Ocean Connect (I) Pvt. Ltd.,, Pune v. Asst. Comm. of Income-tax,, Pune

ITA 49/PUN/2012 | 2005-2006
Pronouncement Date: 29-04-2015 | Result: Allowed

Appeal Details

RSA Number 4924514 RSA 2012
Assessee PAN AAGCS0318E
Bench Pune
Appeal Number ITA 49/PUN/2012
Duration Of Justice 3 year(s) 3 month(s) 18 day(s)
Appellant Ocean Connect (I) Pvt. Ltd.,, Pune
Respondent Asst. Comm. of Income-tax,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 29-04-2015
Date Of Final Hearing 11-12-2014
Next Hearing Date 11-12-2014
Assessment Year 2005-2006
Appeal Filed On 10-01-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 49/PN/2012 (ASSESSMENT YEAR : 2005-06) OCEANS CONNECT (I) PVT. LTD. COMMERZONE 501 5 TH FLOOR BUILDING NO.6 YERAWADA PUNE 411006 PAN NO.AAGCS0318E .. APPLICANT VS. ACIT CIRCLE-1(2) PUNE .. RESPONDENT ASSESSEE BY : SHRI PRAKASH K. JOTWANI & SHRI SHRIKANTH REVENUE BY : MS. NISHTHA TIWARI DATE OF HEARING : 23-03-2015 DATE OF PRONOUNCEMENT : 29-04-2015 ORDER PER R.K.PANDA AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 28-01-2011 OF THE CIT(A)-I PUNE RELATING TO ASSESSMENT YEAR 2005-06. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE OCEAN CONNECT (I) PVT. LTD. (OCIPL IN SHORT) IS A WHOLLY OWNED SUBSIDIARY OF OCEANS CONNECT (UK) LTD. (OCUK IN SHO RT) WHICH WAS INCORPORATED UNDER THE COMPANIES ACT 1956 ON 3 1-08-2001. IT HAS BEEN SET UP TO PROVIDE CALL CENTRE SERVICES TO ITS PARENT COMPANY OCUK. IT FILED ITS RETURN OF INCOME ON 31-10-2005 DECLARING TOTAL INCOME OF RS.12 240/-. A REFERENCE U/S.92CA(1) OF THE I.T. ACT 2 WAS MADE BY THE AO TO THE TPO WHO ISSUED NOTICE U/S .92CA(2) TO THE ASSESSEE CALLING FOR CERTAIN DETAILS. 3. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESS EE DURING THE COURSE OF TRANSFER PRICING ASSESSMENT THE TPO NOTE D THAT THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAS EN TERED INTO INTERNATIONAL TRANSACTION AS UNDER : SR.NO. NAME & ADDRESS OF THE AE DESCRIPTION OF TRANSACTION WITH AE AMOUNT RECEIVED/PAID AS PER BOOKS (RS.) 1 OCCEANS CONNECT (UK) LIMITED OUTBOUND/INBOUND TELEMARKETING/CALL CENTRE SERVICE 8 32 10 579/- THE TPO FURTHER NOTED THAT THE ASSESSEE HAS CHARGED ITS ASSOCIATE ENTERPRISE AT COST + 12% BASIS. THE ASSESSEE HAS C ONSIDERED TNM METHOD TO BE THE MOST APPROPRIATE METHOD FOR BENCHM ARKING ITS TRANSACTION WITH AE WITH RETURN ON CAPITAL EMPLOYED /OPERATING PROFITS AS THE APPROPRIATE PLI. HOWEVER WHILE CAR RYING OUT THE COMPARATIVE WORKING THE ASSESSEE HAS MENTIONED THA T NONE OF THE COMPANIES FOR WHOM THE DATA IS AVAILABLE ON THE PUB LIC DOMAIN CAN BE COMPARED WITH THAT OF THE ASSESSEE COMPANY AS TH E NATURE OF SERVICES OFFERED SIZE AND INDUSTRY VERTICALS OF AL L THE COMPANIES ARE DIFFERENT FROM THAT OF THE ASSESSEE COMPANY. THE A SSESSEE ALSO