TMI Blog2014 (3) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... analysis. If the assessee company, on the basis of its own functional profile, is found to have provided to its AE the low-end back office support services like voice or data processing services as a whole or substantially the whole, the companies providing mainly high-end services by using their specialized knowledge and domain expertise cannot be considered as comparables. If the functions actually performed by the assessee company for its AEs are compared with the functional profile of M/s eClerx Services Pvt. Ltd. and Mold-Tec Technologies Ltd., it is difficult to find out any relatively equal degree of comparability and the said entities cannot be taken as comparables for the 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. Selection of comparable – Whether a company earning high profit margin to be included in the list of comparable – Held that:- the answer to this question will depend on the facts and circumstances of each case inasmuch as potential comparable earning abnormally h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of an international transactions? 2. The assessee in the present case is a company incorporated in India on 19-11-2003. It is a wholly owned subsidiary of Maersk GSC Holdings A/S, which in turn is a downstream subsidiary of APMM Group ( Maersk Group). It is engaged, inter alia, in the business as shared service centre and renders transaction processing, data entry, reconciliation of statements, audit of shipping documents and other similar support services. It also renders I.T. services such as process support, process optimization and technical support services. The return of income for the year under consideration was filed by it on 30-9-2008 declaring total income of Rs. 34,14,980/- under the normal provisions of the Act and book profit of Rs. 12,29,06,881/- computed u/s 115 JB of the Act. In the said year, it had carried out, inter alia, the international transactions of providing I.T. enabled services to its Associated Enterprises (AEs) for the aggregate value of Rs. 117,56,19,974/-. The nature of such services was stated to be transaction processing, data entry, accounting and other support services. During the course of assessment proceedings, a reference was made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Shreeji Info Hubs Ltd. 5. As discussed above, some of the taxpayer's comparables do not stand scrutiny of FAR analysis. 6. Some companies like Eclerx Services Ltd., though is into KPO services and qualify all the filters applied by the tax payer based on the data pertaining to the FY 2007-08, have not been selected. 5. Keeping in view the above material defects pointed out by him, the TPO rejected the TP report submitted by the assessee treating the same as un-reliable and in-correct and proceeded on his own to determine the ALP of the relevant international transactions entered into by it. In this regard, he noted that the assessee company was operating with more than 2000 employees out of the State of Art facility and was providing support services to its AEs such as documentation, finance, operations, logistics, global information systems etc. According to him, these services were in the nature of knowledge based services and thus were liable to be characterised as Knowledge Process Outsourcing (KPO) services. He noted that the assessee was rendering mainly logistic outsourcing services and business analytic services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n response, the company submitted segmental results for software and professional services. But, it was also stated that professional services include both software development services and IT enabled services. Sub-segmental results are not submitted. Thus the same is not considered as a comparable. 7. Informed Technologies India Ltd. The company has exports to the extent of 66.52% of its revenues for the FY 2007-08 (RPTs on income and expense side combined). Thus the company fails 75% export filter applied by the TPO and is not considered as a comparable. 8. KPIT Commins Global Business Solution Ltd. The company is a subsidiary of KPIT Cummins Infosystems Ltd. As per the information and annual report submitted by the company for the FY 2007-08, the company fails 25% RPT filter. 9. Maple E- solutions Ltd. The company is not into KPO services and thus the same is not considered as a comparable. 10. R System International (segmental) The company is not into KPO services and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the upper turnover filter applied by the taxpayer is rejected. 4. Companies whose manufacturing sales were equal to or greater than 50% of their total sales in the latest year for which financial data was available were rejected. Companies whose trading sales were equal to or greater than 50% of their total sales in the latest year for which the financial data was available were rejected. Not an appropriate filter. TPO has applied a more appropriate filter in this regard. The companies whose revenues from IT enabled and related services are more than 75% of their operating revenues for the FY 2006-07 were selected as companies. This is an appropriate filter as this is the stage which will determine the correct comparability. 5. Companies not disclosing segmental financials, whose services appeared different from that of taxpayer This is considered an appropriate filter since this filter will help to identify companies which are similar in function (IT enables service) to arrive at appropriate comparables. Wherever segmental information is available, the same is considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Formerly Vishal Information Technologies Ltd) The company is mainly engaged in data processing services 3. Crossdomain Solutions Ltd. The company is mainly engaged in data processing, insurance claims processing and payroll processing services 4. Datamatics Financial Services Ltd. (seg) The company is mainly engaged in financial accounting and internet based research services. 5. eClerx Services Ltd. The company is mainly engaged in data analytics and data process services. Pricing analytics, bundling optimization, content operations, sales and marketing support, product data management, revenue management and data analytics are some of the offerings to Retail and manufacturing clients. To its Financial Services clients, it offers realtime capital markets, middle and back office support, portfolio risk management services and various critical data management services. 