMPANY VI S--VIS COMPARABLE COMPANIES. AS ALREADY STATED IN THE CO URSE OF ARGUMENTS LEARNED COUNSEL RESTRICTED HIS ARGUME NTS TO THE SELECTION OF COMPARABLES. ASSESSEE IS OBJECTING TO SEVEN COMPARABLES SELECTED BY THE TPO. 12. WE HAVE HEARD THE LEARNED COUNSEL FOR ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE IN DETA IL AND THEIR ARGUMENTS ARE CONSIDERED AT THE APPROPRIATE S TAGES OF THIS ORDER. AS BRIEFLY STATED ASSESSEE IS OBJECT ING TO THE FOLLOWING SEVEN COMPARABLES OUT OF TWELVE COMPARABL ES SELECTED BY THE TPO. ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 7 SL. NO. COMPANY NAME 1. INFOSYS B P O LTD. 2. GENESYS INTERNATIONAL LTD. 3. ECLERX SERVICES LTD. 4. COSMIC GLOBAL LTD. 5. ACROPETAL TECHNOLOGIES LTD. (SEG.) 6. ACCENTIA TECHNOLOGIES LIMITED 7. CROSSDOMAIN SOLUTIONS P. LTD IT WAS SUBMITTED THAT IF THESE COMPARABLES WERE CON SIDERED OTHER ISSUES RELATING TO TRANSFER PRICING ADJUSTMEN T BECOME ACADEMIC IN NATURE. 13. WE HAVE CONSIDERED THE CONTENTIONS OF THE PARTIES AND EXAMINED THE DOCUMENTS AND PAPER-BOOKS PLACED ON RECORD. CORRECTNESS OF INCLUSION OF THE A BOVE COMPANIES IS DECIDED HEREUNDER CASE BY CASE. (1) INFOSYS B P O LTD. : 14. IT WAS THE CONTENTION OF ASSESSEE THAT THIS B PO IS A GIANT IN ITS AREA AND HAS BRAND VALUE OF INF OSYS TECHNOLOGIES LIMITED. ASSESSEES MAIN CONTENTION WA S THAT IT IS NOT FUNCTIONALLY SIMILAR AND ITS TURNOVER IS MUC H MORE WHEN COMPARED TO THAT OF ASSESSEE. IT WAS ALSO CON TENDED THAT THE INFOSYS BPO HAS DONE BRAND BUILDING EXERCI SE BY INCURRING LARGE AMOUNTS OF BRAND BUILDING AND ADVER TISEMENT EXPENDITURE AND UNDERTAKING BRAND CAMPAIGNING OUTSI DE INDIA. FURTHER IT ALSO HAS HUGE ASSET BASE AND TH EREFORE THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE TO ASSE SSEE. ASSESSEE RELIED ON THE DECISION OF THE HONBLE DELH I HIGH COURT IN THE CASE OF CIT V/S. AGNITY INDIA TECHNOLO GIES PVT. ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 8 LTD. (2013) 219 TAXMAN 26 (DEL) WHEREIN IT WAS HE LD THAT HUGE TURNOVER COMPANIES LIKE INFOSYS AND WIPRO CAN NOT BE CONSIDERED AS COMPARABLE TO SMALLER COMPANIES LIKE ASSESSEE. 14.1 WE ARE IN AGREEMENT WITH THE CONTENTIONS OF THE COMPARABILITY ON TURNOVER RATIO OF ASSESSEE WITH TH IS COMPANY ON THE GROUND THAT ASSESSEES TURNOVER IS A BOUT RS.42.06 CRORES AS AGAINST TURNOVER OF RS.1016 CRO RES OF THE INFOSYS. WE ARE ALSO OF THE VIEW THAT OTHER CONTEN TIONS WITH REGARD TO THE BRAND VALUE AND BRAND BUILDING EXERC ISE HAVING HUGE ASSET BASE CAN BE CONSIDERED TO ARRIVE AT THE CONCLUSION THAT INFOSYS BPO IS FUNCTIONALLY NOT SIM ILAR TO THAT OF ASSESSEE. INFOSYS BPO STANDS ON ITS OWN AS AN EXCLUSIVE BPO OF THE INFOSYS TECHNOLOGIES AND IN EARLIER YEAR S GENERALLY INFOSYS BPO IS EXCLUDED IN MANY OF THE C ASES. CONSIDERING THESE ASPECTS WE ARE OF THE OPINION TH AT EVEN THOUGH THE PROFITS OF THE INFOSYS BPO LTD. IS REASO NABLE AND NO SUPER PROFITS ARE EARNED BECAUSE OF ITS BIG BRA ND VALUE THIS COMPANY