DCIT, Bangalore v. M/s Altisource Business Solutions Pvt. Ltd.,, Bangalore

ITA 178/BANG/2015 | 2010-2011
Pronouncement Date: 11-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 17821114 RSA 2015
Assessee PAN AAACO9467A
Bench Bangalore
Appeal Number ITA 178/BANG/2015
Duration Of Justice 6 year(s) 22 day(s)
Appellant DCIT, Bangalore
Respondent M/s Altisource Business Solutions Pvt. Ltd.,, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2021
Appeal Filed By Department
Tags tp
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 11-03-2021
Date Of Final Hearing 09-03-2021
Next Hearing Date 09-03-2021
Last Hearing Date 14-10-2020
First Hearing Date 28-01-2021
Assessment Year 2010-2011
Appeal Filed On 19-02-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AN D SMT. BEENA PILLAI J UDICIAL MEMBER IT (TP) A NO . 178/BANG/2015 ASSESSMENT YEAR : 2010 - 11 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) BANGALORE. VS. M/S. ALTISOURCE BUSINESS SOLUTIONS PRIVATE LTD. 3 RD & 5 TH FLOORS OF WING A & 4 TH FLOOR OF WING B BLOCK NO.12 PRITECH PARK SURVEY NO.51-64/4 BELLANDUR VILLAGE SARJAPUR- MARATHAHALLI OUTER RING ROAD BANGALORE 560 103. P AN : AAACO 9467A APPELLANT RESPONDENT IT (TP) A NO . 335 /BANG/2015 ASSESSMENT YEAR : 2010 - 11 M/S. ALTISOURCE BUSINESS SOLUTIONS PRIVATE LTD. BANGALORE 560 103. PAN: AAACO 9467A VS. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) BANGALOR E . APPELLANT RESPONDENT REVENUE BY : MS. NEERA MALHOTRA CIT(DR)(ITAT) BENGALURU. RESPONDENT BY : SHRI K.R. VASUDEVAN ADVOCATE. DATE OF HEARING : 0 9. 0 3 .2021 DATE OF PRONOUNCEMENT : 11 . 0 3 .202 1 IT(TP)A NOS.178 & 335/BANG/2015 PAGE 2 OF 23 O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER THESE CROSS APPEALS EMANATE FROM THE ORDER OF T HE AO DATED 30.12.2014 PASSED U/S. 143(3) R.W.S. 144C OF THE IN COME-TAX ACT 1961 [THE ACT] IN CONSEQUENCE OF THE DIRECTIONS OF THE DRP U/ S. 144C(5) OF THE ACT DATED 28.11.2014 FOR THE ASSESSMENT YEAR 2010-11. ASSESSEES APPEAL 2. GROUND NOS.1 & 2 ARE GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 3. GROUND NO.3 BY THE ASSESSEE READS AS FOLLOWS:- 4. IN THIS GROUND THE ASSESSEE PRESSED ONLY INCLUS ION OF THE COMPARABLE R SYSTEMS INTERNATIONAL LTD. IN THE ABO VE GROUND. THE LD. AR SUBMITTED THAT THIS COMPANY WAS CONSIDERED AS A COM PARABLE IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. IN IT(TP)A NOS. 404 AND 553/BANG/2015 & C.O. NO. 123/BANG/2015 FOR THE AY 2 010-11 AND VIDE ORDER DATED 13.02.2019 THE TRIBUNAL REMANDED THE MA TTER OF COMPARABILITY OF THIS COMPANY TO THE AO FOR FRESH DECISION. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE AS FOLLOWS:- 19.2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS/CO NTENTIONS AND CAREFULLY PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. WE FIND THAT THE HON'BLE PU NJAB AND HARYANA IT(TP)A NOS.178 & 335/BANG/2015 PAGE 3 OF 23 HIGH COURT IN THE CASE OF MERCER CONSULTING (P.) LT D. (SUPRA) HAS HELD THAT IF THE DATA RELATING TO THE FINANCIAL YEA R IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO IS DIRECTLY AVAILABLE FROM THE ANNUAL ACCOUNTS OF THAT COMPARABLE THEN I TS COMPARABILITY OUGHT TO BE EXAMINED/CONSIDERED. IN THIS REGARD TH E HON'BLE HIGH COURT AT PARAS 27 TO 32 OF ITS ORDER (SUPRA) HAS HE LD AS UNDER: RE: R SYSTEMS INTERNATIONAL LIMITED 27. THE TPO EXCLUDED THE CASE OF R SYSTEMS INTERNAT IONAL LIMITED FROM THE LIST OF COMPARABLES. THE ITAT INCL UDED THE SAME. THE TPO EXCLUDED THE CASE OF R SYSTEMS INTERNATIONAL LIMITED ON THE GROUND THAT IT FOLLOWS THE CALENDAR YEAR I.E. 1ST JANUARY TO 31ST DECEMBER FOR MAINTAINING ITS ANNUAL ACCOUNT WHEREAS THE ACCOUNTI NG YEAR OF THE ASSESSEE IS 1ST APRIL TO 31ST MARCH. TH E TPO FOLLOWED AN ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN ACIT V. HAPAG LLOYD GLOBAL SERVICES LTD . [2013-TII-68-ITAT-MUM-TP] IN WHICH IT HAD BEEN HELD THAT A COMPANY WITH A DIFFERENT FINANCIAL YEAR ENDI NG CANNOT BE COMPARED. 28. WE ARE UNABLE TO AGREE WITH THE DECISION OF THE TPO AND OF THE DRP THAT AFFIRMED IT. THE VIEW TAKEN BY THE TRIBUNAL COMMENDS ITSELF TO US. IT IS NOT THE FINAN CIAL YEAR PER SE THAT IS RELEVANT. EVEN IF THE FINANCIAL YEAR S OF THE ASSESSEE AND OF ANOTHER ENTERPRISE ARE DIFFERENT I T WOULD MAKE NO DIFFERENCE. IF IT IS POSSIBLE TO DETERMINE THE VALUE OF THE TRANSACTIONS DURING THE CORRESPONDING PERIOD S THE PURPOSE OR COMPARABLES WOULD BE SERVED. THE QUESTIO N IN EACH CASE IS WHETHER DESPITE THE FINANCIAL YEAR OF THE ASSESSEE AND OF THE OTHER ENTERPRISE BEING DIFFEREN T THE FINANCIALS OF THE CORRESPONDING PERIOD OF EACH OF T HEM ARE AVAILABLE. IF THEY ARE THE TPO MUST REFER TO THE CORRESPONDING PERIOD OF BOTH THE ENTITIES IN DETERM INING WHETHER THE TWO ARE COMPARABLE OR NOT FOR THE PURPO SE OF DETERMINING THE ALP. 29. AS NOTED BY THE TRIBUNAL THE AUDIT ACCOUNTS OF R SYSTEM INTERNATIONAL LTD. FOR THE YEAR ENDING 31.12 .2008 HAD BEEN GIVEN UNDER ONE COLUMN AND THE DATA FOR TH E QUARTER ENDING 31.03.2009 AND 31.03.2008 (BOTH AUDI TED) HAD BEEN GIVEN IN TWO OTHER COLUMNS. THUS AS RIGHT LY HELD BY THE TRIBUNAL IF FROM THE YEARLY DATA ENDING 31. 