6. Mold-Tek technologies Ltd. The company is mainly engaged in Engineering design services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parable Sales Total Cost Op. Profit OP/TC 1. Aarman Software Pvt. Ltd 15629692 15411904 217788 1.41% 2. Accel Transmatic Ltd. (Software Services Segment) 103991000 89867000 14124000 15.72% 3. Acropetal Technology Ltd. (IT Segment) 385147981 290777218 94370763 32.45% 4. Aricent Technology (Holdings) Ltd (Earlier known as Flextronics Software Systems Ltd) 9570295187 8896849729 673445458 7.57% 5. Avani Ciment Technology's Ltd. 29342809 24121164 5221645 21.65% 6. Bodhtree Consulting Ltd. 104109068 87385058 16724010 19.14% 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2881806000 538729000 18.69% 21. Thirdware Solutions Ltd. (Software Development Services Segment) 509558000 414099000 95459000 23.05% 22. V.G.L Softech Ltd. 42437512 36812017 5625495 15.28% 23. Wipro Ltd. (Wipro Technologies Segment) 112762000000 87713000000 25049000000 28.56% 11. The arithmetic mean of the OP/TC of the above comparables selected by him was worked out by the TPO at 24.99% and after applying the same as average profit margin of the comparables, without allowing any working capital adjustment, to the operating cost of Rs. 12,05,35,098/- as submitted by the assessee in the TP study report, he determined the ALP of international transactions of the assessee company with its AEs involving provision of I.T. services at Rs. 15,06,56,819/-. Since the price charged by the assessee to its AEs for these international transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the objection of the assessee regarding the rejection by the TPO of the five comparables selected by it merely on the ground that they are not KPO service provider was held to be sustainable by the DRP. 13. As regards the seven comparables selected by the TPO, the assessee apparently did not raise any material objection in respect of two comparables namely Crossdomani Solutions and Datamatics Financial Services Limited while one comparable namely Triton Corpn. as taken by the TPO was there in the list of comparables selected by the assessee itself. As regards the remaining four comparables selected by the TPO, which were objected by the assessee, the DRP accepted the objection of the assessee in respect of two comparables namely Acropetal Technologies Limited and Coral Hubs Limited and directed exclusion of the same from the comparables for the following reasons : Acropetal Technologies Ltd. It has been pointed out by the assessee in its submission wherein the Annual Reports of the comparables have been filed, that this comparable fails the export earning filter of 75% in respect of ITES. This has been seen and found correct. Therefore, this comparable fails the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /08 dated 10-02-2009) wherein it was held that the provisions made for future losses cannot be considered while computing the operating profit of the relevant year. We also find that TPO/AO has taken this view consistently i.e., in the case of other comparables and assessee. From the Annual Report submitted by the assessee it is not clear how the assessee has stated that it has controlled transactions or if it violates the RPT limit. In conclusion, this company is found to be comparable. 15. The three comparables selected by the TPO namely Mold-Tek Technologies Ltd., M/s Coral Hubs Ltd. and M/s eClerx Services Limited were also objected by the assessee before the DRP on the basis of their high profitability. This objection of the assessee was not found sustainable by the DRP observing that high and low margins both reflect the industry profitability especially when they are acceptable on functional similarity. It was also observed by the DRP that as the average mean of a fair number of companies is being considered for comparability analysis to arrive at the ALP margin, the super profit of an individual company cannot be objected to if it is otherwise functionally compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's own case in the earlier years. 18. As regards the objection of the assessee that the TPO has not allowed appropriate risk adjustment to the margins of the comparables selected by him as required u/r 10-B(l)(e)(iii) of the Income Tax Rules, 1962, the DRP discussed the claim of the assessee in respect of various risks as under: Market Risk/Business Risk: The taxpayer's claim that it does not bear market risk as it renders services exclusively to its group company is not acceptable. In fact, the taxpayer bears a much bigger market risk viz., single customer risk. As the taxpayer is dependent on its AE its entire existence is dependent on it. If the AE runs out of business or if AE's business gets reduced substantially, the taxpayer's business will also get adversely affected. The taxpayer being a captive service provider cannot even look for other customers. Thus, in fact the taxpayer runs a greater risk than an average independent entity which can always look for other customers or other markets. Thus, there is more risk in the case of tax payer who is dependent on a single customer when compared to comparables who may not depend on single customer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information in the organization may be lost when an employee leaves the organization. The assessee is in a business which requires skilled manpower to run its business. There are judicial pronouncements which confirm that a trained and assembled workforce has a measurable, identifiable value. One example is Ithica Industries Inc. V. CIT 97 TC 253 where the Appellate Tax Court, USA has reached the conclusion that an in-place work force was an intangible asset with an ascertainable value. 19. After the above discussion, the DRP also referred to the various decisions of the Tribunal wherein a similar claim of the assessee for risk adjustment was considered by the Tribunal and held finally, for the following reasons given in its order, that no risk adjustment could be allowed to the assessee: - As discussed above, the taxpayer has also undertaken several risks. Therefore, it is correct to say that it is a risk mitigated entity. - The taxpayer is totally dependent on the AE for business. Thus the taxpayer takes the risks associated with heavy dependence on a single customer, In common business parlance it is known as 'single customer risk'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee 23.30 (2.43) 20.87 3. Maple Esolutions Limited Assessee 20.41 (5.27) 15.14 4. R Systems International Limited- Segmental Assessee 11.87 (9.27) 8.90 5. Spanco Telesystems Solutions Limited -Segmental Assessee 7.22 (4.23) 2.99 6. Triton Corp Limited Common 23.81 (4.46) 19.35 7. Mold-Tek Technologies Limited Department 96.66 (13.35) 83.31 8. Crossdomain Solutions Limited Department 26.96 (1.25) 25.71 9. Datamatics Financial Services Limited Segmental Department 34.87 (0. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted (segmental) 10. eClerx Services Ltd. 24. As submitted by Sr. Advocate Shri Porus Kaka, the ld. Counsel for the assessee, the assessee is disputing the inclusion of two entities out of ten comparables finally selected by the DRP namely Mold-Tek Technologies Ltd. and eClerx Services Ltd. on the ground that firstly they are KPO service providers who cannot be compared with the assessee company, which is basically a BPO service provider and secondly both these entities earning abnormally high profit margins should not be included in the list of comparables. Both these issues are raised in the questions specifically referred for the consideration of this Special Bench and answers to these questions thus will decide the issue raised in ground No. 2 of the assessee's appeal as agreed by the ld. Representatives of both the sides. 