HAS TO BE EXCLUDED ON THE GROUNDS OF FUNCTIONAL DISSIMILARITY ON FAR ANALYSIS. THEREFORE WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY. (2) GENESYS INTERNATIONAL LTD. 15. IT WAS THE CONTENTION THAT THIS COMPANY FUNCTIONS IN TWO HORIZONTALS AND IS HAVING SUPER P ROFITS. IT WAS FURTHER SUBMITTED THAT THIS COMPANY IS NOT ONLY IN SOFTWARE DEVELOPMENT BUT ALSO IN GEOSPATIAL SERVICE S WHICH ARE HIGHLY TECHNICAL. IT ALSO INVOLVES IN CONSULTI NG ACTIVITY. IT WAS THE CONTENTION THAT THIS COMPANY WAS ANALYSE D BY THE ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 9 COORDINATE BENCH OF THE TRIBUNAL AT DELHI IN THE CA SE OF M/S. MERCER CONSULTING (INDIA) LTD. V/S DCIT (VIDE ORDE R DATED 6 TH JUNE 2014 IN ITA NO.966/DEL/2014) WHEREIN THIS COMPANY WAS EXCLUDED IN THAT CASE. LEARNED COUNSEL FOR ASSESSEE RELIED UPON THE FINDINGS OF THE TRIBUNAL V IDE PARAS 14.2 AND 14.3 IN THAT CASE WHICH READ AS FOLLOWS- 14.2. WE HAVE HEARD THE RIVAL SUBMISSIONS A ND PERUSED THE RIVAL MATERIALS ON RECORD. IT HAS BEEN NOTICED SUPRA THAT ASSESSEE IS BASICALLY PROV IDING VARIOUS SERVICES TO THE CUSTOMERS OF ITS AES IN RELATION TO HUMAN RESOURCES WHICH ARE MORE OR LESS CENTERED AROUND THE EMPLOYEES OF THE PROSPECTIVE CLIENTS. WHEN WE CONSIDER THE NATU RE OF SERVICES PROVIDED BY GENESYS INTERNATIONAL CORPORATION LTD. IT COMES TO THE FOREFRONT THAT THEY ARE PROVIDING FULL RANGE OF GEOSPATIAL SERVICE S TO ITS CUSTOMERS. IN SIMPLE TERMS GEOSPATIAL SERVI CES MEANS THE SERVICES RELATING TO THE RELATIVE P OSITION OF THINGS ON THE EARTHS SURFACE. THESE BASI CALLY INCLUDE 3D MAPPING NAVIGATION MAPS IMAGE PROCESSING CADASTRAL MAPPING ETC. IF WE TA KE INTO ACCOUNT THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE BEING FINANCIAL AND RETIREMENT SECURITY HEALTH PRODUCTIVITY OF EMPLOYEES AN D EMPLOYMENT RELATIONSHIPS AND THEN TRY TO COMP ARE THEM WITH THOSE RENDERED BY GENESYS IT IS MANIFESTED THAT BOTH ARE TOTALLY INCOMPARABLE. 14.3. THE TPO ON PAGE 48 OF HIS ORDER HAS EXAMINED CBDT CIRCULAR SO 890 (E) DATED 26.9.2000 WHICH PROVIDES A DETAILED LIST OF PRODUCTS OR SERVI CES THAT CAN BE COVERED UNDER THE ITES FOR THE PURPOSES OF SECTION 10A AND 10B OF THE ACT. IN THIS CIRCULAR INFORMATION TECHNOLOGY ENABLED PRODUCTS/SERVICES HAVE BEEN DIVIDED INTO FIFTEE N CATEGORIES STARTING WITH BANK OFFICE OPERATIO NS CALL CENTRES ETC. AND ENDING WITH WEBSITE SERVICES. FROM THE VERY DESCRIPTION OF SUCH SERVICES IT IS PALPABLE THAT EVEN THOUGH THESE FALL UNDER THE OVERALL ITES CATEGORY BUT SOME OF THEM ARE QUITE DIFFERENT FROM EACH OTHER. TO CITE ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 10 SERVICE AT SL.NO. (VI) OF THIS CIRCULAR IS GEOGRAPHIC INFORMATION SYSTEM SERVICES AND AT SL. NO. (V II) IS HUMAN RESOURCES SERVICES. NO DOUBT ALL THESE FIFTEEN CATEGORIES OF PRODUCTS/SERVICES HAVE BEEN INCLUDED UNDER THE MAJOR HEAD OF INFORMATION TECHNOLOGY ENABLED SERVICES (ITES) BUT MOST OF THEM ARE QUITE DISTINGUISHABLE FROM OTHERS. IN