12.2008 THE RESULTS OF THE QUARTER ENDING 31.03.2008 ARE EX CLUDED IT(TP)A NOS.178 & 335/BANG/2015 PAGE 4 OF 23 AND IF THE RESULTS FOR THE QUARTER ENDING 31.03.200 9 ARE INCLUDED IT IS POSSIBLE TO OBTAIN THE DATA FOR THE FINANCIAL YEAR 01.04.2008 TO 31.03.2009. 30. THIS VIEW IS NOT CONTRARY TO RULE 10(B)(4) WHIC H READS AS UNDER:- '10B(4) THE DATA TO BE USED IN ANALYSING THE COMPARABILITY OF AN UNCONTROLLED TRANSACTION WITH A N INTERNATIONAL TRANSACTION SHALL BE THE DATA RELATIN G TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO'. 31. THE RULE DOES NOT EXCLUDE FROM CONSIDERATION TH E DATA OF AN ENTITY MERELY BECAUSE ITS FINANCIAL YEAR IS D IFFERENT FROM THE FINANCIAL YEAR OF THE ASSESSEE. WHAT THE R ULE REQUIRES IS THAT THE DATA TO BE USED IN ANALYZING T HE FINANCIAL RESULTS OF AN UNCONTROLLED TRANSACTION WI TH AN INTERNATIONAL TRANSACTION SHALL BE THE DATA RELATIN G TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTI ON HAS BEEN ENTERED INTO. THUS SO LONG AS THE DATA RELATIN G TO THE FINANCIAL YEAR IS AVAILABLE IT MATTERS NOT IT THE FINANCIAL YEAR FOLLOWED IS DIFFERENT. IN THE CASE BEFORE US T HE DATA RELATING TO THE RELEVANT FINANCIAL YEAR OF R SYSTEM S INTERNATIONAL LIMITED IS AVAILABLE. 32. WE ARE THEREFORE ENTIRELY IN AGREEMENT WITH T HE DECISION OF THE TRIBUNAL THAT IF THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTI ON HAS BEEN ENTERED INTO IS DIRECTLY AVAILABLE FROM THE AN NUAL ACCOUNTS OF THAT COMPARABLE THEN IT CANNOT BE HELD AS NOT PASSING THE TEST OF SUB-RULE (4) OF RULE 10B. 19.2.2 RESPECTFULLY FOLLOWING THE DECISION OF THE H ON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF MERCER CONSULTING (P.) LTD. (SUPRA) WE ALSO DEEM IT APPROPRIATE TO FOLLOW THE PRINCIPLE THAT IF DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE I NTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO IS DIRECTLY AVAI LABLE FROM THE ANNUAL ACCOUNTS OF THAT COMPANY THEN THE COMPANY OUGHT BE EXAMINED/CONSIDERED FOR COMPARABILITY. WE ACCORDIN GLY REMAND THE MATTER OF COMPARABILITY OF R SYSTEMS INTERNATIONAL LTD. BACK TO THE FILE OF THE AO TO EXAMINE/DECIDE THE SAME IN THE LI GHT OF THE DECISION OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT (SUPRA ). WE HOLD AND DIRECT ACCORDINGLY. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 5 OF 23 5. BEING SO IN OUR OPINION THROUGH R SYSTEMS INTE RNATIONAL LTD. IS FOLLOWING THE CALENDAR YEAR I.E. 1 ST JAN. TO 31 ST DEC FOR MAINTAINING THEIR ACCOUNTS WHEREAS THE ASSESSEE FOLLOWS 1 ST APR. TO 31 ST MARCH STILL IT COULD BE A COMPARABLE TO THE ASSESSEES CASE AND BE INCLU DED AS A COMPARABLE IN THE LIST OF COMPARABLES AS DECIDED BY THE TRIBUN AL IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA). ACCORDINGLY WE REMIT THE MATTER OF COMPARABILITY OF THIS COMPANY TO THE FILE OF AO/TPO TO EXAMINE AND DECIDE IT AFRESH IN THE LIGHT OF THE DI RECTIONS CONTAINED IN THE ORDER OF TRIBUNAL IN INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA). THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. 6. GROUND NO.4 OF THE ASSESSEE READS AS FOLLOWS:- 7. IN THE ABOVE GROUND THE ASSESSEE HAS PRESSED F OR INCLUSION OF ONLY THE FOLLOWING COMPANIES:- (1) ACCENTIA TECHNOLOGIES LTD. (2) FORTUNE INFOTECH LTD. AND (3) JEEVAN SCIENTIFIC TECHNOLOGY LTD. 8. ACCENTIA TECHNOLOGIES LTD.: THE LD. AR SUBMITTED THAT THIS COMPANY SHOULD BE EXCLUDED FOR THE FOLLOWING REASON S:- (I) THE COMPANY HAS SIGNIFICANT INCOME FROM SOFTWARE PRODUCTS AND SERVICES. (II) SEGMENT DATA IN RELATION TO SOFTWARE SERVICES AND P RODUCT AND ITES ARE NOT AVAILABLE IN THE ANNUAL REPORT. (III) THE COMPANY OWNS INTANGIBLES. (IV) THE COMPANY HAS EXTRA-ORDINARY EVENTS OF AMALGAMATI ON/ ACQUISITION DURING THE YEAR. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 6 OF 23 9. HOWEVER THE LOWER AUTHORITIES OBSERVED THAT AC CENTIA TECHNOLOGIES LTD. IS ENGAGED IN MEDICAL TRANSCRIPTION MEDICAL C ODING BILLING & RECEIVABLE MANAGEMENT WHICH ARE ALL INDIVIDUAL PAR T OF HEALTHCARE BPO SERVICES TERMED AS HRCM SERVICES. IN REGARD TO THE REVENUE RECOGNITION THE OBJECTION OF THE ASSESSEE WAS NOT ACCEPTED BY T HE DRP IN VIEW OF FINANCIAL REPORTING IN WHICH IT IS CLEARLY MENTIONE D THAT THE COMPANY SHALL PREPARE AND MAINTAIN ITS ACCOUNTS FAIRLY AND ACCURA TELY IN ACCORDANCE WITH THE ACCOUNTING & FINANCIAL REPORTING. THE QUESTION OF SEGMENTAL INFORMATION DOES NOT ARISE AS THE COMPANY HAS ONLY ONE SEGMENT. HENCE IT SHALL BE CONSIDERED AS A COMPARABLE WITH THE ASS ESSEE. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS COMPARABLE HAS BEEN EXCLUDED BY THE TRIBUNAL A S A COMPARABLE IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA) WHEREIN IT WAS OBSERVED AS UNDER:- 16.4.