25. While opening his arguments on the issue involved in question No. 1, the ld. Counsel for the assessee Shri Porus Kaka referred to the relevant portion of the TPO's order for the earlier year at page 5 of his paper book wherein the nature of work performed or services rendered by the assessee company was discussed. He then invited our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self would appreciate that since majority of employees are only graduates, activities of the Assessee cannot be qualified to be high end in nature. Following are some of the key features of the Assessee's business which are worth noting: Assessee's business activities are performed by graduates and freshers with limited experience. Average age of employees is around 26-27 years; Activities of the Assessee arc based on instructions, standardized processes, data, specifications, process notes and statement of work provided by its AE; Team size generally vary from 17-18 employees with one Team Leader; Quality or output is generally measured in terms of number of documents / transactions processed, number of punching errors, number of queries, etc.; Assessee normally operates in three shifts (8 hours each). In contrast, KPO services generally would not have the above characteristics and primarily comprise high end research and analytical services such as software development, Research and Development in pharmaceuticals, Engineering Design services and other such high end value adding services. Qualifications of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the provision of data processing services merely to its AE, which inter alia involves activities such data entry, transcription, reconciliation, consolidation, co-ordination, preparation, processing and review of shipping documents such as bills of lading, etc and similar support services, following pre-defined procedures and adhering to the set standards and criteria as laid down by the AE and routinely sending the same to the AE as required by them. The Assessee does not have authority to make any decisions (as would he required to be made by an independent KPO) and operates as per the directions and instructions provided by its AE. The activities performed by the Assessee are merely preparatory and auxiliary in nature. Thus the Assessee's role does not involve any judgment or decision making skills and thereby the services provided do not face the risks arising there-from, as in the case of a KPO. Based on the above, it is evident that the environment within which the services are provided by the Assessee are not as sensitive, risk oriented as that of the KPO and thus the Assessee should not be compared to the companies engaged in KPO services and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of work all of which have always been provided by it's AE These activities are performed by low skilled employees who are primarily graduate by qualifications, with minimum / no shipping industry knowledge. Minimum training required to perform the activities Jobs vacancy advertisement clips by the Assessee appearing in newspaper attached as Annexure 1 for giving a view on how Assessee portrays itself to the job seekers Erroneous categorization as KPO (Cont ) Assessee providing low end back office support services has been accepted by revenue authorities in earlier years There has been no change in Assessee's FAR during year under consideration Employee cost broadly similar in FY 2006-07 and FY 2007-08 (Paper book Page No. 231) In contrast, KPO services are significantly higher on the value chain and involves processes that demand advanced information analysis as well as experienced judgment KPO involves the transfer of knowledge intensive business processes that requires significant domain expertise KPO comprises of vendors providing higher end research and analytic based ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed. 32. Shri Porus Kaka then proceeded to explain the nature of functions performed by two entities namely Mold-Tek Technologies Limited and eClerx Services Ltd., with the help of relevant documents. He invited our attention to the relevant portion of the annual report of Mold-Tek Technological Services for financial year 2007-08 at page 139 of the paper book wherein the said entity was described as pioneers in structural engineering services . He also invited our attention to page 140 and 144 of his paper book to point out that almost the entire sales of the said entity for the financial year 2007-08 was on account of export of KPO division. He also brought to our notice the relevant portion at page 145 146 of his paper book wherein it was clearly stated that Mold-Tek Technologies Ltd. is providing only structural engineering services and it has suitably enlarged its HRD Deptt. to handle the increasing number of manpower in the KPO division. He contended that M/s Mold-Tek Technologies Ltd. thus is clearly a KPO service provider and the functions performed by it of providing only structural engineering services are not comparable with that of the assessee. 33. Referring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... destination for KPO because of its large English speaking labour pool, inherent domain expertise due to a large and developed domestic services industry and knowledge and application of internationally accepted quality standards and processes. The country adds more than three million graduates and professional degree and diploma holders annually. It is home to the world's second largest reservoir of engineers and scientists, and the second largest pool of IT manpower. The knowledge services provided by this industry include Investment Research, Legal Research, Sourcing Management, Information Management, Market Research and Analytic Services. Some of the key sectors it services include Banking and Financial Institutions, Legal, Paralegal and Intellectual Property, Contract Research Organizations and the Bio-Pharma Industry. According to a research paper released by KPMG, the global KPO industry is expected to reach USD 17 billion by 2010, of which USD 12 billion (almost 70%) would be outsourced to India alone. In addition, the Indian KPO sector is also expected to employ more than 250,000 KPO professionals by 2010. After achieving great success in BPO, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT in the case of Capital IQ Information Systems (India) (P.) Ltd. DCIT (I.T.A No. 1961/Hyd.2011 dtd. 23-11-2012 and other rendered by Mumbai Bench of ITAT in the case of Lloyds TSB Global Services Pvt. Ltd Vs. DCIT (ITA No. 5928/Mum/2012 dtd. 21-11-2012). He submitted that even after the decision in the case of Willis Processing Services (I) Pvt. Ltd. rendered on 1-3-2013 taking a view against the assessee, the Tribunal has decided this issue in favour of the assessee in the various decisions rendered thereafter. He filed the copies of such orders of the Tribunal passed in the following cases: 1. Zavata India Pvt. Ltd. v. DCIT - ITA 1781/Hyd/2011 dtd. 2-7-2013 (2013) 35 taxmann.com 423) 2. PTC Software (I) Pvt. Ltd. v. ACIT ITA 1605/PN/2011 dtd. 30-4-2013 3. Cognizant Technology Services Pvt. Ltd. v. ACIT ITA 2106/1864/Hyd/2011 dtd. Dated 22-5-2013 4. Symphony Marketing Solutions India Pvt. Ltd. v. ITO ITA 1316/Bang/2012 dt. 14.8.2013 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and applying a transactional net margin method should not be less reliable than for other methods. As a matter of good practice, the typical process for identifying comparable transactions and using data so obtained which is described at paragraph 3.4 or any equivalent process designed to ensure robustness of the analysis should be followed when applying a transactional net margin method, just as with any other method. That being said, it is recognised that in practice the level of information available on the factors affecting external comparable transactions is often limited. Determining a reliable estimate of an arm's length outcome requires flexibility and the exercise of good judgment. See paragraph 1.13. 