OU R CONSIDERED OPINION THE FIFTEEN BROAD CATEGORIES SE T OUT IN THIS CIRCULAR CANNOT PER SE BE CLAIMED AS SIMILA R TO EACH OTHER. A CURSORY LOOK AT THESE PRODUCTS/SERVIC ES TRANSPIRES THAT SOME OF THEM ARE FUNCTIONALLY QUITE DIFFERENT FROM EACH OTHER. FURTHER THE LEVEL OF INVESTMENT REQUIRED FOR PROVIDING SUCH SERVICES I S ALSO NOT CONSISTENT. IN OUR CONSIDERED OPINI ON THE MERE FACT THAT TWO SERVICES ARE PLACED UNDER THIS CATEGORY DO NOT BECOME AUTOMATICALLY COMPARABLE. IF A CASE PROVIDING ONE CATEGORY OF SERVICES UNDER ITES IS CLAIMED AS COMPARABLE WITH ANOTHER IN THE CATEGORY OF SERVICE UNDER ITES AS PER THIS CIRCULAR THEN IT MUST BE SHOWN EX FACIE THAT IT IS BROADLY SIMILAR. ADVERTING TO THE FACTS OF THE INSTAN T CASE WE FIND THAT THE SERVICES RENDERED BY GENESYS FALL UNDER CLAUSE (VI) WITH THE HEADING GEOGRAPHICA L INFORMATION SYSTEMS SERVICES WHEREAS THOSE RENDERED BY THE ASSESSEE FALL PARTLY UNDER CLAU SE (VII) WITH THE HEADING HUMAN RESOURCES SERVICES A ND PARTLY UNDER CLAUSE (XI) WITH THE HEADING PAYR OLL. ON JUXTAPOSITION EXAMINATION OF THESE TWO SETS O F SERVICES WE FIND THAT THERE IS A VAST DIFFERENCE W HICH MAKE ONE QUITE DISTINCT FROM THE OTHER. IN VIEW OF SUCH FUNCTIONAL INCOMPARABILITY BETWEEN ASSESSE E AND GENESYS WE HOLD THAT THIS COMPANY CANNOT BE TREATED AS COMPARABLE. WE THEREFORE DIRECT TO EXCLUDE THIS CASE FROM THE LIST OF COMPARABLES. 15.1. ON CAREFUL CONSIDERATION OF THE MATTER RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO ORDINATE BENCH WE ARE ALSO OF THE OPINION THAT THERE IS VAS T DIFFERENCE BETWEEN THE FUNCTIONS OF THE ABOVE COMPA NY AND THAT OF ASSESSEE. THIS COMPANY AS SUCH CANNOT BE T REATED AS COMPARABLE ON FAR ANALYSIS. WE THEREFORE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY. ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 11 (3) ECLERX SERVICES LTD. 16. THE OBJECTION OF ASSESSEE TO THIS COMPA RABLE IS THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR. IT I S IN THE BUSINESS OF CONSULTANCY AND ADVISORY SERVICE AND PR OVIDES ONLY ANALYTICAL DATA. IT IS ALSO INVOLVED IN QUALIT Y MONITORING. IT IS THE STAND OF THE ASSESSEE THAT THIS COMPANY O FFERS SOLUTIONS THAT INCLUDE DATA ANALYTICS OPERATIONS MANAGEMENT AUDITS AND RECONCILIATION AND THEREFORE HAS TO BE CLASSIFIED AS HIGH END KPO. IN SUPPORT OF THE ST AND OF THE ASSESSEE EXTRACTS FROM THE ANNUAL REPORT OF THIS C OMPANY HAVE BEEN POINTED OUT. THEREFORE THE FUNCTIONS OF THE ABOVE COMPANY ARE DISSIMILAR TO ASSESSEE WHICH IS A CAPTIVE SERVICE PROVIDER. ON THE PRINCIPLES LAID DOWN B Y THE HONBLE SPECIAL BENCH OF THE ITAT (MUMBAI) IN THE C ASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. V/S. ACIT ( ITA NO.7466/MUM/2012 FOR ASSESSMENT YEAR 2008-09 DATED 7.3.2014) AND THE PRINCIPLES LAID DOWN BY THE COORD INATE BENCH OF THE TRIBUNAL(DELHI) IN THE CASE OF M/S. ME RCER CONSULTING (INDIA) PVT. LTD. (SUPRA) ASSESSEE SUB MITS THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. 