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AN D SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD; INCLUDING THE J UDICIAL PRONOUNCEMENT CITED. WE FIND THAT A CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF TESCO HINDUSTAN SERVICE CEN TRE (P.) LTD. (SUPRA) HAS HELD THAT THIS COMPANY 'ACCENTIA' IS N OT FUNCTIONALLY COMPARABLE TO AN ASSESSEE RENDERING ITES AND IN THI S REGARD AT PARA 13 OF ITS ORDER THE CO-ORDINATE BENCH HELD AS UNDE R: '13. AS REGARDS ACCENTIA TECHNOLOGIES LTD. AND ICRA ONLINE LTD. THIS TRIBUNAL IN THE ASSESSEE'S OWN CAS E FOR ASSESSMENT YEAR 2008-09 HAS EXCLUDED THESE TWO COMPANIES FROM THE SET OF COMPARABLES IN PARA 5 AS. '5. THEREAFTER HE SUBMITTED THAT THE FOLLOWING COMPANIES SHOULD BE EXCLUDED ON THE BASIS OF FUNCTIONAL DISSIMILARITY AND IN SUPPORT OF HIS CONTENTION HE PLACED RELIANCE ON THE TRIBUNAL ORDE R RENDERED IN THE CASE OF M/S. FLEXTRONICS TECH. (IND IA) PVT. LTD. V. DCIT IN IT(TP)A NO.1559(B)/2012 DATED 23.10.2015 COPY AVAILABLE ON PAGE NOS.17 TO 38 OF IT(TP)A NOS.178 & 335/BANG/2015 PAGE 7 OF 23 COMPILATION OF CASE LAWS SUBMITTED BEFORE THE TRIBUNAL. (A) ACCENTIA TECH. LTD. (SEG.) (B) ACROPETAL TECH. LTD. (SEG.) (C) CORAL HUBS LTD. (D) CROSSDOMAIN SOLUTIONS LTD. (E) ECLERX SERVICES LTD. (F) GENESYS INTERNATIONAL CORPN. LTD. (G) MOLD TEK TECHNOLOGIES LTD.' WE FURTHER NOTE THAT THE FUNCTIONAL COMPARABILITY HAS BEEN EXAMINED IN DETAILED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF EQUANT SOLUTI ONS INDIA (P.) LTD. V. DY. CIT [2016] 157 ITD 292/66 TAXMANN.COM 2 (DELHI - TRIB.) AS WELL AS IN THE CAS E OF ITO V. INTERWOVEN SOFTWARE SERVICES (INDIA) (P.) LT D. [2016] 74 TAXMANN.COM 103 (BANG. - TRIB.). FURTHER IN THE CASE OF ACROPETAL TECHNOLOGIES LTD. (SEG) THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KODI AK NETWORKS (INDIA) PVT. LTD. V. DY CIT [IT(TP)A NO. 1 540 (BANG) OF 2012] HAS CONSIDERED THE FUNCTIONAL COMPARABILITY AND FOUND THAT THIS COMPANY IS NOT COMPARABLE WITH A CAPTIVE SERVICE PROVIDER. ACCORDINGLY WE DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THESE COMPANIES FROM SET OF COMPARABLES.' 16.4.2 RESPECTFULLY FOLLOWING THE ABOVE DECISIONS O F THE CO- ORDINATE BENCH IN THE CASE OF TESCO HINDUSTAN SERVI CE CENTRE (P.) LTD. (SUPRA) WE HOLD AND DIRECT THAT ACCENTIA TECH NOLOGIES LTD. BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES ON G ROUNDS OF FUNCTIONAL DISSIMILARITY. 11. IN VIEW OF THE ABOVE ORDER OF THE CO-ORDINATE B ENCH OF THE TRIBUNAL WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY FROM T HE LIST OF COMPARABLES. 12. FORTUNE INFOTECH LTD. : THE LD. AR SUBMITTED THAT THIS COMPANY USES WEB BASED SOFTWARE UNIQUE TECHNOLOGY AND TECHN ICAL KNOW-HOW IMPARTED FROM ITS BUSINESS PARTNERS FOR PROVIDING B PO SERVICES. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 8 OF 23 13. THE LD. DR SUBMITTED THAT THIS COMPANY HAS DEVE LOPED ITS OWN SOFTWARE CALLED FINETRAN AND IMPACT INDEX FOR P ERFORMING SERVICES IN MEDICAL TRANSCRIPTION AND PATENT RECORD MANAGEMENT. FURTHER IT WAS SUBMITTED THAT ON EXAMINATION OF ANNUAL ACCOUNTS OF THE SAID COMPANY IT WAS FOUND THAT THERE WAS NO MENTION IN THE ANNUAL R EPORT ABOUT THE IMPORT OF THE UNIQUE TECHNOLOGY AND TECHNICAL KNOW-HOW FRO M THE BUSINESS PARTNERS. EVEN OTHERWISE EVERY COMPANY IS REQUIRE D TO USE THE SOFTWARE AND TECHNOLOGY FOR PROVIDING ITES SERVICES AND THER EFORE ON THE BASIS OF ANNUAL REPORT IT CANNOT BE COMPARED WITH THE ASSESS EE. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LD. AR FORTUNE INFO TECH LTD. HAS BEEN EXCLUDED AS A COMPARABLE BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF OUTSOURCE PARTNERS INTERNATIONAL P. LTD. V. DCIT IN IT(TP)A NO. 337/BANG/2015 VIDE ORDER DATED 06.02.2017 WHEREIN IT WAS HELD AS UNDER:- ON PERUSAL OF THE DETAILS FURNISHED AND SUBMISSION S MADE IT IS SEEN THAT THIS COMPANY HAS DEVELOPED ITS OWN SOFTWARE CA LLED 'FINETRAN' AND 'IMAGE INDEX' FOR PERFORMING SPECIALIZED SERVIC ES IN MEDICAL TRANSCRIPTION AND PATIENT RECORD MANAGEMENT. ON APP RAISAL OF THE SAME WE ARE OF THE OPINION THAT THIS COMPARABLE CO MPANY HAS DEVELOPED UNIQUE SOFTWARE FROM WHICH IT WOULD DERIV E SUBSTANTIAL BENEFITS/ADVANTAGES WHEN COMPARED WITH THE ASSESSEE WHICH IS UNDERTAKING PURE CALL CENTRE SERVICES. APPLYING THE PRINCIPLE THAT COMPANIES WHICH ARE. ON SIMILAR STANDARDS ONLY SHOU LD BE TAKEN AS COMPARABLES WE HOLD THAT THIS COMPANY WHICH HAS UN IQUE INTANGIBLES CANNOT BE TAKEN AS A COMPARABLE FOR THE ASSESSEE AND ACCORDINGLY DIRECT THE ASSESSING OFFICER/TPO TO EXC LUDE IT FROM THE LIST OF COMPARABLES IN THIS CASE. HENCE BASED ON THE ABOVE FACTS FORTUNE SHOULD NO T BE SELECTED AS A COMPARABLE COMPANY HOWEVER THE COMPANY IS CURREN TLY KNOWN AS CSC BPS INDIA LTD. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 9 OF 23 15. FOLLOWING THE ABOVE RATIO LAID DOWN BY THE CO-ORDIN ATE BENCH OF THE TRIBUNAL WE DIRECT THE AO/TPO TO EXCLUDE THE FORTU NE INFOTECH LTD. FROM THE LIST OF COMPARABLES. 