2.69 Prices are likely to be affected by differences in products, and gross margins are likely to be affected by differences in functions, but net profit indicators are less adversely affected by such differences. As with the net margin method resembles, this, however, does not mean that a mere similarity of functions between two enterprises necessarily lead to reliable comparisons. Assuming similar functions can be isolated from among the wide range of function ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not affect the gross margin or gross mark-up on costs if not reflected in price differences. See Annex I to Chapter II Sensitivity of gross and net profit indicators . 2.71 Net profit indicators may be directly affected by such forces operating in the industry as follows: threat of new entrants, competitive position, management efficiency and individual strategies, threat of substitute products, varying cost structures (as reflected, for example, in the age of plant and equipment), differences in the cost of capital (e.g. self financing versus borrowing), and the degree of business experience (e.g. whether the business is in a start-up phase or is mature). Each of these factors in turn can be influenced by numerous other elements. For example, the level of the threat of new entrants will be determined by such elements as product differentiation, capital requirements, and government subsidies and regulations. Some of these elements also may impact the application of the traditional transaction methods. 2.72 Assume, for example, that a taxpayer sells top quality audio players to an associated enterprise, and the only profit information available on comparable busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being used, it would not be appropriate to apply the transactional net margin method without making adjustments for such differences. The extent and reliability of those adjustments will affect the relative reliability of the analysis under the transactional net margin method. See discussion of comparability adjustments at paragraphs 3.47-3.54. 2.75 Another important aspect of comparability is measurement consistency. The net profit indicators must be measured consistently between the associated enterprise and the independent enterprise. In addition, there may be differences in the treatment across enterprises of operating expenses and non-operating expenses affecting the net profits such as depreciation and reserves or provisions that would need to be accounted for in order to achieve reliable comparability. 38. Referring to the relevant portion of the OECD guidelines, Shri Porus Kaka submitted that determining a reliable estimate of arm's length outcome requires flexibility and exercise of good judgment. He contended that a reasonable, sensible and practical approach is expected to be adopted in order to ensure that the TNMM can afford a practical solution to oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s might consist of losses or unusually high profits. It is suggested that extreme results can affect the financial indicators that are looked at in the chosen method and where one or more of the potential comparables have extreme results, further examination would be needed to understand the reasons for such extreme results. He submitted that if the relevant data is secured, further analysis is required to find out the reliability of such data as suggested in the OECD guidelines. He contended that this vital aspect was not considered by the Tribunal in the case of Willis Processing Services (I) Pvt. Ltd. (supra) and the decision was rendered without further analysis or investigation to find out any abnormality and to nullify the effect of such abnormality by applying suitable statistical method. He submitted that even the comparison of functions made by the Tribunal in para 30.10 of its order passed in the case of Wills Processing Services (I) Pvt. Ltd. is very generic which is done without making any further analysis of the functions performed in order to ascertain whether it was a case of BPO service provider or KPO service provider. 41. Advocate Shri Ajay Vora, the ld. Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction so as to make meaningful comparison with the comparables possible. 42. Shri Ajay Vora contended that there are basic and fundamental differences in the characteristics of BPO as compared to KPO. In support of this contention, he relied on the report prepared by the National Skill Development Corporation (NSDC) on Human Resource and Skill Requirements in the IT and ITES Industry Sector (2022) placed at page 7 to 45 of his paper book and took us through the relevant portion thereof. He invited our attention to page 12 of the said report to point out that the expression ITES and BPO are used interchangeably. He invited our attention to page 19 of the report wherein it is stated that customer interaction and finance and accounting services form a significant portion of BPO services. He contended that the BPO thus is involved in rendering mainly voice and data processing services which are in the nature of low end services. He contended that the KPO services on the other hand, as stated in the report, move beyond simple voice and data services and include data analytics, content management, research and information services, animation, biotech and pharmaceutical research ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... media content supply. BPO on the other hand, involves a predefined way of handling a business process, which is taught to agents or employees. BPO services normally include transaction processing, setting up a bank account, selling of insurance policies, technical support and voice and email-based support. 6. Contact with clients: Unlike BPOs, KPO employees tend to have greater direct contact both with international clients and with their teams overseas, once again underscoring the need for specialised skills. This could mean establishing direct channels of communication with a team member overseas to seek clarifications in the midst of completing work. If the work involved is complicated, direct communication with the client may also be needed, as seen in several cases of filing tax returns. 44. Shri Ajay Vora contended that even the CBDT now has recognized the difference between KPO and BPO while framing the safe harbour rules. He contended that the FAR analysis will be different in case of BPO as compared to KPO and pointed out that in the case of CRM Services (I) Pvt. Ltd. (ITA 4068/Del/2009 and ITA No. 4796/Del/2010 dtd. 30thJune, 2011), Delhi Bench of ITAT in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit of shipping documents and other similar support services. He submitted that this nature of services rendered by the assessee again was repeated in the relevant portion of the TP study report appearing on page 65 of the paper book. He also invited our attention to the information relating to the functions performed by the assessee in connection with provision of I.T. enabled services to its AE as given in the relevant portion of the TP study report appearing at page 76 and 78 of the paper book and pointed out that the services performed by the assessee included, inter alia, to reconcile the differences between Equipment Management System and the Transport Plan in Global Customers Service Systems, tender handling, contract drafting and data quality. He contended that all these services rendered by the assessee are clearly in the nature of KPO services and not routine BPO functions as it is not possible to render these services without a specialized knowledge. He contended that the assessee thus cannot be considered either as BPO or KPO but it lies somewhere in between as the services rendered by it are in the nature of BPO as well as KPO. He contended that keeping in view these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in assessee's own case for A.Y. 2007-08. 