16.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER SUBMITTED THAT HAVING ACCEPTED ADITYA BIRL A MINACS WORLDWIDE LTD. AS A COMPARABLE COMPANY THIS COMPA NY SHOULD ALSO BE INCLUDED AS OTHERWISE BOTH THE COM PANIES SHOULD BE EXCLUDED. 16.2 WE HAVE CONSIDERED THE ISSUE AND EXAMINED TH E ANNUAL REPORT AND THE OBJECTIONS OF ASSESSEE. AS S EEN FROM THE ANNUAL REPORT THE ABOVE COMPANY IS INVOLVED I N ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 12 DIVERSE NATURE OF SERVICES AND THERE WAS NO SEGMEN TAL DATA FOR DIVERSIFIED SERVICE PORT FOLIO. MOREOVER THIS COMPANY CAN BE CONSIDERED AS KPO AND WE ARE OF THE OPINION THAT THIS COMPANY IS NOT COMPARABLE TO ASSESSEES SERVICES. WE THEREFORE DIRECT THE ASSESSING OFFICER/TPO TO EXCL UDE THIS COMPANY. (4) COSMIC GLOBAL LTD. 17. THE MAIN OBJECTION OF ASSESSEE WITH REFERENCE TO THE INCLUSION OF THIS COMPANY IS WITH REFERENCE TO OUTSOURCING OF ITS MAIN ACTIVITY. EVEN THOUGH THIS COMPANY WAS SELECTED AS COMPARABLE IN ASSESSEES TP STUDY IT HAS RAISED OBJECTION BEFORE THE TPO THAT THIS COMPANYS EMPLOYEE COST IS LESS THAN 21.30% AND MOST OF THE COST IS WITH REFERENCE TO THE OUTSOURCING CHARGES OR TRANSLATION CHARGES AND AS SUCH THIS IS NOT A COMPARABLE COMPANY. THE TPO THOUGH CONSID ERED THESE SUBMISSIONS REJECTED THE SAME ON THE REASON THAT THIS DOES NOT IMPACT THE PROFIT MARGIN OF THE COMPA NY. OPPOSING THE VIEW TAKEN BY THE TPO IT IS SUBMITTED THAT THIS COMPANY CANNOT BE SELECTED AS COMPARABLE AS SIMIL AR ISSUE WAS DISCUSSED BY THE COORDINATE BENCH OF THE TRIBUNAL(DELHI) IN THE CASE OF MERCER CONSULTING (I NDIA) P. LTD. (SUPRA) VIDE PARAS 13.2 TO 13.3 WHICH READ AS UNDER- 13.2. NOW COMING TO THE FACTUAL MATRIX O F THIS CASE WE FIND FROM THE MATERIAL ON RECORD THAT OUTSOURCING CHARGES OF THIS CASE CONSTITUTE 57.31% OF THE TOTAL OPERATING COSTS. THIS DOES NOT APPE AR TO US TO BE A VALID REASON FOR ELIMINATING THI S CASE FROM THE LIST OF COMPARABLES. ON GOING THROUGH THE ANNUAL ACCOUNTS OF COSMIC GLOBAL LIMITED A COP Y OF WHICH HAS BEEN PLACED ON RECORD WE FIND THAT ITS TOTAL REVENUE FROM OPERATIONS ARE AT RS.7 .37 ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 13 CRORE DIVIDED INTO THREE SEGMENTS NAMELY ME DICAL TRANSCRIPTION AND CONSULTANCY SERVICES AT RS.9.90 L ACS TRANSLATION CHARGES AT RS.6.99 CRORE AND ACCOU NTS BPO AT RS.27.76 LAC. THE LD. AR HAS MADE OU T A CASE THAT OUTSOURCING ACTIVITY CARRIED OUT BY THIS COMPANY CONSTITUTES 57% OF TOTAL EXPENSES. TH E REASON FOR WHICH WE ARE NOT AGREEABLE WITH THE LD. AR IS THAT WE HAVE TO EXAMINE THE REVENUE OF THIS CASE ONLY FROM ACCOUNTS BPO SEGMENT AND NOT ON THE ENTITY LEVEL BEING ALSO FROM MEDICAL TRANSCR IPTION AND TRANSLATION CHARGES. WHEN WE ARE EXAMININ G THE RESULTS OF THIS COMPANY FROM THE ACCOUNT S BPO SEGMENT ALONE THERE IS NO NEED TO EXAMI NE THE POSITION UNDER OTHER SEGMENTS. THE ENTIRE OUTSOURCING IS CONFINED TO TRANSLATION CHARGES PAID AT RS.3.00 CRORE WHICH IS STRICTLY IN THE REALM OF THE TRANSLATION SEGMENT REVENUES FROM WHICH ARE TO THE TUNE OF RS.6.99 CRORE. IF THIS SEGMENT O F TRANSLATION IS NOT UNDER CONSIDERATION FOR DEC IDING AS TO WHETHER THIS CASE IS COMPARABLE OR NOT WE CANNOT TAKE RECOURSE TO THE FIGURES WHICH ARE RELEV ANT FOR SEGMENTS OTHER THAN ACCOUNTS BPO. THUS I T IS HELD THAT THIS CASE CANNOT BE EXCLUDED ON TH E STRENGTH OF OUTSOURCING ACTIVITY WHICH IS ALIEN TO THE RELEVANT SEGMENT. 