JUSTIFIED THE WORKING FOR THE MARGIN OF 12% OVER CO STS BY SUBMITTING AS UNDER WHICH HAS BEEN REPRODUCED BY TH E TPO AND WHICH READS AS UNDER: . . . . . . . III) WE HAVE STUDIED THE CALL CENTER INDUSTRY IN INDIA TO LOCATE A COMPARABLE CASE I.E. ONE SATISFYING THE F OLLOWING CONDITIONS : 3 1) A CAL CENTRE PROVIDING SERVICES AS MENTIONED ABOV E 2) HAVING A SINGLE CUSTOMER 3) HAVING A CAPACITY OF 80-100 SEATS IV) GIVEN THE NASCENT STAGE OF THIS BUSINESS AND THE FACT THAT THIS BUSINESS SEGMENT CONSISTS OF MANY SMALL COMPANIES THAT ARE NOT LISTED AND ARE OFTEN IN-HOUSE OR CAPTIVE SERVICES AND H ENCE DO NOT ADVERTISE OR PROVIDE OPERATING DATA THE IDENTIFICATI ON OF A COMPARABLE IS EXTREMELY DIFFICULT. V) THE COMPANIES WHICH WE IDENTIFIED FOR COMPARISON INCLUDED; 1) DAKSH ESERVICES PRIVATE LIMITED 2) SPECTRAMIND ESERVICE PVT. LTD. 3) PROGEON LTD. 4) WNS INDIA (MUMBAI) 5) MPHASIS 6) HCL TECHNOLOGIES BPO LTD. HOWEVER NONE OF THE ABOVE MATCH THE SPECIFICATIONS MENTIONED IN (III) ABOVE. MANY OF THE COMPANIES IDENTIFIED PROVI DE DATA ENTRY AND RELATED OUTSOURCED SERVICES IN ADDITION TO CALL CE NTER SERVICES. FURTHER THEIR SIZE AND INDUSTRY VERTICAL ALSO DIFFER FROM THAT OF OCIPL. VI) MOREOVER GIVEN THE NATURE OF SERVICES AS PER THE AGREEMENT (REF. SECTION D) THE RISKS AND RESPONSIBILITIES INVOLV ED AS WELL AS THE REQUIREMENT OF FUNDS OVER THE NEAR FUTURE THE RATE O F RETURN IS APPEARS TO BE REASONABLE. FURTHER THE RATE PER SEAT A S WORKED OUT ON THE BASIS OF REVENUES CALCULATED AT COST + 12% IS COMPAR ABLE WITH THE RATES CHARGED BY OTHER CALL CENTERS FOR SIMILAR SERVICE S. IT WOULD BE RELEVANT TO NOTE THAT IN TERMS OF THE RESPONSIBILITIE S ASSUMED BY OCIPL THE RISKS TO OCIPL ARE MINIMAL AS IT DOES NOT BE AR RISKS OF CAPITAL EXPENDITURE MARKETING COLLECTION INITIAL TRAINING AND SPECIFIC HARDWARE / SOFTWARE FOR PROJECTS. ALSO SINCE THIS IS A D EDICATED OPERATION COSTS -FOR THE PURPOSES OF ADDING THE MARGIN OF 12% - ARE OVERALL COSTS AS PER THE AUDITED PROFIT AND LOSS ACCOUNT AND HENCE INCLUDE AMORTIZATIONS AND DEPRECIATION. THEREFORE TH E PRICE HAS BEEN CALCULATED ON A REASONABLE BASIS AND THIS IS BORNE OUT B Y THE FACT THAT THE PRICING HELPS TO COVER ESTIMATED FUTURE REQUIREME NT OF FUNDS.' 4. HOWEVER THE TPO WAS NOT SATISFIED WITH THE ABOV E EXPLANATION OF THE ASSESSEE AND ISSUED A SHOW CAUSE NOTICE UNDER THE PROVISO TO SECTION 92C(3) OF THE I.T. ACT. IN THE SAID NOTICE THE TPO HAD PROPOSED THE FOLLOWING 2 COMPANIES TO BE TA KEN FOR BENCHMARKING THE INTERNATIONAL TRANSACTION PERTAINI NG OUTBOUND/INBOUND TELEMARKETING/CALL CENTRE SERVICES FOLLOWING TNM METHOD THE DETAILS OF WHICH ARE AS UNDER : 4 SR.NO. NAME OF THE COMPANY PLI (OP/OE) 1 MAPLE ESOLUTIONS LTD 34.86% 2 SAFFRON GLOBAL LTD. 24.72% AVERAGE 29.79% 5. THE ASSESSEE