TMI Blog2014 (10) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... has challenged the order of the Assessing Officer in disallowing the claim of deduction u/s.35D. Once the same is disallowed, there cannot be any further addition u/s.14A since it amounts to double disallowance. We accordingly direct the Assessing Officer to delete the addition. Claim of deduction u/s.10A - Held that:- Assessing Officer is not justified in restricting the deduction u/s.10A on account of disallowance u/s.40(a)(ia) and 43B. Comparable selection - Held that:- Considering the software development services rendered by the assessee the companies dissimilar with that of assessee need to be deselected from final list of comparables. - ITA No. 1319/PN/2011 - - - Dated:- 10-10-2014 - Shailendra Kumar Yadav (Judicial Member) And R. K. Panda (Accountant Member) For the Assessee : Nikhil Pathak For the Revenue : M. S. Verma ORDER R. K. Panda (Accountant Member) This appeal filed by the assessee is directed against the order passed u/s.143(3) r.w.s. 144C(13) and 115WE(3) by the DCIT, Circle-11(1), Pune for the Assessment Year 2007-08. 2. Ground of appeal No.1 by the assessee reads as under : 1. The Ld. DRP erred in confirming the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmises however strong may be cannot be the basis for addition. Since in the instant case, there is no direct or indirect evidence brought on record by the Assessing Officer that the assessee has incurred further indirect expenses for the purpose of increasing the share capital of the company, therefore, the addition made by the Assessing Officer deserves to be deleted. We accordingly direct the Assessing Officer to delete the same. Ground of appeal No.2 by the assessee is accordingly allowed. 7. Ground of appeal No.3 by the assessee reads as under : 3. The Ld. DRP erred in confirming the action of the Assessing Officer by holding that the amount incurred of ₹ 33,17,360/- for increasing the share capital was disallowable u/s.14A of the Act. 7.1 As mentioned in the preceding paragraph the assessee has incurred expenditure of ₹ 33,17,360/- during the year under consideration for increasing the share capital. The assessee claimed the above amount as eligible for deduction u/s.35D and accordingly the same was claimed as deduction in the return of income. According to the Assessing Officer, the above direct expenditure of ₹ 33,17,360/- deserves disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of appeal No.1 in which it has challenged the order of the Assessing Officer in disallowing the claim of deduction u/s.35D. Once the same is disallowed, there cannot be any further addition u/s.14A since it amounts to double disallowance. We accordingly direct the Assessing Officer to delete the addition of ₹ 33,17,360/-. Ground of appeal No.3 raised by the assessee is accordingly allowed. 11. Grounds of appeal No.4 and 4.1 by the assessee read as under: 4. The Ld. DRP erred in restricting the claim of deduction u/s.10A to ₹ 6,38,86,434/- as against the claim of ₹ 9,22,90,403/- made by the assessee by apportioning the various expenses between the eligible and non-eligible undertaking on the basis of turnover of each of the units. 4.1 The Ld. DRP erred in holding that the deduction u/s.10A was not allowable in respect of the disallowance made u/s.40(a)(ia) and 43B. 11.1 Facts of the case, in brief, are that during the course of assessment proceedings the Assessing Officer observed that the assessee has claimed deduction of ₹ 9,22,90,403/- u/s.10A of the I.T. Act. From the various details furnished by the assessee the Assessing Officer no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id units. (c) The Auditor of the assessee company has certified the claim of deduction u/s.10A on the basis of assumption made and determined appropriate by the management of the company without ascertaining its propriety. As such, the certificate of the Auditor cannot be relied upon to allow claim of the assessee (d) All services of taxable/non-taxable units are consumed by single holding company (related party). 11.3 In absence of specific separate details of expenses incurred on the 2 units the Assessing Officer, following the provisions of section 80IA(8) proceeded to compute such profits and gains on reasonable basis as provided in the proviso to the said section. He noted that certain disallowances u/s.40(a)(ia), 40A(7) and 43B were admitted by the assessee for violation of the respective provisions According to the Assessing Officer, the disallowance u/s.40(a)(ia), 40A(7) and 43B is not the actual earning but addition with intention to penalize the mistake of the assessee. There is no immunity given to any such undertaking which otherwise are eligible for deduction u/s.10A to disobey the statutory provisions of the Act. The Assessing Officer accordingly restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supporting the order of the Assessing Officer submitted that the action of the