50. As regards the dispute raised by the assessee in respect of filters applied by the TPO for the selection of comparables, Shri Ajeet Kumar Jain contended that different filters are required to be applied in order to find a suitable comparable transaction. He submitted that the objective of such search for comparable companies, as stated in the TP study report submitted by the assessee (relevant portion of the paper book page 88), is to identify a group of independent companies with publicly available data that perform broadly similar functions, operate in broadly similar market and bear broadly similar risk to that of tested party. He invited our attention to the reasons given by the TPO on page 3 4 of his order for rejecting the filters applied by the assessee and contended that the same are sufficient to show that the filters applied by the assessee were not appropriate. He pointed out that the filters applied by the TPO, on the other hand, were fully justified in the facts of the case as the same were fair and logical as explained by the TPO giving cogent and convincing reasons. He submitted that the assessee, in any case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on para 1.40 of the said guidelines wherein it is stated that the factor of characteristic of property or services must be given more or less weight depending on the transfer pricing method. It is explained that under CUP method, any material difference in the characteristics of property or services can have an effect on the price whereas such difference in the characteristics of property/services is less sensitive in the case of TNMM. It is suggested in para 1.41 that in comparability analysis for method based on gross or net profit indicators, it may be acceptable depending on the facts and circumstances of the case to broaden the scope of comparability analysis to include uncontrolled transactions involving products that are different but where similar functions are undertaken. He submitted that the assessee himself took call centers as well as KPO as comparables and the same approach being adopted by the TPO, no fault can be found going by the OECD guidelines suggesting broad functional similarities where TNMM is followed. 53. As regards the reliance placed by Shri Porus Kaka on para 2.64 and 2.65 of the OECD guidelines, Shri Ajeet Kumar Jain submitted that the weakne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ES inasmuch as the comparables were selected from ITES without applying specifically any qualitative filter and the contention of the assessee seeking further dissection of these comparables was not accepted by the Tribunal observing that there will not be any end in that way and it is a very subjective exercise. Shri Ajeet Kumar Jain contended that the assessee in the present case has also not done any horizontal classification since it has taken call centers and KPO as comparables and since the broad comparability at ITES level is quite fair and proper in the facts and circumstances of the case, the claim of the assessee for further dissection in the form of BPO and KPO should not be accepted. 55. In the rejoinder, Shri Porus Kaka submitted that Rule 10B(2) of the Income Tax Rules, 1962 is applicable in case of all the methods applied for determining the ALP of an international transaction and there is no merit in the contention raised by Shri Ajeet Kumar Jain, the ld. CIT (DR) that the applicability of the said Rule depends on the method followed. Relying on Section B.3.1 of the OECD guidelines and the decision of Hon'ble Delhi High Court in the case of Li and Fung India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s length price and compute the total income of the assessee accordingly, subject to the conditions provided therein. The Board has prescribed rules 10A to 10E in the Income-tax Rules, 1962, giving the manner and the circumstances in which different methods would be applied in determining arm's length price and the factors governing the selection of the most appropriate method. These provisions have been enacted with a view to provide a statutory framework which can lead to computation of reasonable, fair and equitable profit and tax in India so that the profits chargeable to tax in India do not get diverted elsewhere by altering the prices charged and paid in intra-group transactions leading to erosion of tax revenues. 57. During the course of hearing before us, the ld. Representatives of both the sides have referred to and relied on the OECD Transfer Pricing Guidelines for multinational enterprises and Tax Administrations issued in July, 2010 in support of their respective arguments. These guidelines focus on the main issues of principle that arise in the transfer pricing area and are intended to address transfer pricing and other related tax issues with respect to multin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the property transferred or services provided in the international transaction or the specified domestic transaction ; (b) resale price method, by which, (i) the price at which property purchased or services obtained by the enterprise from an associated enterprise is resold or are provided to an unrelated enterprise, is identified; (ii) such resale price is reduced by the amount of a normal gross profit margin accruing to the enterprise or to an unrelated enterprise from the purchase and resale of the same or similar property or from obtaining and providing the same or similar services, in a comparable uncontrolled transaction, or a number of such transactions; (iii) the price so arrived at is further reduced by the expenses incurred by the enterprise in connection with the purchase of property or obtaining of services; (iv) the price so arrived at is adjusted to take into account the functional and other differences, including differences in accounting practices, if any, between the international transaction 55a [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then evaluated on the basis of the functions performed, assets employed or to be employed and risks assumed by each enterprise and on the basis of reliable external market data which indicates how such contribution would be evaluated by unrelated enterprises performing comparable functions in similar circumstances; (iii) the combined net profit is then split amongst the enterprises in proportion to their relative contributions, as evaluated under sub-clause (ii); (iv) the profit thus apportioned to the assessee is taken into account to arrive at an arm's length price in relation to the international transaction or the specified domestic transaction : Provided that the combined net profit referred to in sub-clause (i) may, in the first instance, be partially allocated to each enterprise so as to provide it with a basic return appropriate for the type of international transaction or specified domestic transaction in which it is engaged, with reference to market returns achieved for similar types of transactions by independent enterprises, and thereafter, the residual net profit remaining after such allocation may be split amongst the enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be employed and the risks assumed, by the respective parties to the transactions; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail. (3) An uncontrolled transaction shall be comparable to an international transaction or a specified domestic transaction if (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction. 