OBJECTED TO THE ADOPTION OF THE ABO VE 2 COMPANIES FOR BENCHMARKING THE INTERNATIONAL TRANSA CTION STATING THAT ASSESSEE IS NOT AWARE WHETHER THE SELECTED COM PARABLE COMPANIES OPERATE UNDER SIMILAR CONTRACTS AND SIMIL AR CIRCUMSTANCES. IT WAS ARGUED THAT OCEAN CONNECT (I ) PVT. LTD. IS WHOLLY OWNED BY OCUK. ALL TECHNOLOGY HARDWARE AND SOFTWARE SPECIFICATIONS HAVE BEEN DECIDED BY OCUK. THE FINAN CE FOR THIS HAS ALSO BEEN PROVIDED EXHAUSTIVELY BY OCUK. THE AS SESSEE FURTHER STATED THAT ALL THE RISKS OTHER THAN THE PU RE RISKS ARE BORNE BY OCUK WHICH IS ALSO RESPONSIBLE FOR MARKETING CUSTO MER SERVICES LEGAL AND FINANCIAL ASPECTS OCIPL IS ONLY EXECUTING THE CONTRACT AS PER THE INSTRUCTION OF OCUK. IT WAS FURTHER ARGUED THAT NO SUCH ADJUSTMENT WAS MADE IN THE PRECEDING YEARS. IT WAS ARGUED THAT OCUK HAS INCURRED LOSS DURING 2004-05. 6. HOWEVER THE TPO REJECTED THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS NOT COMMENTED A SINGLE WORD ABOUT THE PROCESS OF FINDING OUT THE COMPARABLE COMPANIES AND THE FINAL 2 COMPARABLE COMPANIES SELECTED. ACCORDING TO THE TP O THESE FINAL 2 COMPARABLE COMPANIES WERE SELECTED AFTER A THOROU GH STUDY MADE ON PROWESS KEEPING IN MIND THE PROVISIONS AND GUIDE LINES PROVIDED IN THE I.T. ACT 1961 AND I.T. RULES 1962. HOWEVE R THE ASSESSEE HAS NOT EVEN OBJECTED TO THE PLI ADOPTED BY THE TPO . ACCORDING TO THE TPO WHILE APPLYING TNM METHOD THE I.T. RULES 1962 5 PRESCRIBE THAT THE COMPARISON HAS TO BE MADE BETWEE N THE CONTROLLED TRANSACTION AND THAT BETWEEN UNCONTROLLE D TRANSACTION. THE TRANSACTION BETWEEN THE ASSESSEE AND ITS AE IS CONTROLLED TRANSACTION IS A FOREGONE CONCLUSION. HOWEVER THE JUSTIFICATION FOR CHARGING A SPECIFIC AMOUNT SHOULD NOT BE MET ONLY F ROM THE UNDERLYING CONTROLLED TRANSACTION. ACCORDING TO TH E TPO THE ASSESSEE IN THE INSTANT CASE HAS SQUARELY FAILED TO CARRY OUT ITS RESPONSIBILITY OF BENCHMARKING ITS TRANSACTION BETW EEN THE INDEPENDENT UNRELATED ENTITIES. THE TPO FURTHER VE RIFIED THE AGREEMENT BETWEEN THE ASSESSEE AND OCUK AND OBSERVE D THAT THE ASSESSEE IS REQUIRED TO PROVIDE THE SERVICES TO OCU K ONLY AND NOT TO ANY OTHER CUSTOMERS. THEREFORE BUSINESS OPERAT IONS OF THE ASSESSEE IS DEPENDING ONLY ON ONE CLIENT WHICH ITSE LF IS THE BIGGEST RISK. ACCORDING TO THE TPO IT IS NOT POSSIBLE TO Q UANTIFY THE RISK FACTORS. SIMILARLY THE ASSESSEE HAS ALSO NOT TRIE D TO DEMONSTRATE THE SAME. THEREFORE HE REJECTED THE ARGUMENT OF THE A SSESSEE THAT ADJUSTMENT SHOULD BE MADE CONSIDERING THE RISK FACT OR. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE TPO CONSIDERED THE TWO COMPARABLES NAMELY MAPLE ESOLUTIONS AND SAF FRON GLOBAL LTD. AS COMPARABLES. CONSIDERING THE ARITHMETIC M EAN OF 29.79% OF THE 2 COMPARABLES THE TPO MADE UPWARD ADJUSTMENT OF RS.1 48 03 162/- TO THE INTERNATIONAL TRANSACTION C ARRIED OUT BY THE ASSESSEE. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO GAVE AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS ARGUMENTS IF ANY. 6 AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE TH E AO MADE ADDITION OF RS.1 48 03 162/- TO THE TOTAL INCOME OF THE ASSESSEE. 8. BEFORE CIT(A) THE ASSESSEE MORE OR LESS REITERAT ED THE SAME ARGUMENTS EXCEPT STATING FURTHER THAT THE TPO WAS N OT JUSTIFIED IN REJECTING THE OTHER 8 COMPARABLES WHICH HE HAS INIT IALLY SELECTED FROM THE PROWESS PROCESS. HOWEVER THE LD.CIT(A) W AS ALSO NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESS EE AND UPHELD THE ADDITION MADE BY THE AO/TPO. WHILE DOING SO H E HELD THAT THE TPO AFTER EXAMINING THE ISSUE IN DETAIL ISSUED THE SHOW CAUSE NOTICE WHEREIN HE HAD GIVEN THE DETAILS ABOUT THE 9 COMPARABLES FOUND DURING THE T.P. STUDY AND WHY 2 ARE PROPOSED TO BE ADOPTED. IF THE ASSESSEE HAD ANY OBJECTION ON THAT ISSUE TH E RIGHT FORUM AND THE OPPORTUNITY WAS TO HAVE OBJECTED TO BEFORE THE TPO. SINCE THE ASSESSEE HAS NOT DONE SO HE CANNOT BE PERMITTED TO RAISE AN ISSUE WHICH WAS SPECIFICALLY PUTFORTH BEFORE HIM BY THE T PO AND WAS NOT OBJECTED TO AND THEREFORE BY IMPLICATION IT HAS TO BE TAKEN TO HAVE BEEN ACCEPTED. ACCORDING TO THE LD.CIT(A) THE OBJE CTIONS BEING RAISED NOW ON THE EXCLUSION OF THE 7 COMPARABLES WI LL REQUIRE DE NOVO EXAMINATION OF THE TP ISSUE WHICH CANNOT BE PERMITTED UNLESS IT IS ESTABLISHED THAT PROPER OPPORTUNITY WA S NOT GRANTED. ACCORDING TO HIM THE TRANSACTION BETWEEN THE ASSESS EE AND THE AE ARE BETWEEN THE PARENT COMPANY AND THE SUBSIDIARY A ND THEREFORE THE AGREEMENT IS UNDISPUTEDLY BETWEEN 2 INTERESTED PARTIES AND THEREFORE THE SAME CANNOT BE GIVEN WEIGHTAGE AS IS BEING CLAIMED. THERE IS NOTHING ON RECORD WHICH CAN SHOW WHY 12% O F MARKING IS 7 CORRECT. HE ACCORDINGLY UPHELD THE T.P. ADJUSTMENT MADE BY THE AO. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX ( APPEA LS) HAS ERRED IN CONFIRMING THE ADDITIONS OF RS. 1 48 03 162/- BEIN G THE ADJUSTMENTS RECOMMENDED BY THE TRANSFER PRICING OFFICE R U/S.92CA(3)OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITIONS OF RS.1 48 03 162/- ON THE G ROUND THAT THE APPELLANT HAS NOT OBJECTED TO THE ISSUES RAISED BY TPO A ND HENCE THE SAME CANNOT BE ENTERTAINED. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT ENTERTAINING THE BASIC ARGUMENT PLACED BY THE APPELLANT THAT THE INSTANCES QUOTED BY THE TPO WERE EXTREME AND EXTR A ORDINARY RESULTS WHICH ARE COMPARABLE AS THE SAME VIEW HAVE BEEN HELD BY MANY BENCHES TO THE HON TRIBUNALS. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITIONS WITHOUT ENTERTAINING ADDITI ONAL EVIDENCE BY WAY OF DATA OF THE COMPANIES REFERRED TO IN BY TH E TPO IN SELECTION OF THE COMPANIES WHOSE DATA HAVE BEEN RELIED UPON BY THE TPO. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN OVERLOOKING TO THE DECISION OF THE TERRITORIAL JU RISDICTION OF THE APPELLATE TRIBUNAL IN CASE OF E-GAIN COMMUNICATION P VT. LTD. - 23 SOT 285 WHEREIN THE PROFITABILITY RATIO IS MUCH LOWE R THAN THE CASE OF THE APPELLANT CARRYING ON EXACTLY THE SIMILAR BUSI NESS. 6. YOUR APPELLANT REQUEST LEAVE TO ADD ALTER OR M ODIFY THE GROUNDS OF APPEAL IF SO REQUIRED. 10. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO T HE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF MARKET TOOLS RESEARCH (P) LTD. VS. DCIT REPORTED IN 43 TAXMANN.C OM 195 (COPY OF WHICH IS PLACED AT PAGE 124 TO 127 OF THE PAPER BOOK) SUBMITTED THAT THE TRIBUNAL FOLLOWING THE DECISION OF VARIOUS BENCHES OF THE TRIBUNAL INCLUDING THAT OF THE HYDERABAD BENCH HAVE HELD THAT MAPLE ESOLUTIONS LTD. CANNOT BE TREATED AS COMPARAB LE AS ITS 8 FINANCIAL RESULTS ARE NOT RELIABLE. ACCORDINGLY I T HAS BEEN HELD NOT TO TREAT THIS COMPANY AS A COMPARABLE. REFERRING T O THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF STR EAM INTERNATIONAL SERVICES PVT. LTD. VS. ACIT VIDE ITA NO.8290/MUM/2011 ORDER DATED 10-10-2014 FOR A.Y. 20 07-08 (COPY OF WHICH WAS FILED DURING THE COURSE OF HEARI NG) HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION AT PARA 13 O F ORDER HAS HELD THAT MAPPLE ESOLUTIONS WAS UNDER SERIOUS INDICTMENT IN FRAUD CASES. ACCORDINGLY FOLLOWING ORDER OF THE TRIBUNA L FOR A.Y. 2006- 07 IN ITA NO.8997/MUM/2010 THE TRIBUNAL HAD DIRECT ED TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES F OR A.Y. 2007- 08 ALSO. REFERRING TO THE SAID DECISION HE SUBMITT ED THAT THE COMPANY TRITON CORPORATION LTD. WAS ALSO INVOLVED I N FRAUD FOR WHICH IT WAS HELD THAT THE FINANCIAL RESULTS OF THE COMPANY ARE NOT RELIABLE. THE TRIBUNAL FURTHER HELD THAT WHENEVER A COMPANY OR ITS DIRECTORS ARE FOUND TO BE INVOLVED IN A FRAUD THE COORDINATE BENCHES HAVE TAKEN THE CONSISTENT VIEW OF EXCLUDING THE SAID COMPANY FROM THE FINAL LIST OF COMPARABLES AS THE F INANCIAL RESULTS ARE NOT RELIABLE. 11. REFERRING TO THE REPLY GIVEN TO THE TPO VIDE LE TTER DATED 24- 10-2008 (COPY OF WHICH IS PLACED AT PAPER BOOK PAGE 7) HE DREW THE ATTENTION OF THE BENCH TO THE SUBMISSIONS MADE WHER E IT WAS STATED THAT SAFFRON GLOBAL LTD. AND MAPLE ESOLUTIONS ARE BOTH PART OF TRITON CORPORATION LTD. HE SUBMITTED THAT THIS LETT ER WAS ADDRESSED TO THE TPO ON 24-10-2008. HOWEVER THE TPO HAS PAS SED THE ORDER ON 16-10-2008 WHICH IS PRIOR TO THE REPLY. HE SUB MITTED THAT THE 9 ASSESSEE WAS NOT AWARE OF THE ORDER PASSED BY THE T PO BY THE TIME THE LETTER WAS ADDRESSED. HOWEVER THE AO OR THE C IT(A) HAS NOT COMMENTED UPON THIS ISSUE. HE SUBMITTED THAT SAFFR ON GLOBAL