Assessing Officer in restricting the claim of deduction u/s.10A to ₹ 6.38 crores is justified since deduction u/s.10A is not available to disallowance u/s.40(a)(ia) and section 43B. For the above proposition, the Ld. Departmental Representative relied on the decisions of the Mumbai Bench of the Tribunal in the case of Tricom India Ltd. reported in 36 SOT 302 (Mumbai) and CG International Pvt. Ltd. reported in 13 SOT 280 (Mumbai) and the decision of the Hon ble Madras High Court in the case of Menon Impex Pvt. Ltd. reported in 128 Taxmann 11. She submitted that in the above decisions it has been held that deduction is unavailable against the receipts which were not derived from the operation of the eligible business. She submitted that the Assessing Officer in the assessment order has discussed that the assessee has failed to provide a bifurcation of expenses between the eligible and ineligible business as separate books were not maintained for which he adopted a reasonable estimate. She accordingly submitted that the order of the Assessing Officer be upheld. 14. We have considered the rival ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the Revenue is whether on that basis the Tribunal was justified in directing the AO to grant the exemption under s. 10A. On this position, in the present case it cannot be disputed that the net consequence of the disallowance of the employer's and the employees contribution is that the business profits have to that extent been enhanced. There was, as we have already noted, an add back by the AO to the income. All profits of the unit of the assessee have been derived from manufacturing activity. The salaries paid by the assessee, it has not been disputed, relate to the manufacturing activity. The disallowance of the PF/ESIC payments has been made because of the statutory provisions-s. 43B in the case of the employer's contribution and s. 36(v) r/w s. 2(24)(x) in the case of the employees contribution which has been deemed to be the income of the assessee. The plain consequence of the disallowance and the add back that has been made by the AO is an increase in the business profits of the assessee. The contention of the Revenue that in computing the deduction under s. 10A the addition made on account of the disallowance of the PF/ESIC payments ought to be ignored cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account for various differences on account of intangible, R D, risk factors, etc. 5.6] The assessee submits that without prejudice to its contention that the addition made u/s 92CA is not warranted at all, it is submitted that the learned DRP ought to have granted the benefit of 5% to the assessee company as per the second proviso to section 92C(2). 16.1 Facts of the case, in brief, are that for the impugned assessment year, the assessee company has provided three types of services to its AE, namely, (a) software development services, (b) design, engineering, testing and authoring services and (c) business support services, the details of which are given on page 2 of the TPO's order and which are as under: Sr.No. Nature of Transaction Amount (Rs.) Method 1 Provision of software development services 39,29,09,065/- TNMM 2 Provision of design engineering, Testing and authoring services, development, Maintenance and testing of embedded system software services 43,48,75,003/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ologies Ltd 6.20 2 Aztech Software Technology Services 18.93 3 Four Soft Ltd 18.94 4 Gebbs Infotech Ltd NA 5 Genysis International Corporation 12.89 6 Goldstone Technologies Ltd 20.31 7 Helios Matheson Information Tech. Ltd . 40.60 8 Infosys Technologies Ltd 40.87 9 KPIT Cummins Infosystems Ltd 17.32 10 Lanco Global Systems Ltd 19.87 11 L T Infotech Ltd 15.15 12 Marrs Software International Ltd 6.44 13 Melstar Information Technology Ltd 1.42 14 Mindtree Consulting Ltd 17.69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aztec Software and Technology Services Ltd. 18.93 3 Helios Matheson Information Technology Ltd. 40.60 4 Infosys Technologies Ltd. 40.87 5 Larsen Tuobro Infotech Ltd. 15.15 6 Mindtree Consulting Ltd. (Seg) 17.69 7 R.S. Software (India) Ltd. 13.09 8 SIP Technologies and Exports Ltd. 10.12 9 Sasken Communication Technologies Ltd. 21.92 10 Transworld Infotech Ltd. 32.88 11 Kals Information Systems Ltd. 30.55 12 Compucom Software Ltd. 35.63 13 Goldstone Technologies Ltd. 20.31 Avg. Operating Margin 23.38 17.3 Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned that Maars is engaged in software development and it does not carry any inventories. Referring to page 498 of paper book-III he drew the attention of the Bench to the Director s report where the break up of expenditure is given and submitted that substantial expenditure has been incurred by the said company on software development activity. He accordingly submitted that Maars is engaged in software development activity and accordingly, the same is functionally comparable with