60. The OECD transfer pricing guidelines, issued in July, 2010, also express a similar view when it states in para 1.38 that information on product characteristics might be more important if the method applied is CUP than if it is TNMM. It further explains in para 1.40 that the requirement for comparability of property or services is the strictest for the CUP method whereas differences in characteristics of property or services are less sensitive in case of transactional profit methods than in case of traditional transaction methods. It further clarifies, in para 1.41, that the comparability analysis for method based on gross or net profit indicator often puts more emphasis on functional similarity than on product similarity and, depending on the facts and circumstances of the case, it may be acceptable to broaden the scope of comparability analysis to include un-controlled transactions involving products that are different, but where similar functions are undertaken. 61. Chapter II of the OECD transfer pricing guidelines (July, 2010) deals with selection of the transfer pricing method and Part III thereof deals with transactional profit methods. Section B-2 of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon'ble Delhi High Court in the case of Li and Fung India (P.) Ltd. (supra) wherein it was observed in para 34 that the standard of comparability for application of TNMM is no less than that for the application of any other transfer pricing method. We are also aware of the guidance provided in OECD Transfer Pricing Guidelines in section B.3.1. of Chapter II wherein it is stated that a comparability analysis performed for selecting and applying a transactional net margin method should not be less reliable than for other methods. At the same time, we have to take note of the fact that the relevant financial data is not available in the public domain in respect of many ITES service providers as they are private limited companies. Moreover, many of the ITES providers, which are listed public limited companies and whose financial data is available in public domain, are captive service providers and they, therefore, cannot be considered as comparables having substantial related party transaction. Keeping in view these problems as well as other problems discussed in the remaining portion of this order, which are peculiar to the ITES industry, our endeavor is to find out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te method or methods produces a range of figures all of which are relatively equally reliable. It is stated in para 3.56 that in some cases, all comparable transactions examined will not have a relatively equal degree of comparability. It is suggested that where it is possible to determine that some uncontrolled transactions have a lesser degree of comparability than others, they should be eliminated. 67. As already observed, the comparability of an international transaction with uncontrolled transaction for the purpose of determining the ALP of an international transaction by following TNMM is required to be judged with reference to the functions performed as per sub Rule (2)(b) of Rule 10B read with Rule (l)(e) thereof and there is no bar in the TP regulations in India to exclude certain entities selected as potential comparables on broad functionality test by applying the functional test at narrow or micro level to attain the relatively equal degree of comparability. On the other hand, Rule 10-B(3) provides that the uncontrolled transaction selected/judged as per Rule 10-B(2) shall be comparable to an international transaction only if none of the differences, if any, between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and health services. It is also stated that the growth in this segment is expected to be in the areas of legal process outsourcing, engineering services outsourcing and financial and market research. In para 1.4.3 of the report, one of the key success factors for Indian BPO industry is stated to be its ability to move up the value chain through KPO service offerings. In para 4.3 of the report, it is stated that the ITES industry is likely to see an increasing share of penetration from KPOs. It is also stated that while the BPO sector would contribute large volumes, the KPO sector would be a value play . It is further stated that a lot more areas are likely to witness KPO activity spanning patent advisory, high end research and analytics, online market research and legal advisory. 70. Shri Ajay Vora has also placed on record a copy of Article KPO -An Emerging Opportunity for Chartered Accountants published in 2006 in the Journal The Chartered Accountants to highlight the distinction between BPOs and KPOs. As stated in the said Article, KPO, simply put, is the upward shift of the BPO industry in the value chain. It is explained that the KPO is a new industry with high grow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices provided mainly with the assistance or use of information technology requiring application of knowledge and advanced analytical and technical skills, namely: (i) geographic information system; (ii) human resources services; (iii) engineering and design services; (iv) animation or content development and management; (iv) business analytics; (v) financial analytics; or (vi) market research, but does not include any research and development services whether or not in the nature of contract research and development services; 73. On a careful study of the material placed before us to highlight the distinction between BPO services and KPO services, we are of the view that even though there appears to be a difference between the BPO and KPO services, the line of difference is very thin. Although the BPO services are generally referred to as the low end services while KPO services are referred to as high end services, the range of services rendered by the ITES sector is so wide that a classification of all these services either as low end or high end is always not possible. On the one hand, KPO segment is ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artificial segregation within ITES may lead to creation of more problems in the comparability analysis than solving the same. 76. Having held that ITES services cannot be further bifurcated as BPO and KPO services for the purpose of comparability analysis, the next question that arises is what could be the basis of such dissection, bifurcation or classification of ITES services to facilitate relatively equal degree of comparability when the broad functional analysis based on ITES sector is taken into account by applying TNMM. In our opinion, this purpose of attaining a relatively equal degree of comparability can be achieved by taking into consideration the functional profile of the tested party and comparing the same with the entities selected as potential comparables on broad functional analysis taken at ITES level. The principal functions performed by the tested party should be identified and the same can be compared with the principal functions performed by the entities already selected to find out the relatively equal degree of comparability. If it is possible by this exercise to determine that some uncontrolled transactions have a lesser degree of comparability than others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticularly the problems discussed by us in para 73 to 75 of this order and accordingly the relatively equal degree of comparability should be sought to be achieved by taking into consideration the functional profile of the tested party and comparing the same with functional profile of the potential comparables selected at ITES level. 