16. JEEVAN SCIENTIFIC TECHNOLOGY LTD .: THE LD. AR SUBMITTED THAT THIS EMPLOYEE COST IN THE CASE OF THIS COMPANY IS LESS T HAN 25% AND AS PER THE ANNUAL REPORT THE IT ENABLED SERVICES CONSTITUTE B OTH BPO OPERATION AND ENTERPRISE SOLUTION AND THEREFORE NEEDS TO BE EXCLU DED FROM THE COMPARABLES. 17. THE LD. DR SUBMITTED THAT THE DETAILS RELATING TO SEGMENTAL EMPLOYEE COST IS NOT AVAILABLE IN THE ANNUAL REPORT HOWEVER IN REFERENCE TO TOTAL REVENUE THE EMPLOYEE COST IS MORE THAN 25%. FURTH ER THERE IS A FUNCTIONAL DISSIMILARITY BETWEEN THE ASSESSEE AND T HE COMPARABLE. 18. WE HAVE HEARD BOTH THE PARTIES. THIS COMPARABL E HAS BEEN EXCLUDED BY THE TRIBUNAL IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA) WHEREIN IT WAS OBSERVED AS UNDER:- 18.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREF ULLY PERUSED THE MATERIAL ON RECORD. THE ASSESSEE'S CONT ENTIONS ARE THAT 'JEEVAN' FAILS THE EMPLOYEE COST FILTER OF 25% APPL IED BY DRP. THE ISSUE OF APPLYING THE EMPLOYEE COST FILTER AT 25% O F SALES SUO MOTU BY THE DRP HAS BEEN DISCUSSED EARLIER IN THIS ORDER WHILE DEALING WITH THE COMPARABILITY OF 'ACROPETAL TECHNOLOGIES L TD. ' AT PARAS 10 TO 10.5.2 OF THIS ORDER ( SUPRA ). FROM THE RECORD IT IS SEEN THAT NEITHER THE ASSESSEE NOR THE TPO HAVE APPLIED THE E MPLOYEE COST FILTER WHILE DETERMINING THE ALP. AS SUCH THE DRP HAS APPLIED THIS FILTER SUO MOTU . WHEN NEW FILTERS ARE APPLIED IT IS NECESSARY TO EXAMINE WHETHER SUCH AN APPLICATION OF A NEW FILTER HAS ANY IMPACT ON THE INCLUSION OR EXCLUSION OF OTHER COMPANIES. I N VIEW OF THE ABOVE WE DEEM IT APPROPRIATE TO REMAND THE ISSUE O F COMPARABILITY OF THIS COMPANY BACK TO THE FILE OF THE TPO WITH TH E DIRECTION THAT THE NEW FILTERS APPLIED SUO MOTU MAY BE APPLIED ON THE OTHER COMPARABLE COMPANIES AS WELL AND THEN THE INCLUSION /EXCLUSION OF THIS COMPANY AS A COMPARABLE BE DECIDED. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 10 OF 23 19. IN VIEW OF THE ABOVE ORDER OF THE COORDINATE BE NCH OF THIS TRIBUNAL WE DIRECT THE AO/TPO TO EXCLUDE JEEVAN SCIENTIFIC T ECHNOLOGIES LTD. FROM THE LIST OF COMPARABLES. 20. GROUND NO.13 BY THE ASSESSEE READS AS FOLLOWS:- 21. AFTER HEARING BOTH THE PARTIES WE FIND THAT TH AT THIS ISSUE CAME UP FOR CONSIDERATION BEFORE THE HONBLE SUPREME COURT IN THE CASE OF ENGINEERING ANALYSIS CENTRE OF EXCELLENCE (P.) LTD. V. CIT [2021] 125 TAXMANN.COM 42 (SC) JUDGMENT DATED 02-03-2021 WHEREIN IT WAS HELD THAT TRANSACTION RELATING TO SOFTWARE ARE IN THE NATURE OF SALE AND NOT LICENSE NO COPYRIGHT OR PART OF ANY COPYRIGHT IS LICENSED TO T HE ASSESSEE. THE NON- RESIDENT OWNER CONTINUES TO HAVE PROPRIETARY RIGHTS IN THE SOFTWARE AND USE OF SOFTWARE BY THE INDIAN COMPANY IS LIMITED TO MAK ING BACK-UP COPY AND REDISTRIBUTION. SO PAYMENT RECEIVED FOR SALE OF CO MPUTER SOFTWARE IS BUSINESS INCOME. AS SUCH SOFTWARE PURCHASED IS IN THE NATURE OF PURCHASE AND SALE OF PRODUCT AND NO TDS IS DEDUCTIB LE. BEING SO IT IS IT(TP)A NOS.178 & 335/BANG/2015 PAGE 11 OF 23 ALLOWABLE AS EXPENDITURE AND THERE IS NO QUESTION O F DEDUCTION OF ANY TDS ON THE SAME. ACCORDINGLY THIS GROUND OF ASSESSEE I S ALLOWED. 22. GROUND NO.14 WAS NOT PRESSED AS SUCH IT IS DIS MISSED. 23. GROUND NO.15 READS AS FOLLOWS:- 24. WE REMIT THE ISSUE TO THE AO AND DIRECT TO GIVE CORRECT TDS CREDIT AFTER EXAMINATION. 25. GROUND NO.16 READS AS UNDER:- 26. THE AO IS DIRECTED TO GIVE MAT CREDIT IN ACCORD ANCE WITH LAW. 27. IN THE RESULT THE APPEAL BY THE ASSESSEE IS P ARTLY ALLOWED. REVENUES APPEAL 28. GROUND NO.2 BY THE REVENUE READS AS FOLLOWS:- IT(TP)A NOS.178 & 335/BANG/2015 PAGE 12 OF 23 29. THE DRP OBSERVED THAT IT WAS NOTICED FROM THE P ROFIT & LOSS ACCOUNT THAT OUT OF TOTAL EXPENSES OF RS.87.26 CROR ES EXPENSES OF RS.55.85 CRORES INCURRED ONSITE DEVELOPMENT OF SOFT WARE WHICH WORKS OUT TO 64% OF THE TOTAL EXPENSES WHICH MAKES IT CLEAR T HAT THE COMPANY IS PREDOMINANTLY IN PROVIDING ONSITE SERVICES AND THER EFORE NOT COMPARABLE WITH ASSESSEE. IT WAS ALSO OBSERVED THAT EMPLOYEE COST FILTER NEEDS TO BE APPLIED IN ITS SEGMENT ALSO ON THAT COUNT ALSO EMP LOYEE COST IS LESS THAN 25% AND CANNOT BE RETAINED AS COMPARABLE. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 30. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THIS COMPANY WAS CONSIDERED AS A COMPARABLE BY THE TRIBUNAL IN THE C ASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA) WHEREIN IT WAS OBSERVED AS UNDER:- 10.5.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS ON THIS ISSUE AND CAREFULLY PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. FROM THE DETAILS ON RECORD W E FIND THAT THE ASSESSEE HAS OBJECTED TO THE INCLUSION OF 'ACROPETA L' IN THE SET OF COMPARABLES ON THE GROUND THAT IT IS NOT FUNCTIONAL LY COMPARABLE TO THE ASSESSEE; BOTH BEFORE THE TPO AND THE DRP. HOWE VER IT IS SEEN THAT THE DRP HAS NOT ADJUDICATED ON THE FUNCTIONAL COMPARABILITY OF 'ACROPETAL' VIS--VIS THE ASSESSEE IN THE CASE ON H AND. INSTEAD THE DRP HAS RENDERED A FINDING THAT THE SERVICES RENDER ED BY 'ACROPETAL' ARE PREDOMINANTLY ON-SITE SERVICES AND APPLIED THE ON-SITE FILTER. THE DRP FURTHER DIRECTED THAT 'ACROPETAL' NEEDS TO BE E XCLUDED FROM THE SET OF COMPARABLES AS ITS EMPLOYEE COST IS LESS THA T 25% AND EMPLOYEE COST FILTER SHOULD BE APPLIED. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 13 OF 23 10.5.2 IN THIS REGARD IT IS SEEN THAT NEITHER T HE ASSESSEE IN ITS TP STUDY NOR THE TPO HAS APPLIED THE ON-SITE FILTER WH ILE DETERMINING THE ALP. SIMILAR IS THE CASE WITH EMPLOYEE COST FIL TER; WHICH HAS NEITHER BEEN APPLIED BY THE ASSESSEE NOR BY THE TPO WHILE DETERMINING THE ALP. AS SUCH THE DRP HAS APPLIED TH ESE FILTERS SUO MOTU. WHEN NEW FILTERS ARE APPLIED IT IS NECESSARY TO EXAMINE WHETHER SUCH AN APPLICATION OF A NEW FILTER HAS ANY IMPACT ON THE OTHER COMPANIES ABOUT THEIR INCLUSION OR EXCLUSION. IT IS ALSO SEEN THAT THE DRP HAS NOT RENDERED A FINDING ON THE FUNC TIONAL COMPARABILITY OF 'ACROPETAL' EVEN THOUGH A SPECIFIC GROUND HAS BEEN RAISED AND THE JUDICIAL DECISIONS IN THIS REGARD HA VE BEEN BROUGHT TO THE NOTICE OF THE DRP. IN VIEW OF THE ABOVE WE DEE M IT APPROPRIATE TO REMAND THE ISSUE OF COMPARABILITY OF ACROPETAL T ECHNOLOGIES LTD. BACK TO THE FILE OF THE TPO WITH A DIRECTION THAT THE TWO FILTERS I.E. ON-SITE FILTER AND EMPLOYEE COST FILTER APPL IED BY THE DRP SUO MOTU MAY BE APPLIED TO THE OTHER COMPARABLE COMPAN IES AS WELL AND FUNCTIONAL CAPACITY BE DECIDED IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENT CITED BY THE ASSESSEE (SUPRA). 31. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL WE ARE INCLINED TO REMIT THIS ISSUE TO THE FILE OF AO/TPO WITH SIMILAR DIREC TIONS. 32. GROUND NO.3 BY THE REVENUE IS AS FOLLOWS:- 33. ICRA ONLINE LTD. : THE DRP OBSERVED THAT THE TOTAL FOREIGN CURRENCY EARNINGS DURING THE YEAR IS 11.14 CRORES A S AGAINST THE TOTAL SERVICE REVENUE OF 18.35 CRORES WHICH INDICATES THA T ONLY 60% REVENUE IS COMING FROM EXPORT AS AGAINST THE 100% EXPORT OF TH E ASSESSEE COMPANY. IN VIEW OF THIS 75% EXPORT EARNING FILTER NEEDS TO BE APPLIED AS AGAINST THE 25% APPLIED BY THE TPO. HENCE THE DRP OBSERVED THA T IT CANNOT BE RETAINED AS A COMPARABLE. AGAINST THIS THE REVENU E IS IN APPEAL BEFORE US. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 14 OF 23 34. AFTER HEARING BOTH THE PARTIES WE FIND THAT TH IS COMPANY WAS CONSIDERED IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA) WHEREIN THIS ISSUE WAS REMITTED BACK TO THE FILE OF AO/TPO OBSERVING AS FOLLOWS:- 11.3.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS A ND CAREFULLY PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AS SESSEE HAS OBJECTED TO THE INCLUSION OF 'ICRA' ON THE GROUND T HAT IT IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE; BOTH BEFOR E THE TPO AS WELL AS THE DRP. THE DRP HOWEVER HAS NOT ADJUDICA TED ON ITS FUNCTIONAL COMPARABILITY OF 'ICRA' BUT INSTEAD PRO CEEDED TO RENDER A FINDING THAT THIS COMPANY REQUIRES TO BE EXCLUDED BY APPLYING 75% EXPORT EARNING FILTER. IN THIS REGARD IT IS SE EN THAT THE TPO APPLIED THE FILTER OF 25% OF EXPORT EARNINGS. THE D RP ORDER HOWEVER STATES THAT 'IN THE PRECEDING PARAS IT HAS BEEN HELD BY US THAT 75% EXPORT EARNING FILTER NEEDS TO BE APPLIED CONSISTENTLY FOR THE ITES SEGMENT ALSO AS AGAINST THE 25% EXPORT EAR NING FILTER APPLIED BY THE TPO.' BUT WE FIND THAT THERE IS NO SUCH DISCUSSION OR DECISION BEEN RENDERED BY THE DRP AS CLAIMED. IN TH E ABSENCE OF ANY SUCH DISCUSSION OR DECISION BEING RENDERED AS CLAIMED APPLYING THE 75% EXPORT EARNING FILTER SUO MOTU IS NOT TENABLE. FURTHER IF ANY NEW FILTERS ARE APPLIED IT IS IMPE RATIVE TO EXAMINE WHETHER THE APPLICATION OF SUCH A FILTER HAS ANY IM PACT ON THE OTHER COMPANIES ABOUT THEIR INCLUSION OR EXCLUSION IN THE SET OF COMPARABLES. THAT 'ICRA' WAS NOT SELECTED AS A COMP ARABLE BY TPO'S IN OTHER CASES CANNOT BE A VALID GROUND FOR E XCLUSION IN THIS CASE ALSO UNLESS THE REASONS FOR SUCH EXCLUSION IN OTHER CASES ARE KNOWN. IN VIEW OF THE ABOVE WE DEEM IT APPROPRIATE TO REMAND THE ISSUE OF COMPARABILITY OF THIS COMPANY I.E. ICRA O NLINE LTD. TO THE FILE OF THE TPO WITH THE DIRECTION THAT THE FIL TER APPLIED SUO MOTU BY THE DRP IN THE CASE OF 'ICRA' BE APPLIED TO THE ENTIRE SET OF COMPARABLE COMPANIES. 35. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL TH IS ISSUE IS REMITTED BACK TO THE AO WITH SIMILAR DIRECTIONS. 36. SUNDARAM BUSINESS SERVICES LTD. : THE DRP OBSERVED THAT THE ANNUAL REPORT OF THIS COMPANY SHOWS THAT TOTAL REVE NUE WAS RS.19.34 CRORES FROM BPO SERVICES OUT OF WHICH ONLY RS.7.14 CRORES (36.91%) IS IT(TP)A NOS.178 & 335/BANG/2015 PAGE 15 OF 23 FROM EXPORT. SINCE 75% EXPORT EARNING FILTER HAS T O BE APPLIED FOR ITES SEGMENT ALSO THE COMPANY FAILS THE SAID FILTER. H ENCE IT WAS EXCLUDED. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 37. WE HAVE HEARD BOTH THE PARTIES. THIS COMPARABL E WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA) AND REMITTED BACK TO AO/TPO FOR FRESH CONSIDERATIO N WHEREIN IT WAS OBSERVED AS UNDER:- 11.4.3 WE HAVE CONSIDERED THE RIVAL CONTENTIONS A ND CAREFULLY PERUSED THE MATERIAL ON RECORD. THIS COMPANY 'SUND ARAM' WAS SELECTED AS A COMPARABLE BY THE TPO AND THE ASSESSE E HAD ACCEPTED THE SAME WITHOUT ANY OBJECTION. WE FIND THAT THE DR P SUO MOTU EXAMINED THE COMPARABILITY OF THIS COMPANY AND DIRE CTED ITS EXCLUSION FROM THE SET OF COMPARABLES ON THE GROUND THAT IT FAILS THE 75% EXPORT EARNING FILTER A NEW FILTER INTRODUCED BY THE DRP WHICH WAS NOT APPLIED EITHER BY THE TPO OR THE ASSESSEE. THE DRP ORDER IN THIS REGARD STATES THAT 'IT HAS ALREADY BEEN HE LD IN THE PRECEDING PARAS THAT 75% EXPORT EARNING FILTER HAS TO BE CONS ISTENTLY APPLIED FOR ITES SEGMENT ALSO'. WE HOWEVER FIND THAT THER E IS NO SUCH DISCUSSION OR DECISION RENDERED BY DRP AS CLAIMED. IN THE ABSENCE OF ANY SUCH DISCUSSION OR DECISION AS CLAIMED APP LYING THE 75% EXPORT EARNING FILTER SUO MOTU IS NOT TENABLE. ALSO IF ANY NEW FILTERS ARE APPLIED IT IS NECESSARY TO EXAMINE WHETHER THE APPLICATION THEREOF HAS ANY IMPORT ON THE OTHER COMPARABLES COM PANIES REGARDING THEIR INCLUSION OR EXCLUSION FROM/INTO TH E FINAL SET OF COMPARABLES. SINCE WE HAVE TAKEN THE STAND THAT IF ANY NEW FILTER IS APPLIED IT SHOULD BE APPLIED UNIFORMLY ON THE ENTI RE SET OF COMPARABLE COMPANIES WE DEEM IT APPROPRIATE TO REM AND THE ISSUE OF COMPARABLITY OF THIS COMPANY SUNDARAM BUSINESS SERVICES LTD. BACK TO THE FILE OF THE TPO WITH A DIRECTION THAT T HE 75% EXPORT EARNING FILTER APPLIED SUO MOTU BY THE DRP BE A PPLIED ON THE ENTIRE SET OF COMPARABLE COMPANIES. 38. TAKING A CONSISTENT VIEW WE REMIT THIS ISSUE TO THE AO/TPO WITH SIMILAR DIRECTIONS. 39. GROUND NO.4 BY THE REVENUE READS AS UNDER:- IT(TP)A NOS.178 & 335/BANG/2015 PAGE 16 OF 23 40. WITH REGARD TO ECLERX SERVICES LTD. THE DRP O BSERVED THAT THIS COMPANY IS ENGAGED IN PROVISION OF IT ENABLED SERVI CES [ITES] WHICH ARE IN THE NATURE OF KPO. IT WAS SEEN FROM THE ANNUAL REP ORT THAT THE COMPANY IS KPO COMPANY WHICH CANNOT BE COMPARED TO THE ASSESSE E COMPANY. THE ASSESSEE COMPANY IS ENGAGED IN ROUTINE ITES. HENCE THE DRP EXCLUDED THE SAME. AGAINST THIS THE REVENUE IS IN APPEAL B EFORE US. 41. WE HAVE HEARD THE RIVAL SUBMISSIONS. THIS COM PANY WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA) WHEREIN IT WAS EXCLUDED FROM THE COMPARABLES OBSER VING AS UNDER:- 13.4.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AN D CAREFULLY PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDIC IAL PRONOUNCEMENTS CITED. THE DRP HAS RENDERED A CLEAR FINDING THAT THE FUNCTIONS PERFORMED BY 'EXLERX' ARE NOT SIMILAR TO THAT OF ASSESSEE IN THE CASE ON HAND AND THEREFORE CANNOT B E AS COMPARABLE AND HAS GIVEN ITS DETAILED REASONING FOR ARRIVING A T THIS DECISION; INCLUDING PLACING RELIANCE ON CERTAIN JUDICIAL PRON OUNCEMENTS. WE FIND THAT AS POINTED OUT BY THE LEARNED AR OF THE ASSESSEE THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TESC O HINDUSTAN SERVICE CENTRE (P.) LTD. (SUPRA) HAS HELD THAT THIS COMPANY CANNOT BE COMPARED WITH A COMPANY RENDERING ITES. THE RELE VANT PORTION OF THE ORDER AT PARA 14.1 AND 14.2 THEREOF IS EXTRA CTED HEREUNDER: 'E-CLERX SERVICES LIMITED. 14.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RELEVANT RECORD. AT THE OUT SET WE NOTE THAT THE . .31- PPARABILITY OF M/S. ECLERX SERVICES LTD. HAS BEEN EXAMINED BY THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MAERSK GLOBAL CENTRES (INDIA) (P.) LTD. V. ASSTT . CIT [2014] 43 TAXMANN.COM 100/147 ITD 83 (MUM.) (SB) IN PARAS 82 AND 83 AS UNDER: IT(TP)A NOS.178 & 335/BANG/2015 PAGE 17 OF 23 '82. IN SO FAR AS M/S. ECLERX SERVICES LIMITED IS CONCERNED THE RELEVANT INFORMATION IS AVAILABLE IN THE FORM OF ANNUAL REPORT FOR FINANCIAL YEAR 2007-0 8 PLACED AT PAGES 166 TO 183 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE SAID COMPANY PROVIDES DATA ANALYTICS AND DATA PROCESS SOLUTIONS TO SOME OF THE LARGEST BRANDS IN THE WORLD AND IS RECOGNIZED AS EXPERTS IN CHOSEN MARKETS-FINANCIAL SERVICES AND RETAIL AND MANUFACTURING. IT IS CLAIME D TO BE PROVIDING COMPLETE BUSINESS SOLUTIONS BY COMBINING PEOPLE PROCESS IMPROVEMENT AND AUTOMATION. IT IS CLAIMED TO HAVE EMPLOYED OVER 1500 DOMAIN SPECIALISTS WORKING FOR THE CLIENTS. IT IS CLAIMED THAT ECLERX IS A DIFFERENT COMPANY WITH INDUSTRY SPECIALIZED SERVICES FOR MEETING COMPLEX CLIENT NEEDS DATA ANALYTICS KPO SERVICE PROVIDER SPECIALIZING IN TWO BUSINESS VERTICALS - FINANCIAL SERVICES AND RETAIL AND MANUFACTURING. IT IS CLAIME D TO BE ENGAGED IN PROVIDING SOLUTIONS THAT DO NOT JUST REDUCE COST BUT HELP THE CLIENTS INCREASE SALES AN D REDUCE RISK BY ENHANCING EFFICIENCIES AND BY PROVIDING VALUABLE INSIGHTS THAT