LTD. AND MAPLE ESOLUTIONS BELONG TO THE TRITON GROUP AND SINCE SAFFRON GLOBAL LTD. AND MAPLE ESOLUTIONS ARE FOUND INVOLVE D IN FRAUD THEREFORE IN VIEW OF THE VARIOUS DECISIONS CITED THESE 2 COMPANIES ARE TO BE EXCLUDED FROM THE LIST OF COMPARABLES. O NCE THESE 2 COMPANIES ARE EXCLUDED THEN NOTHING SURVIVES AND T HE RESULT DECLARED BY THE ASSESSEE HAS TO BE ACCEPTED. HE FU RTHER SUBMITTED THAT DURING A.YRS. 2006-07 TO 2008-09 THE TNM METH OD ADOPTED BY THE ASSESSEE SHOWING COST + 12% MARK UP HAS BEEN ACCEPTED. SIMILARLY DURING A.Y. 2009-10 THE AO IN THE ORDER PASSED U/S.143(3) HAS ACCEPTED THE RESULTS AND NO ADJUSTME NT HAS BEEN MADE. HE ACCORDINGLY SUBMITTED THAT FOLLOWING THE RULE OF CONSISTENCY AS WELL AS CONSIDERING THE FACT THAT TH E 2 COMPARABLES SELECTED BY THE TPO ARE INVOLVED IN FRAUD FOR WHIC H IT HAS TO BE EXCLUDED FROM THE COMPARABLES THE BOOK RESULTS DEC LARED BY THE ASSESSEE HAS TO BE ACCEPTED. 12. IN HIS ALTERNATE CONTENTION HE SUBMITTED THAT IT MAY BE SET ASIDE FOR THE LIMITED PURPOSE OF CONSIDERING THE 2 COMPARABLES AS TO WHETHER THEY ARE INVOLVED IN FRAUD OR NOT AND IF SO THEN TO EXCLUDE THE SAME. 13. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). HE SUB MITTED THAT THE ASSESSMENT YEAR INVOLVED IN THE INSTANT CASE IS 200 5-06 WHEREAS THE 10 ASSESSMENT YEAR INVOLVED IN THE CASE DECIDED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF STREAM INTERNA TIONAL SERVICES PVT. LTD. RELATES TO A.Y. 2007-08. THEREFORE MAPP LE ESOLUTIONS CANNOT BE EXCLUDED FROM THE LIST OF COMPARABLES. F URTHER THE ASSESSEE HAS NOT TAKEN ANY COMPARABLES FOR THE TP S TUDY DURING THE YEAR. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF L D.CIT(A) BE UPHELD. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER/ TRANSFER PRICING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THE ASSESSEE IN THE INSTANT CASE HAS EN TERED INTO INTERNATIONAL TRANSACTION WITH ITS AE AMOUNTING TO RS.8 32 10 579/-. IT HAS CHARGED ITS AE AT COST + 12% BASIS. FURTHER THE ASSESSEE HAS CONSIDERED TNM METHOD TO BE MOST APPROPRIATE METHOD FOR BENCHMARKING ITS TRANSACTION WITH AE WITH RETURN ON CAPITAL EMPLOYED BY OPERATING PROFITS AS THE APPROPRIATE PL I. FURTHER ALTHOUGH IN THE TP STUDY REPORT THE ASSESSEE HAD ID ENTIFIED 6 COMPANIES HOWEVER IT IS MENTIONED THAT NONE OF TH E COMPANIES FOR WHOM THE DATA IS AVAILABLE ON THE PUBLIC DOMAIN CAN BE COMPARED WITH THAT OF THE ASSESSEE COMPANY AS THE NATURE OF SERVICES OFFERED SHOWS THAT THE INDUSTRY VERTICALS OF THE COMPANIES ARE DIFFERENT FROM THAT OF THE ASSESSEE COMPANY. WE FIND THE TPO AFTER REJECTING THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE DURING TP ASSESSMENT PROCEEDINGS CONSIDERED MAPLE ESOLUTIONS LTD. WITH P LI OF 34.86% AND SAFFRON GLOBAL LTD. WITH PLI OF 24.72% AS THE F INAL SET OF 11 COMPARABLES FOR DETERMINING THE ALP OF THE INTERNAT IONAL TRANSACTIONS CARRIED ON BY THE ASSESSEE AND ACCORDI NGLY MADE UPWARD ADJUSTMENT OF RS.1 48 03 162/- TO THE INTERN ATIONAL TRANSACTION. 15. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT MAPLE ESOLUTIONS AND SAFFRON GLOBAL LTD. BELONG TO TRITON CORPORATION LTD. WHICH ARE FOUND TO BE INVOLVED IN FRAUD FOR WHICH THE BOOK RESULTS OF THE COMPANIES ARE NOT RELIABLE. VARIOUS BENCHES OF THE TRIBUNAL HAVE DIRECTED TO EXCLUDE THE ABOVE 2 COMPANIES FROM THE LIST OF COMPARABLES BECAUSE OF THEIR INVOL VEMENT IN FRAUDULENT PRACTICES. THEREFORE ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE BOTH THESE COMPANIES ARE TO BE EXCLUD ED FROM THE LIST OF COMPARABLES AND THE COST +12% METHOD ADOPTED BY THE ASSESSEE SHOULD BE ACCEPTED. IT IS ALSO THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT IN THE PRECEDING YEAR AS WELL AS IN SUBSEQUENT YEARS NO ADJUSTMENT HAS BEEN MADE TO THE INTERNATIO NAL TRANSACTION CARRIED OUT BY THE ASSESSEE AND THE COST + 12% BASI S ADOPTED BY THE ASSESSEE HAS BEEN ACCEPTED. IT IS THE SUBMISSION O F THE LD. DEPARTMENTAL REPRESENTATIVE THAT THE ABOVE ISSUES WERE NOT BROUGHT TO THE NOTICE OF THE CIT(A). THE DECISION IN THE CASE OF STREAM INTERNATIONAL (I) PVT. LTD. RELIED ON BY TH E LD. COUNSEL FOR THE ASSESSEE RELATES TO A.Y. 2007-08. THEREFORE T HE SAME CANNOT BE CONSIDERED FOR THIS YEAR. FURTHER ACCORDING TO TH E LD. DEPARTMENTAL REPRESENTATIVE THE ASSESSEE HAS NOT C ONSIDERED ANY COMPANY AS COMPARABLE. THEREFORE ACCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE THE TPO SHOULD BE GIVE N ANOTHER 12 OPPORTUNITY TO SELECT COMPARABLE CASES BY MAKING FU RTHER STUDY AND ADOPT SUITABLE COMPARABLES. 16. AFTER CONSIDERING THE ARGUMENTS AND COUNTER ARG UMENTS WE ARE OF THE CONSIDERED OPINION THAT THE MATTER REQUI RES FRESH ADJUDICATION AT THE LEVEL OF THE TPO CONSIDERING TH E FACT THAT ASSESSEE HAS NOT CONSIDERED ANY COMPANY AS COMPARAB LE AND THE 2 COMPANIES SELECTED BY THE TPO FROM THE FINAL LIST O F 10 COMPANIES ARE INVOLVED IN FRAUD FOR WHICH THE FINANCIAL RESUL TS CANNOT BE CONSIDERED AS CORRECT AND RELIABLE. THE TPO HOWEV ER IS AT LIBERTY TO SEARCH FOR FRESH COMPARABLES AND DETERMINE THE A LP OF THE INTERNATIONAL TRANSACTION CARRIED OUT BY THE ASSESS EE FOR THE IMPUGNED ASSESSMENT YEAR. WHILE DOING SO THE TPO SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECI DE THE ISSUE AS PER FACT AND LAW. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29-04-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED: 29 TH APRIL 2015 SATISH 13 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I PUNE 4. THE CIT-I PUNE 5. THE D.R A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT PUNE BENCHES PUNE