the assessee company. Even though these were clarified before DRP they did not consider the same. He accordingly submitted that the said company cannot be excluded. VJIL CONSULTING LTD. [VJIL] : 20. The Ld. Counsel for the assessee submitted that the only reason given by the TPO for rejecting VJIL is that the said company has incurred losses. Referring to the submissions given before the DRP, copies of which are placed at page 561 of the paper book, the Ld. Counsel for the assessee submitted that profits and losses are part and parcel of business activity and hence, merely because VJIL has incurred loss in this year, the TPO is not justified in rejecting the said company from the list of final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly submitted that Quintegra is engaged in IT services. Merely because the said company is engaged in developing different types of software as compared to the assessee company, there is no reason to hold that the said company is not comparable with the assessee. Referring to para 5.10 on pages 560-561 of paper book-III he submitted that these facts were also clarified by the assessee vide its submission to DRP. He accordingly submitted that the TPO is not justified in excluding Quintegra from the list of final comparable entities. He accordingly submitted that Maars, VJIL and Quintegra should be included in the final list of comparables while determining the AEP. 21.2 The Ld. Counsel for the assessee submitted that the TPO is not justified in including the following companies in the list of final comparables since these companies are not comparable. INFOSYS TECHNOLOGIES LTD. (INFOSYS) : 22. The Ld. Counsel for the assessee submitted that Infosys is the market giant in the field of software development and it assumes all risks leading to higher profits whereas the assessee company is a captive unit of its holding company, Deere Co., USA and it assumes only limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee submitted that the financial year considered for determining the Operating Margin of Transworld is 01.07.2006 to 30.06.2007 as against the financial year of the assessee company which is 01.04.2006 to 31.03.2007. He submitted that the provisions of Rule 10B(4) of the Income Tax Rules 1962 provide that the data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Accordingly, Transworld is not comparable with the assessee company. For the above proposition, he relied on the decision of the Pune Bench of the Tribunal in the case of PTC Software (India) Pvt. Ltd. [ITA No. 1605/PN/11] for A.Y.2007 - 08 wherein the Bench has excluded Transworld in view of the above reasoning. HELIOS MATHESON INFORMATION TECHNOLOGY LTD. (HELIOS) : 24. The Ld. Counsel for the assessee submitted that Helios is functionally different from the assessee company. Referring to the decision of Pune Bench of the Tribunal in the case of PTC Software (India) Pvt. Ltd. [ITA No. 1605/PN/l 1] for A.Y.2007 - 08 (Copy of which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.3 In respect of the above three companies, the Ld. Counsel for the assessee submitted that the assessee had selected these companies as comparable entities in the course of TP proceedings. However, in view of the reasons mentioned above, these companies are not comparable with the assessee company. For the above proposition, he relied on the following decisions wherein it has been held that even where the assessee had identified certain companies as comparable at the time of TP study, such companies may be excluded at a later stage if they are found to be not comparable on facts - a. DCIT vs. Quark Systems (P) Ltd. [132 TTJ 1 (Chd)(SB)] b. Sapient Corporation (P) Ltd. vs. DCIT [15 ITR (Trib) 285 (Del)] c. Teva India (P) Ltd. vs. DCIT [149 TTJ 57 (Mum)(UO)] 24.4 The Ld. Counsel for the assessee submitted that the TPO is not justified in newly introducing the following two companies as comparable entities with the assessee company. KALS INFORMATION SYSTEMS LTD. (KALS) : 25. The Ld. Counsel for the assessee submitted that Kals is engaged in provision of software development services as well as sale of software products and the separate segmental data is not avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT reported in 57 SOT 339. In that case, the Tribunal held that generally the RPT filter is to be adopted between the range of 10% - 25%. However, where a large number of comparable entities are available, the RPT filter should be adopted at 15% of total transactions and the limit of RPT transactions is to be relaxed to 25% only where sufficient number of comparable entities are not available for determining the ALP of international transactions entered by the tested party. He submitted that in the instant case, a large number of companies are found to be functionally comparable with the assessee company and hence, the RPT filter should be adopted at the level of 15% and not at 25% in view of the above ruling. He submitted that as