EMPOWER BETTER DECISIONS. M/S. ECLERX SERVICES PVT. LTD. IS ALSO CLAIMED TO HAVE A SCALABLE DELIVERY MODEL AND SOLUTIONS OFFERED THAT INCLUDE DATA ANALYTICS OPERATIONS MANAGEMENT AUDITS AND RECONCILIATION METRICS MANAGEMENT AND REPORTING SERVICES. IT ALSO PROVIDES TAILORED PROCESS OUTSOURCING AND MANAGEMENT SERVICES ALONG WITH A MULTITUDE OF DATA AGGREGATION MINING AND MAINTENANCE SERVICES. IT IS CLAIMED THAT THE COMPANY HAS A TEAM DEDICATED TO DEVELOPING AUTOMATION TOOLS TO SUPPORT SERVICE DELIVERY. THESE SOFTWARE AUTOMATION TOOLS INCREASE PRODUCTIVITY ALLOWING CUSTOMERS TO BENEFIT FROM FURTHER COST SAVING AND OUTPUT GAINS WITH BETTER CONTROL OVER QUALITY. KEEPING IN VIEW THE NATURE OF SERVICES RENDERED BY M/S. ECLERX SERVICES PVT. LTD. AND ITS FUNCTIONAL PROFILE WE ARE OF THE VIEW THAT THIS COMPANY IS ALSO MAINLY ENGAGED IN PROVIDING HIGH- END SERVICES INVOLVING SPECIALIZED KNOWLEDGE AND DOMAIN EXPERTISE IN THE FIELD AND THE SAME CANNOT B E COMPARED WITH THE ASSESSEE COMPANY WHICH IS IT(TP)A NOS.178 & 335/BANG/2015 PAGE 18 OF 23 MAINLY ENGAGED IN PROVIDING LOW-END SERVICES TO THE GROUP CONCERNS. 83. FOR THE REASONS GIVEN ABOVE WE ARE OF THE VIEW THAT IF THE FUNCTIONS ACTUALLY PERFORMED BY THE ASSESSEE COMPANY FOR ITS AES ARE COMPARED WITH THE FUNCTIONAL PROFILE OF M/S. ECLERX SERVICESPLTD. AND MOLD-TEC TECHNOLOGIES LTD. IT IS DIFFICULT TO FIND OUT ANY RELATIVELY EQUAL DEGREE OF COMPARABILITY AND TH E SAID ENTITLES CANNOT BE TAKEN AS COMPARABLES FOR TH E PURPOSE OF DETERMINING ALP OF THE TRANSACTIONS OF THE ASSESSEE COMPANY WITH ITS AES. WE THEREFORE DIRECT THAT THESE TWO ENTITIES BE EXCLUDED FROM THE LIST OF 10 COMPARABLES FINALLY TAKEN BY THE AO/TPO AS PER THE DIRECTION OF THE DRP.' 14.2 AS DISCUSSED BY THE SPECIAL BENCH IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) (P.) LTD. (SUPRA) TH IS COMPANY PROVIDES DATA ANALYSIS OPERATING MANAGEMEN T AUDITS RECONCILIATION METRICS MANAGEMENT AND OPER ATING SERVICES IT HAS TWO BUSINESS VERTICALS - FINANCIAL SERVICES RETAIL AND MANUFACTURING. IT WAS FOUND TO HAVE BEIN G PROVIDING COMPLETE BUSINESS SOLUTIONS IN THE NATURE OF HIGH END SERVICES. THE NATURE AND DIFFERENT FIELD O F SERVICES PROVIDED BY THIS COMPANY CLEARLY SHOW THAT IT IS NOT FUNCTIONALLY COMPARABLE WITH THE ITES. ACCORDIN GLY WE DIRECT THE TPO/AO TO EXCLUDE THIS COMPANY FROM T HE SET OF COMPARABLES.' 13.4.2 IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN THE ORDER OF THE DRP AND THE DIRECTION OF THE DRP TO EXCLUDE 'ECLERX SERVICESLTD. ' FROM THE SET OF COMPARABLES IS UPHELD SINCE THIS C OMPANY 'ECLERX' IS EXCLUDED ON GROUNDS OF FUNCTIONAL DISSIMILARITY TH E APPLICATION OF NEW FILTERS BY THE DRP WILL HAVE NO BEARING ON ITS EXCLUSION OR INCLUSION AS IT WOULD CONTINUE TO REMAIN EXCLUDED O N GROUNDS OF FUNCTIONAL COMPARABILITY. THEREFORE THERE IS NO NE ED TO REMAND THE MATTER TO THE TPO AS SOUGHT FOR BY THE LEARNED DR. CONSEQUENTLY GROUND NO.9 OF REVENUE'S APPEAL IS DISMISSED. 42. FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL WE FIND NO INFIRMITY IN THE ORDER OF THE DRP. THIS GROUND OF THE REVENUE IS DISMISSED. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 19 OF 23 43. GROUND NO.5 OF THE REVENUE READS AS FOLLOWS:- 44. THIS COMPANY WAS EXCLUDED BY THE DRP ON THE REA SON THAT IT IS AN ESTABLISHED PLAYER IN THE MARKET HAVING TREMENDOUS BRAND VALUE WHICH HAS A GREAT IMPACT ON THE PRICING IN THE MARKET. ITS M ARGIN IS VERY HIGH. HENCE IT WAS EXCLUDED FROM THE COMPARABLES. AGAINST THIS REVENUE IS IN APPEAL BEFORE US. 45. WE HAVE HEARD BOTH THE PARTIES. THIS COMPANY W AS CONSIDERED IN THE CASE OF INDECOMM GLOBAL SERVICES INDIA PVT. LTD. (SUPRA) WHEREIN THE TRIBUNAL OBSERVED AS UNDER:- 12.4.1 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AN D CAREFULLY PERUSED THE MATERIAL ON RECORD; INCLUDING THE JUDIC IAL PRONOUNCEMENTS CITED. THE DRP HAS RENDERED A CLEAR FINDING THAT THIS COMPANY 'INFOSYS' CANNOT BE CONSIDERED AS FUNC TIONALLY COMPARABLE AND HAVE GIVEN THEIR DETAILED REASONING FOR ARRIVING AT THE DECISION INCLUDING RELIANCE ON VARIOUS JUDICIA L PRONOUNCEMENTS. FURTHER AS SUBMITTED BY THE LEARNED AR OF THE ASSE SSEE THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TESC O HINDUSTAN SERVICE CENTRE (P.) LTD. (SUPRA) HAS HELD THAT THIS COMPANY CANNOT BE COMPARED WITH A COMPANY RENDERING ITES. THE RELE VANT PORTION OF THE ORDER AT PARA 15.4 THEREOF IS EXTRACTED HERE UNDER: '15.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. WE FIN D THAT THE ASSESSEE HAS BROUGHT ON RECORD SUFFICIENT EVIDENCE TO ESTABLISH THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR AND DIFFERE NT FROM THE ASSESSEE AND HENCE IS NOT COMPARABLE AND THE FINDIN G RENDERED IN THE CASE OF TRILOGY E-BUSINESS SOFTWARE INDIA (P.) LTD. V. DY. CIT [2013] 29 TAXMANN.COM 310/140 ITD 540 (BANG.) FOR A SSESSMENT YEAR 2007-08 IS APPLICABLE TO THIS YEAR ALSO. WE AR E INCLINED TO CONCUR WITH THE ARGUMENT PUT FORTH BY THE ASSESSEE THAT INFOSYS BPO IT(TP)A NOS.178 & 335/BANG/2015 PAGE 20 OF 23 LTD. IS NOT FUNCTIONALLY COMPARABLE SINCE IT HAS TH E BENEFIT OF MARKET VALUE AS WELL AS BRAND VALUE. THIS COMPANY ENJOYS T HE BENEFITS OF SCALE AND MARKET LEADERSHIP. IN THIS VIEW OF THE MA TTER WE HOLD THAT THIS COMPANY OUGHT TO BE OMITTED FROM THE SET OF CO MPARABLE COMPANIES. IT IS ORDERED ACCORDINGLY.' 