13.3. HOWEVER WE FIND THIS CASE TO INCOMPARABLE ON THE ALTERNATIVE ARGUMENT ADVANCE D BY THE LD. AR TO THE EFFECT THAT TOTAL REVE NUE OF THE ACCOUNTS BPO SEGMENT OF COSMIC GLOBAL LIMITED IS VERY LOW AT RS.27.76 LACS. WE HA VE DISCUSSED THIS ASPECT ABOVE IN THE CONTEXT OF CG- VAKS CASE AND HELD THAT A CAPTIVE UNIT CANN OT BE COMPARED WITH A GIANT CASE AND THUS EXCLUDED CG-VAK WITH TURNOVER FROM ACCOUNTS BPO SEGMEN T AT RS.86.10 LACS. AS THE SEGMENTAL REVENUE O F BPO SEGMENT OF COSMIC GLOBAL LIMITED AT RS.27.76 LAC IS STILL ON MUCH LOWER SIDE THE REASONS GIVE N ABOVE WOULD FULLY APPLY TO HOLD COSMIC GLOBA L LIMITED AS INCOMPARABLE. THIS CASE IS THEREF ORE DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARAB LES. IN VIEW OF THE DETAILED ANALYSIS OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ABOVE REFERRED CASE IN THIS CA SE ALSO WE ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 14 ACCEPT THE CONTENTIONS OF ASSESSEE AND DIRECT THE A SSESSING OFFICER/TPO TO EXCLUDE THIS COMPARABLE FOR THE SAME REASONS. (5) ACROPETAL TECHNOLOGIES LTD. (SEG.) 18. THE OBJECTION OF ASSESSEE WITH REFERENCE TO TH IS COMPANY IS THAT THE COMPANY IS INVOLVED IN ENGINEER ING DESIGN SERVICES AND HIGH END SERVICES AND HAS PRODU CTS IN ITS INVENTORY. IT IS ALSO INVOLVED IN R&D ACTIVITY AND DEVELOPING SOPHISTICATED DELIVERY SYSTEM. IT WAS FURTHER SUBM ITTED THAT THIS COMPANY IS NOT FUNCTIONALLY COMPARABLE AT SEG MENT LEVEL ALSO AS ENGINEERING DESIGN SERVICES ARE HIGH END SERVICES AS CONSIDERED IN OTHER CASES. IT IS FUR THER SUBMITTED THAT ALLOCATION OF EXPENSES BETWEEN SEGME NTS IS NOT POSSIBLE AND DEPRECIATION WAS NOT ALLOCATED BET WEEN THE SEGMENTS. THERE ARE EXTRA-ORDINARY EVENTS WHICH IMP ACT PROFIT ALSO AS CAN BE SEEN FROM THE ANNUAL REPORTS . IT IS FURTHER SUBMITTED THAT THIS COMPANY IS NOT SELECTED IN THE LIST OF COMPARABLES SELECTED IN THE CASE OF MERCER CONS ULTING (INDIA) PVT. LTD. AND THEREFORE SELECTION OF THE C OMPANY BY THE TPO IN THIS CASE WHICH IS ALSO IN SIMILAR I TES SERVICES IS NOT PROPER. 18.1 AFTER CONSIDERING THE RIVAL CONTENTIONS WE A GREE WITH THE OBJECTIONS RAISED BY ASSESSEE. AS SEEN FRO M THE ANNUAL REPORT THIS COMPANY IS INVOLVED IN ENGINEER ING DESIGN SERVICES AND HAS PRODUCTS ALSO WHICH MAKES IT FUNCTIONALLY NOT COMPARABLE. EVEN AT THE SEGMENTAL LEVEL IT PROVIDES ENGINEERING DESIGN SERVICES WHICH WAS CON SIDERED AS HIGH END BY THE COORDINATE BENCH OF THE TRIBUNA L IN THE ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 15 CASE OF HYUNDAI MOTORS INDIA ENGINEERING( SUPRA) IN EARLIER YEAR. THEREFORE WE ARE OF THE OPINION THAT THIS C OMPANY CANNOT BE SELECTED AS A COMPARABLE. WE ACCORDINGL Y DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THIS COMPANY. (6) ACCENTIA TECHNOLOGIES LIMITED. 