per the working of the TPO on page 36 of his order, the RPT transactions in the case of Compucom is 18.58% i.e. more than 15% and therefore, Compucom should be excluded from the final list of comparable entities. ADDITION OF ₹ 4,63,25,506/- IN RESPECT OF DESIGN ENGINEERING, TESTING AND AUTHORING SERVICES SEGMENT : 27. The Ld. Counsel for the assessee submitted that the assessee company has provided design, engineering and other related servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 The Ld. Counsel for the assessee submitted that the addition made by the TPO is not justified. He submitted that the TPO is not justified in introducing KLG Systel as a comparable entity with the assessee company since the revenue from export of services in the case of this company is only about 0.24% of the total revenue of the company whereas 100% of the revenues generated by the assessee company are through export of services. This issue is already clarified by the assessee in its submission to DRP [para 6.11- 6.12 on pages 570 - 571 of P.B. - III] and the computation of foreign exchange earnings to total revenue ratio in the case of KLG Systel is on page 571 of P.B. - III. The relevant excerpts of the annual report of KLG Systel for this year are on pages 433 - 434 of P.B. - II. Thus, in view of the submissions made in para 6.11 above, KLG should be rejected in this year. He submitted that KLG Systel was rejected by the DRP in its order for A.Y.2008- 9 in assessee's own case on the ground that the exports of the said company were below 25% of total revenue and hence, the DRP is not justified in accepting the said company as a comparable entity in this year [page 609 of P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities was worked out at 11.22% as against the Operating Margin of the assessee company of 10.95%. Hence, it was submitted that the design engineering and other allied services rendered by the assessee to its AE were within the margin of +/- 5% from the ALP and hence, no adjustment u/s 92C was required in case of this segment. 28.2 However, the TPO did not accept the contention of the assessee. Out of the 11 comparable companies selected by the assessee, the TPO rejected 5 companies and has newly introduced 2 companies. The final list of comparable entities in this segment which is on pages 45 - 46 of the TPO's order are as under- Sr. No. Companies selected as comparable by the TPO OM (%) 1 Capital Trust Ltd. -6.71 2 ICC International Agencies Ltd. 82.92 3 ICRA Management Consulting Services Ltd. 15.23 4 ICRA Online Ltd. 63.33 5 IDC (India) Ltd. 15.33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s engaged in functionally different from the assessee company and it is also engaged in providing software services and thus, the said company is not comparable with the assessee company. He referred to the extract of the web pages wherein it is mentioned that ICRA Online is a leading Information Services and Technology Solutions provider [page 438 of Paper Book - II]. Further, in the Directors' Report of ICRA Online, it is mentioned that the said company is engaged in providing Information Products to various mutual fund houses and the flagship product of the said company is 'MFI Explorer'. He submitted that it is engaged in providing business support services to its AE and unlike ICRA Online, the assessee is not engaged in development and sale of products. Accordingly, ICRA Online is not comparable with the assessee company. 30.1 Further, he submitted that the TPO has considered the Information providing services segmental results. ICRA Online is also engaged in providing BPO Services along with providing Information Services. He submitted that BPO services also fall within the category of business support services and hence, if, at all, ICRA Online is to be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Margin of the assessee company and the Avg. Operating Margin of the various comparable companies does not exceed 5%, then the benefit of second proviso to section 92C(2) may be granted to the assessee company and accordingly, no addition should be made in the case of the assessee. 31. The Ld. Departmental Representative on the other hand heavily relied on the order of the AO/TPO/DRP. So far as the adjustment of ₹ 5,03,32,400/- to the ALP of the International Transaction of Software Development is concerned, he submitted that the TPO has given a detailed reasoning for arriving at the PLI margin of the comparables at 23.38% as against 14.53% worked out by the assessee. After taking into account of these facts and after taking into account the objections raised by the assessee, the DRP has confirmed the action of the AO/TPO and therefore the grounds raised by the assessee in grounds of appeal No.5.1 is not acceptable. 31.1 As regards the two comparables which was added by the TPO namely Kals Information Systems Ltd and Compucom Software Ltd., he submitted that the same is justified. So far as the comparable Kals Information System Ltd., is concerned, he submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his company cannot be considered as comparable. 