78. To sum up, we hold that the potential comparables of ITES sector level can be selected by applying broad functional test at first stage and although the comparables so selected can be put to further test, depending on facts of each case, by comparing the specific functions performed in the international transactions with that of uncontrolled transactions to attain the relatively equal degree of comparability as discussed above, the classification of ITES into low-end BPO services and high-end KPO services for comparability analysis would not be fair and proper. The first question referred to this Special Bench is whether for the purpose of determining the arm's length price of international transactions of the assessee company providing back office support services to their overseas associated enterprises, companies performing KPO functions s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng documents such of hills of lading, etc. Broad activities carried on by MGSCIPL as directed by AL from time to time are as follows: Export/Import documentation - Log, review and process shipping instructions to produce draft transport documents; - Receive, log and process amendments to shipping instructions: - Publish Transport Documents to the Web; - Perform data quality checks and updates; Reconcile differences between Equipment Management System (RKEM - Rederiets Kontainer Equipment Management) and the Transport Plan in Global Customer Service System (GCSS): Identify and correct manifest errors including coding errors in GCSS; - Other services such as daily exchange rate update in Maersk Line Invoicing System (MLIS), manual entry of surcharges not covered by Maersk Automated Rating System (MARS), reports required by local authorities and customs, submit vessel port omission notifications, issue arrival notices, manual entry of surcharges not covered by MARS, confirm and collect invoice details, etc. Agency Operation: - Prepare vessel load and discharge lists; - Clearance of Electron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: DL Process support MGSCIPI, provides first line process support services or preliminary support services to users o corporate systems. Users are the employees of Maersk group entities worldwide. IT professionals of MGSCIPL analyze the problem faced by users and offer preliminary solutions on use of systems and provide support to system implementation. If the problem is not resolved, then the same is escalated to second level support. Process Optimisation Second level support is provided by technical personnel who are expert in specific modules within the corporate systems and provide solutions through remote access control. Employees who are involved in rendering these services require in depth understanding of the system for analyzing system utilization and user behavior. MGSCIPL provides consultancy to Global IS portfolios and Area business teams in areas of deployment support and post implementation audits. MGSCIPL also carries out surveys, identifies the gaps in the process and bridges the same. Technical support MGSCIPL provides following technical support services: Service desk support which includes desktop an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Tech etc. which again goes to show that the functions performed by the assessee company to its AEs were mainly in the nature of providing back office support services of low-end nature. Going by the functions performed by the assessee to its AEs during the year under consideration, we are of the view the assessee was a captive contract service provider mainly rendering back office support services and such services rendered by it to its AEs involving some degree of special knowledge and expertise formed only small portion of the services rendered by it which essentially were in the nature of incidental services. 81. In so far as the case of Mold-Tek Technologies Ltd. is concerned, it is observed from the annual report of the said company for the financial year 2007-08 placed at page 139 to 151 of the paper book that the said company was pioneer in structural engineering KPO services and its entire business comprised of providing only structural engineering services to various clients. Further information of Mold-Tek Technologies Ltd. available on their Website is furnished in the form of printout at page 158 to 165 of the paper book and a perusal of the same shows that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007-08 placed at page 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 claimed 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 claimed to be engaged in providing solutions that do not just reduce cost, but help the clients increase sales and 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 provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's appeal including the issue involved in Q No. 2 referred to this Special Bench have become infructuous/academic requiring no adjudication on merit. The same are accordingly dismissed. However, keeping in view that the issue involved in Q No. 2 has been specifically referred for the adjudication by this Special Bench, we now proceed to consider and decide the same for the sake of completeness. 86. As regards the issue involved in question No. 2 as to whether in the facts and circumstances of the case, the company earning abnormal high profit margin should be included in the list of comparable cases for the purpose of determining ALP of an international transaction, Shri Porus Kaka referred to the provisions of section 92-C of the Act to point out that the word used therein is Arithmetic mean and not mean or average . He contended that the arithmetic mean envisages existence of arithmetic progression meaning thereby that it expects the comparable figures in a specific range. He contended that anything beyond that range therefore should not be taken into consideration. In support of this contention, he relied on the meaning of the expression arithmetic mean gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [2013] 29 taxmann.com 412 (Bang.) 7. Capital IQ Information Systems (India) (P.) Ltd. v. DCIT [2013] 32 taxmann.com 21 (Hyd.) 8. Sap Labs India (P.) Ltd. v. ACIT [2011] 44 SOT 156 (Bang.) 9. DCIT v. Quark Systems (P.) Ltd. [2010] 132 TTJ 1 (Chd.)