12.4.2 IN VIEW OF THE ABOVE WE FIND NO REASON TO I NTERFERE WITH THE ORDER OF THE DRP AND CONSEQUENTLY THE DRP'S DIRECTI ON TO EXCLUDE THIS COMPANY 'INFOSYS' IS UPHELD. SINCE THIS COMPA NY 'INFOSYS' IS EXCLUDED ON GROUNDS OF FUNCTIONAL DISSIMILARITY TH E APPLICATION OF NEW FILTERS BY THE DRP WILL HAVE NO BEARING ON ITS EXCLUSION OR INCLUSION AS IT WOULD CONTINUE TO REMAIN EXCLUDED O N GROUNDS OF FUNCTIONAL COMPARABILITY. THEREFORE WE FIND THERE IS NO NEED TO REMAND THE COMPARABILITY OF THIS COMPANY TO THE FIL E OF THE TPO AS SOUGHT FOR BY THE LEARNED DR. CONSEQUENTLY GROUND NO. 8 OF REVENUE'S APPEAL IS DISMISSED. 46. WE HAVE GONE THROUGH THE FINDINGS OF THE TRIBUN AL IN THE AFORESAID ORDER. ON SIMILAR REASONING THE EXCLUSION OF THIS COMPANY BY THE DRP IS CONFIRMED. THIS GROUND OF REVENUE IS DISMISSED. 47. GROUND NO. 6 BY THE REVENUE READS AS FOLLOWS:- 48. THE TPO HAS APPLIED AN UPPER CAP FOR ALLOWING W ORKING CAPITAL ADJUSTMENT WITHOUT PROVIDING ANY RATIONALE AND APPL IED PLR RATE AT 11.75% P.A. AS AGAINST 11.87% FOR COMPUTING WORKING CAPITA L ADJUSTMENT. HOWEVER THE DRP OBSERVED THAT ASSESSEE WHILE WORKI NG OUT THE PLR RATE HAS TAKEN INTO CONSIDERATION THE DATA FOR FY 2008-0 9 INSTEAD OF FY 2009-10 WHICH WAS NOT ACCEPTABLE. HOWEVER THE DRP DIRECTE D THE AO TO COMPUTE THE MEAN OF WORKING CAPITAL ADJUSTMENT IN RESPECT O F COMPARABLES RETAINED AFTER GIVING EFFECT TO THE DIRECTIONS OF THE DRP OR DER. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 21 OF 23 49. WE HAVE HEARD BOTH THE PARTIES. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE DRP. HOWEVER THE AO IS DIRECTED T O COMPUTE THE MEAN OF WORKING CAPITAL ADJUSTMENT IN RESPECT OF COMPARABLE S RETAINED AFTER GIVING EFFECT TO THIS ORDER OF THE TRIBUNAL. IT IS ORDERE D ACCORDINGLY. 50. GROUND NOS. 7 & 8 BY THE REVENUE READ AS UNDER: - 51. THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF YOKOGAWA INDIA LTD. 391 ITR 274 WHEREIN IT WAS HELD AS FOLLOWS:- THAT FROM A READING OF THE RELEVANT PROVISIONS OF SECTION 10A IT IS MORE THAN CLEAR THAT THE DEDUCTIONS CONTEMPLATED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIG IBLE UNITS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCT ION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANT LY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEO US CIRCULAR NO. 794 DATED 9-8-2000. IT(TP)A NOS.178 & 335/BANG/2015 PAGE 22 OF 23 IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRS T PROVISO TO SECTIONS 10A(1); 10A(1A) AND 10A(4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS T HE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOU S CIRCULAR OF THE DEPARTMENT (NO.794 DATED 9-8-2000) UNDERSTOOD T HE SITUATION IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DE DUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UN DERTAKING HAS TO BE MADE INDEPENDENTLY AND THEREFORE 'IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OT HER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAI NED IN SECTIONS 70 72 AND 74 WOULD BE PREMATURE FOR APPLICATION. T HE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRI OR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EX PRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A HAS A LREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFO LDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL INCOME OF TH E ASSESSEE' IN SECTION 10A AS 'TOTAL INCOME OF THE UNDERTAKING'. FOR THE AFORESAID REASONS IT IS HELD THAT THOUGH SE CTION 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 AND' NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. 52. IN VIEW OF THE ABOVE JUDGMENT OF HONBLE SUPREM E COURT THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. 53. GROUND NOS. 9 & 10 BY THE REVENUE ARE AS FOLLOW S:- IT(TP)A NOS.178 & 335/BANG/2015 PAGE 23 OF 23 54. THIS ISSUE IS DECIDED IN FAVOUR OF ASSESSEE IN VIEW OF THE DRP FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN CIT V. TATA ELXSI LTD. 349 ITR 98 (KARN) WHICH IS CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. HCL TECHNOLOGIES LTD. IN CIVIL APPEAL NO.8489- 8490 OF 2013 & ORS. DATED 24.04.2018 . 55. IN THE RESULT THE REVENUES APPEAL IS PARTLY A LLOWED. 56. THUS BOTH THE APPEALS BY THE REVENUE AND ASSES SEE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF MARCH 2021. SD/- SD/- ( BEEN A P ILLAI ) ( CHANDR A POOJARI ) JUDICIAL M EMBER ACCOUNTANT MEMBER BANGALORE DATED THE 11 TH MARCH 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.