31.5 As regards the request of the assessee for exclusion of KLG Systel Ltd. is concerned, he submitted that the assessee itself has rejected this company as a comparable stating that it is functionally different. However, the TPO has noticed from the Director s report that this company is engaged in planning, design and erection and large scale infrastructural projects in India. The website of this company also states so. Further, the website of the company shows that this company is engaged in Design Engineering Services, therefore, this company is engaged in Design Engineering Services which is functionally similar to the assessee company, therefore, the action of the TPO is justified. 31.6 As regards the adjustment of ₹ 62,72,964/- to the ALP of International Transaction of Design Support Services is concerned, he submitted that the assessee has mentioned the nature of international transaction as provision of Regional Supply Management services, however, no such services or narration is mentioned in the TP study report. He submitted that the assessee had selected TNMM method as most appropriate method for benchmarki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee in respect of 27 companies as comparable. We find the TPO rejected 16 companies out of the 27 companies and added 2 new companies as comparable entities, namely Kals Information Systems Ltd., and Compucom Software Ltd. From the 16 companies so rejected by the TPO out of the 27 companies shown by the assessee, we find the assessee is objecting to the exclusion of the following companies as comparables : 1. Maars Software International Ltd., 2. VJIL Consulting Ltd., 3. Quintegra Solutions Ltd., 4. Infosys Technologies Ltd., 5. Transworld Infotech Ltd., 6. Helios and Matherson Information Technology Ltd., 32.2 From the various details furnished by the assessee, we find Maars Software International Ltd., (Maars) was rejected by the TPO as a comparable on the ground that it is carrying out significantly different functions. The basis of such arrival by the AO was the report of the Director. It is the submission of the Ld. Counsel for the assessee that the above said para of the Directors report mentions about the future plans of the company and does not indicate the position of the company for the year under consideration. We find from page 501 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that simply because the company has incurred loss in one year the same cannot be a ground to reject the company from the list of comparables. Since the Revenue has not shown that VJIL Consulting Ltd., is a persistent loss making company, therefore, merely because this company has incurred loss during the impugned financial year, the same in our opinion cannot be a ground to reject the same from the list of comparables. We accordingly direct the AO/TPO to include the same in the list of comparables. 32.4 So far as Quintegra Solutions Ltd. is concerned, we find the TPO rejected the same from the list of comparables on the basis of certain paras in the report of the Directors. It is the submission of the Ld. Counsel for the assessee that Quintegra Solutions Ltd., is engaged in the business of software development. From the profit and loss account of the company placed at page 516 of the paper book we find Quintegra has declared income from software services at ₹ 62.72 Crores for the year ending 31-03-2007 as against total receipt of ₹ 62.76 crores. From the above, it is clear that the income from software services accounts for 99.9% of the total revenue. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies can be excluded. 34. Now coming to the merit of each case, we find the assessee in its TP study report has included Infosys Technologies Ltd., as comparable. From the various details furnished by the assessee, we find the TPO in its order for A.Y. 2006-07 in assessee s own case has held that Infosys is not a comparable company with that of the assessee company because of huge disparity between the turnover of Infosys Technologies Ltd. with that of the assessee company. 