19. THIS COMPANY WAS OBJECTED TO BY ASSESSEE ON THE REASON OF SUPER PROFITS AS WELL AS EXTRA-ORDINA RY EVENTS. IT WAS SUBMITTED THAT ACQUISITION OF OAK TECHNOLOGI ES & TRANS SERVICES HAS IMPACT ON THE PROFITS OF THE COM PANY AND HAS TAKEN INORGANIC GROWTH AS STRATEGY TO INCREASE THE PROFITS BECAUSE OF THE PECULIAR ECONOMIC CIRCUMSTAN CES AND BRAND VALUE. THE SAME IN THESE CIRCUMSTANCES CANNO T BE SELECTED. IT WAS SUBMITTED THAT ASSESSEE WAS IN ME DICAL TRANSCRIPTION SERVICES. 19.1. THE DEPARTMENTAL REPRESENTATIVE HOWEVER OBJECTED TO THE PLEAS OF ASSESSEE STATING THAT THE EXTRAORDINARY EVENTS OCCURRED IN EARLIER YEAR AND T HEREFORE THE SAME CANNOT BE CONSIDERED AS HAVING ANY IMPACT IN THE YEAR UNDER CONSIDERATION. 19.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND NOTICED THAT THIS COMPANY OPERATES IN A DIFFERENT BUSINESS STRATEGY OF ACQUIRING COMPANIES FOR INORGANIC GROWT H AS ITS STRATEGY. IN EARLIER YEARS ON THE REASON OF ACQUIS ITION OF VARIOUS COMPANIES BEING AN EXTRAORDINARY EVENT WHI CH HAD AN IMPACT ON THE PROFIT THIS COMPANY WAS EXCLUDED. AS SUBMITTED BY THE LEARNED COUNSEL THIS YEAR ALSO T HE ACQUISITION OF SOME COMPANIES BY THAT COMPANY MAY H AVE ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 16 IMPACT ON THE PROFIT. CONSIDERING THE PROFIT MARGIN S OF THE COMPANY AND INSUFFICIENT SEGMENTAL DATA WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE SELECTED AS A COMPARABLE. MOREOVER THIS IS ALSO NOT A COMPARABL E IN THE CASE OF M/S. MERCER CONSULTING (INDIA) P. LTD. (SU PRA) WHICH INDICATES THAT THE TPO THEREIN HAS EXCLUDED IT AT THE OUTSET. IN VIEW OF THIS WE DIRECT THE ASSESSING OFFICER/TP O TO EXCLUDE THIS COMPARABLE FROM THE LIST OF COMPARABL ES SELECTED. (7) CROSSDOMAIN SOLUTIONS P.LTD: 20. ASSESSEES MAIN OBJECTION PERTAINS TO VIOLATIO N OF PRINCIPLES OF NATURAL JUSTICE IN SELECTING THIS COM PARABLE. BEFORE THE TPO ASSESSEE OBJECTED TO OBTAINING INFO RMATION UNDER S.133(6) WHICH IS NOT AVAILABLE IN THE PUBLIC DOMAIN. VIDE ANNEXURE 16 TO THE OBJECTION ASSESSEE RAISED TWO GROUNDS MAINLY ON OBTAINING INFORMATION UNDER S.13 3(6) AND VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. BE FORE US ALSO THE MAIN CONTENTION IS WITH A REFERENCE TO THE VARI ATION IN REVENUE BETWEEN THE INFORMATION IN THE ANNUAL REPOR T AND THE FIGURES ADOPTED BY THE TPO. EVEN THOUGH AN ISSU E WAS RAISED THAT THIS COMPANY WAS NOT FUNCTIONALLY COMPA RABLE WE DO NOT SEE ANY MERIT IN THAT ARGUMENT AS NO SUC H OBJECTION WAS RAISED BEFORE THE REVENUE AUTHORITIES . FURTHER WE HAVE SEEN THE ANNUAL REPORT AND MOST OF THE REVENUE OF THIS COMPANY IS FROM SERVICES ONLY. COMP ANY IS IN THE PAY ROLL SERVICE ACTIVITY. THEREFORE WE ARE OF THE OPINION THAT THE