(SB) 10. Agnity India Technologies (P.) Ltd. v. 1TO ITA No. 3856 (Del)/2010 11. Philips Software Center (P.) Ltd. v. ACIT [2008] 119 TTJ 721 (Bang.) 12. Adobe Systems India (P.) Ltd. v. ACIT [2011] 138 TTJ 122 (Del) 13. Teva India (P.) Ltd. v. DCIT [2011] 44 SOT 105 (Mum)(URO) 14. ACIT v. Sonata Software Ltd. [2013] 29 taxmann.com 144 (Mum) 15. Meritor LVS India (P.) Ltd. v. ACIT ITA No. 405/Bang/2011 16. DCIT v. Mit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... running through these entities so as to include them in the list of final comparables. Our attention was drawn to the decision of Chandigarh Special Bench of ITAT in the case of Quark Systems Pvt. Ltd. wherein the issue of super normal profit was considered by the Tribunal and it was held that when the profit margin is abnormally high, the matter may be investigated further. Mr. Porus Kaka also relied on the decision of Mumbai Bench of ITAT in the case of Symantec Software Solutions (P.) Ltd. (supra) and pointed out that the entities earning super normal profits were excluded by the Tribunal in this case on the ground that there was failure on the part of the A.O./TPO to prove that the higher profits shown by these entities were normal. He contended that super normal profits thus certainly is a trigger which at least should invoke further investigation or enquiries to ascertain and decide whether the entities earning such super normal profits should be included in the list of final comparables or not. 89. Shri Ajay Vora, the ld. Counsel for the intervener also put forth his argument on the issue relating to the exclusion of entity earning super normal or abnormal profits from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mean. He submitted that as per the principles of statistical analysis, the size of sample is important inasmuch as higher the sample size, better or closure is the estimate. He referred to Chapter 5 Measures of Central Tenancy given in the book Statistics for Economics prescribed as text book for class XI and submitted that arithmetic mean as explained therein is the most commonly used measure of central tendency. It is defined as a sum of the values of all observations divided by number of observations. He pointed out from the example given therein that in case of extreme figures also, the arithmetic mean is used as a measure of central tendency. He contended that by adopting the arithmetic mean to work out the average profit margin of the comparables, Indian law has recognized the extreme values also for comparability. He submitted that the quartile method of central tendency removes the extreme results but by adopting the arithmetic mean and not quartile, the law makers want even the extreme results to be considered. 91. As regards the CBDT Circular No. 14 of 2011, para 55.10 referred by Shri Porus Kaka, Shri Ajeet Kumar Jain submitted that section 92-C of the Act was or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited by him are as under: Sl No. Name of the case Date of decision Bench 1 Exxon Mobil Company India Pvt. Ltd. 10.06.11 Mumbai 2 BP India Services Pvt. Limited 23.09.11 Mumbai 3 Actis advisors Pvt. Limited 12.10.13 Mumbai 4 Nextlink India Pvt. limited ...10.12 Bangalore 5 24/7 Customer.Com. Pvt. Limited 09.11.12 Bangalore 6 Trilogy E-Business software India Pvt. Limited 23-11-12 Bangalore 7 Exxon Mobil Company India Pvt. Limited 19.12.12 Mumbai 8 Stream international Services Pvt. limited 11.01.13 Mumbai 9 Willis Processing Services (I) P. Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain on the decision of the Tribunal the case of 24/7 Customer.Com (P.) Ltd. (supra), wherein it was held by the Bangalore Bench that the exclusion of companies with abnormal profits from the comparables may be in line with the principles enumerated in the OECD guidelines but the same cannot be said to be in tune with the Indian TP regulations. It was noted by the Tribunal in this context that the Indian TP Rules specifically deviate from OECD guidelines in this aspect and specify the arithmetic mean for determining the ALP as against the quartile method suggested in the OECD guidelines which excludes the companies that fall in the extreme quartiles for comparability. He submitted that in the case of Trilogy E-Business Software India Ltd. (supra) a similar view was reiterated by the Tribunal holding that there is no bar in the relevant Rule 10B(2) to consider the companies earning abnormal profits as comparable to tested party as long as they are functionally comparable. It was held that this question may not arise at all in the context of OECD guidelines and US TP regulations as they advocate a quartile method for determining ALP whereby the extreme results get automatically exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in Question No. 2 referred to this Special Bench relating to exclusion of high margin comparables and also perused the relevant material available on record. As per the first proviso to section 92C(2) of the Act, where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices. The meaning of the term arithmetic mean is given in the Concise Oxford Dictionary, as a mean number of arithmetic progression and relying on the same, Shri Pours Kaka has argued that by using the expression arithmetic mean in the statute, the legislature has expected the comparable figures to be within a specific range. He has contended that anything beyond that range should not be taken into consideration and any significant diversion such as abnormal high profit margin should not be included in the list of comparable cases for the purpose of determining the ALP of an international transaction. We find it difficult to accept this contention of Shri Porus Kaka. The arithmetic mean may be a mean number in the context of any arithmetic progression as given in the Concise Oxford Dictionary. However, in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal in other cases decided thereafter. On the other hand, it is observed that the Tribunal, in some of the cases cited by Shri Ajeet Kumar Jain, the ld. CIT DR, has passed well discussed and well reasoned orders after taking into consideration not only the relevant TP regulations in India but even the relevant OECD guidelines. For instance, in the case of BP India Services (P.) Ltd. (supra), it was held by the Mumbai Bench that the very rationale of having average in case of more than one comparables is to iron out the effect of extreme cases and find the profit margin as a representative of the whole lot. It was also held by the Tribunal that the higher or lower profit rate has not been prescribed as the determinative factor in the relevant Rules i.e. Rule 10B(2) and 10B(3) to make a case incomparable. The Tribunal observed that the profit rate in any case cannot be such determinative factor in itself as it is a consequence of the effect of the various factors. In the case of 24/7 Customer.Com (P.) Ltd. (supra), the Bangalore Bench of this Tribunal considered the relevant OECD guidelines in this respect and held that the exclusion of companies with abnormal profits fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons for unusual high profit and in order to establish whether the entities with such high profit can be taken as comparables or not. 99. The question No. 2 referred to this Special Bench is as to whether, in the facts and circumstances of the case, companies earning abnormally high profit margin should be included in the list of comparable cases for the purpose of determining arm's length price of an international transaction. As already observed, the issue involved in this question has become infructuous in so far as the case of the assessee before the Special Bench is concerned and the same therefore no more survives for consideration in the present case. In generality, we are of the view that the answer to this question will depend on the facts and circumstances of each case inasmuch as potential comparable earning abnormally high profit margin should trigger further investigation in order to establish whether it can be taken as comparable or not. Such investigation should be to ascertain as to whether earning of high profit reflects a normal business condition or whether it is the result of some abnormal conditions prevailing in the relevant year. The profit margi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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