34.1 We find the Hon ble Delhi High Court in the case of CIT Vs. Agnity India Technologies Pvt. Ltd., (Supra) has held that Infosys Technologies Ltd., cannot be considered as a comparable entity with that of smaller companies. In various other judicial decisions it has been held that considering huge difference in revenues, assets and risks assumed by Infosys and other smaller companies, Infosys Technologies Ltd., cannot be considered as comparable entity with smaller companies. In this view of the matter and considering the fact that the TPO in assessee s own case in the immediately preceding assessment year has excluded Infosys as a comparable, therefore, we direct the AO/TPO to exclude Infosys from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist of comparables by observing as under : 20. With regard to the inclusion of Helios Matheson Information Technology Ltd., the assessee has raised similar arguments as in the case of KALS Information Solutions Ltd. (Seg). We have perused the relevant para of the order of the TPO i.e., 6.3.21, in terms of which the said concern has been included as a comparable concern. The assessee pointed out that as in the case of KALS Information Solutions Ltd. (Seg), in the instant case also for A.Y. 2006-07 the said concern was found functionally incomparable by the assessee in its Transfer pricing study and the said position was not disturbed by the TPO. The relevant portion of the Transfer pricing study, placed at page 432 of the Paper book has been pointed out in support. Considered in the aforesaid light, on the basis of the discussion in relation to KALS Information Solutions Ltd. (Seg), in the instant case also we find that the said concern is liable to be excluded from the list of comparables. 36.1 Since the Pune Bench of the Tribunal in the case of PTC Software Ltd., (Supra) has already taken a view that Helios and Matherson Information Ltd., is not a comparable and is fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts namely application software segment and Training. As per the TPO, the application software segment is functionally comparable to the assessee as the said concern is engaged in software services. The stand of the assessee is that a perusal of the Annual Report of the said concern for F. Y. 2006-07 reveals that the application software segment is engaged in the business of sale of software products and software services. The assessee pointed out this to the TPO in its written submissions, copy of which is placed in the Paper book at page 420.3 to 420.4. The assessee further pointed out that there was no bifurcation available between the business of sale of software products and the business of software services, and therefore, it was not appropriate to adopt the application software segment of the said concern for the purposes of comparability with the assessee's IT-Services Segment. The TPO however, noticed that though the application software segment of the said concern may be engaged in selling of some of the software products which are developed by it, however, the said concern was not into trading of software products as there were no cost of purchases debited in the Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia) Pvt. Ltd., (Supra), we find the Pune Bench of the Tribunal has rejected Compucom Software Ltd., as a comparable on the ground that the RPT Transactions (Expenses) of the assessee with that the said company are more than 25% for A.Y. 2007-08. The relevant observation of the Tribunal is as under : 14. Similarly, in the case of Compucom Software Ltd., the TPO has observed in para 6.3.19 of his order that the said concern has nil sales revenue from related parties against total sales of 23.82 crores, but has incurred RPT expenses of ₹ 6.65 crores against total expenses of 17.78 crores. The ratio of RPT to total transactions has been computed at 15.19% by the TPO. Again the TPO has adopted the denominator of ₹ 41.60 crores inclusive of total sales whereas the numerator is ₹ 6.65 crores, comprising of only RPT expenses and no RPT sales. Therefore, the denominator is to be corrected at ₹ 17.78 crores and the correct percentage of RPTs would be 37.40%, i.e., RPT expenses/total expenses. The RPTs being in excess of the 25% filter adopted by the TPO, the said concern in our view is also liable to be excluded from the list of comparables for the purpose of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, from para 6.98 of page 569 of the paper book we find the assessee has submitted before the DRP that KLG Systel Ltd., is not a comparable with the assessee company since KLG Systel Ltd.,is engaged in variety of business support services such as providing enterprise project management, automation and manufacturing and enterprise business. In view of the above, we are of the considered opinion that KLG Systel Ltd., cannot be considered as a comparable entity with that of the assessee company. We accordingly direct the TPO/AO to exclude the same from the list of comparables. 39. So far as the addition of ₹ 62,72,964/- in respect of business support services segment is concerned, we find as against 11 companies selected by the assessee as comparables with average operating margin of 11.22%, the TPO rejected 5 companies and introduced 2 new companies. Although assessee has not vehemently argued for any exclusion of certain companies, however, he strongly challenged the inclusion of ICC International Agencies Ltd., and ICRA online Ltd. as fresh comparables. 40. So far as ICRA Online Ltd., is concerned we find from the various details filed by the assessee that it is engage ..... X X X X Extracts X X X X X X X X Extracts X X X X
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