COMPANY IS FUNCTIONALLY SIMILAR TO THE ACTIVITIES OF THE ASSESSEE COMPANY WHICH IS IN THE ITES FIELD. IN VIEW OF THIS WE ARE NOT INCLINED TO EXCLUDE THI S COMPANY ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 17 ON THE BASIS OF FUNCTIONAL DISSIMILARITY AS CONTEN DED BY THE ASSESSEE BEFORE US. BUT WE DIRECT THE AO/TPO TO E XAMINE THE VARIATION IN REVENUE BETWEEN THE INFORMATION IN ANNUAL REPORT AND THE FIGURES ADOPTED BY THE TPO. THE ASS ESSING OFFICER/TPO IS DIRECTED TO WORK OUT THE PLI AFTER G IVING PROPER OPPORTUNITY TO THE ASSESSEE AND CONSIDERING THE OBJECTIONS OF THE ASSESSEE. SUBJECT TO THESE REMARK S ASSESSEES CONTENTIONS ARE REJECTED. 21. WITH REFERENCE TO GROUND NO.2.5 ON RISK PROFIL E LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER/DRP HAVE NOT CONSIDERED THE RISK PROFILE OF THE ASSESSEE AND NECESSARY ADJUSTMENTS HAVE NOT BEE N MADE IN ORDER TO MITIGATE THE DIFFERENCES BETWEEN THE ASSESSEES RISK PROFILE AND THE COMPARABLES SELECTE D BY THE TPO. ASSESSEE CONTENDS THAT ADJUSTMENT OF 1% WHIC H WAS GRANTED BY THE COORDINATE BENCH IN THE CASE OF HELL OSOFT INDIA P. LTD. IN ITA 645/HYD/2009 SHOULD HAVE BEEN ALLOWED. EVEN THOUGH IT WAS CONTENDED THAT THE COOR DINATE BENCH ORDER IN THAT BEHALF IS BINDING ON THE ASSESS ING OFFICER WE ARE NOT INCLINED TO AGREE WITH THAT CON TENTION AS RISK PROFILE OF EACH ASSESSEE DIFFERS DEPENDING ON ITS OWN BUSINESS ACTIVITY WHEN COMPARED TO THAT OF THE COMP ARABLE COMPANY AND IN EACH CASE SEPARATE RISK PROFILE HAS TO BE ANALYSED IN FAR ANALYSIS. THEREFORE ALLOWING DEDUC TION OF 1% TOWARDS RISK PROFILE UNIFORMLY CANNOT BE ADOPTED AS A NORM. FURTHER THIS ASPECT REQUIRES TO BE RE-EXAMIN E BY THE TPO. THEREFORE AFTER EXCLUDING THE ABOVE COMPANIE S IF ANY ADJUSTMENT IS REQUIRED TO BE MADE ASSESSING OFFICE R IS DIRECTED TO CONSIDER THE RISK PROFILE AND ALLOW NEC ESSARY ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 18 DEDUCTION BASED ON THE FACTS OF EACH COMPARABLE CA SE. THE ASSESSING OFFICER/TPO SHOULD ALSO ALLOW THE WORKING CAPITAL ADJUSTMENT ALREADY PROVIDED IN THE COMPUTATION BY T HE TPO. THIS GROUND IS DECIDED ACCORDINGLY. 22. GROUND NO.3 PERTAINS TO EXCLUSION OF INTERNET EXPENSES FROM EXPORT TURNOVER. THE ASSESSING OFFICE R WHILE COMPUTING DEDUCTION UNDER S.10A OF THE ACT REDUCED INTERNET EXPENSES OF RS.7 26 221 FROM EXPORT TURNOV ER. IN DOING SO THE ASSESSING OFFICER RELIED ON THE DEFI NITION OF THE TERM EXPORT TURNOVER IN CLAUSE (IV) OF EXPLANATIO N 2 TO S.10A OF THE ACT. IT WAS SUBMITTED THAT THESE COMMU NICATION EXPENSES COMPRISE OF EXPENSES INCURRED TOWARDS TELE PHONE EXPENSES AND INTERNET AND THESE ARE SPENT IN INDI A AND DO NOT COME WITHIN THE PURVIEW OF THE SAID EXPLANATION . IN THE ALTERNATIVE IT WAS SUBMITTED THAT THE SAME SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER AS WELL. THE TPO REJECTED THE CONTENTION AND THE DRP ALSO DECLINED TO INTERFE RE ON THIS GROUND. 23. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. HONBLE BOMBAY HIGH COURT IN THE CASE OF GEM PLUS JEWELLERY (330 ITR 175) AND THE SPECIAL BENCH (CHEN NAI) OF THE TRIBUNAL IN THE CASE OF SAK SOFT LTD. (121 TTJ 865) HAVE HELD THAT COMMUNICATION CHARGES THOUGH HAVE TO BE EXCLUDED FROM THE EXPORT TURNOVER FOR THE PURPOSE O F COMPUTING DEDUCTION UNDER S.10A OF THE ACT THE SAM E SHOULD ALSO BE EXCLUDED FROM THE TOTAL TURNOVER. WE THEREFORE DIRECT THE ASSESSING OFFICER TO COMPUTE THE DEDUCTION UNDER S.10A AFTER REDUCING THE COMMUNICA TION EXPENSES BOTH FROM THE EXPORT TURNOVER AS WELL AS T OTAL ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 19 TURNOVER. GROUND NO.3 IS ACCORDINGLY TREATED AS PA RTLY ALLOWED. 24. GROUND NO.4 PERTAINS TO THE CONTENTION THAT T HE ASSESSING OFFICER SHOULD HAVE ALLOWED DEDUCTION UND ER S.10A WITHOUT SETTING OFF BROUGHT FORWARD BUSINESS LOSSES OF RS.1 06 39 284. IT WAS THE CONTENTION THAT THE ASSE SSING OFFICER DID NOT PROPOSE TO MAKE ADJUSTMENT OF CARRY FORWARD BUSINESS LOSS IN THE DRAFT ASSESSMENT ORDER WHERE AS IN THE FINAL ORDER THE ASSESSING OFFICER SET OFF THE BRO UGHT FORWARD BUSINESS LOSS BEFORE ALLOWING DEDUCTION UNDER S.10A . THE ASSESSEE IS MAINLY CONTESTING THAT THE ASSESSING OF FICER CAN NOT ADJUST THE BROUGHT FORWARD LOSSES IN THE FINAL ORDER AFTER THE DIRECTIONS OF THE DRP. WHILE ACCEPTING THAT TH E ASSESSING OFFICER SHOULD NOT HAVE DIFFERED FROM THE DRAFT ORDER AS THE SAME WAS ALSO COVERED BY THE DIRECTIO NS OF THE DRP WE CANNOT IGNORE THE FACT THAT AS PER LAW BRO UGHT FORWARD BUSINESS LOSS OF THE UNIT ARE TO BE SET OFF BEFORE ARRIVING AT THE DEDUCTION UNDER S.10A. THIS PRINCI PLE WAS UPHELD BY THE SPECIAL BENCH OF THE TRIBUNAL(AHD.) I N THE CASE OF GOLDMINE SHARES AND FINANCE P. LTD. (302 ITR (AT ) 208)- AHD. THEREFORE IF BROUGHT FORWARD LOSSES PERTAI NS TO THE UNDERTAKING WHICH WAS CLAIMING THE DEDUCTION UNDER S.10A EVEN IF THEY ARE SET OFF AGAINST OTHER INCOME IN R ESPECTIVE YEARS THE SAME SHOULD BE NOTIONALLY SET OFF AGAIN ST THE INCOME OF THIS YEAR. THEREFORE WE DIRECT THE ASSE SSING OFFICER TO GIVE AN OPPORTUNITY TO THE ASSESSEE AND EXAMINE THE BROUGHT FORWARD LOSSES ISSUE AND THEN MAKE THE DISALLOWANCE IF ANY. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY TO RAISE ITS CONTENTIONS ON THIS ISSUE. THEREFORE ITA.NO. 159/HYD/2014 M/S. EXCELLENCE DATA RESEARCH PVT. LTD. HYDERABAD 20 THE GROUND OF THE ASSESSEE ON THIS ISSUE IS CONSIDE RED ALLOWED FOR STATISTICAL PURPOSES. 25. IN THE RESULT ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 31 ST JULY 2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD DT 31 ST JULY 2014. COPY FORWARDED TO: 1. M/S. EXCELLENCE DATA RESEARCH PVT. LTD. THE V PARK PLOT NO.17 VEGA BLOCK 8 TH FLOOR SOFTWARE UNITS LAYOUT MADHAVPUR HYDERABAD 500 081. 2. 3. 4. 5. INCOME TAX OFFICER WARD 2(1) HYDERABAD DISPUTE RESOLUTION PANEL HYDERABAD ADDITIONAL COMMISSIONER OF INCOME-TAX (TRANSFER PRICING) D DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. B.V.S.