TMI Blog2017 (1) TMI 1490X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case, the Hon ble DRP had erred in directing the AO to include M/s CG-VAK Software and Exports Ltd. as a comparable while benchmarking the software consultancy services transaction ignoring the fact that the company has diversified activities like software development, services and products of which it is primarily into software development activity. 2. In the facts and circumstances of the case, the Hon ble DRP had erred in directing the AO to Include M/s Eforce India Pvt. Ltd. as a comparable while benchmarking the software consultancy services transaction ignoring the fact that the company had an operating loss of 55.27% during the AY 2010-11 which depicted an extremely unusual state of affairs of the company, and therefore ought to have been excluded from being considered as a comparable. 3. In the facts and circumstances of the case, the Hon ble DRP had erred in directing the AO to not consider Infosys while benchmarking the software consultancy services transaction by ignoring to appreciate the fact that the profitability trend of Infosys Ltd. over the years from the time when it was a small company the margin has almost remained constant o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh end software development but failed to appreciate that M/s.Acropetal Technologies Limited ha d an ITeS segment very similar to the services rendered by the assessee which alone was considered by the TPO for benchmarking this transaction. 3. The appeal filed by the Revenue is against the order of Dispute Resolution Panel (in short 'the DRP'), wherein though various grounds of appeal have been raised but the learned Authorized Representative for the assessee pointed out that in case the order of DRP is upheld on exclusion of the concerns having high turnover in Segment-1, then no adjustment would be required to be made since the margins would be within +/- 5%. In respect of BPO Segment i.e. Segment-2, wherein the total turnover is about ₹ 1 crore. The learned Authorized Representative for the assessee pointed out that the two concerns i.e. Accentia Technologies Ltd., which was engaged in KP O Segment and Acropetal Technologies Ltd. which was engaged in design engineering activities, then in case both these concerns are excluded, then the margins of BPO are within +/- 5% and no further adjustment needs to be made. 4. The learned Departmental Representative for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP held that the said concerns i.e. all the five concerns were not comparable to the assessee. With regard to M/s. Persistent Systems Ltd., it observed that it had more than 3000 new products released in the last five years, which showed that it is developer of software products and also like Infosys, M/s. Wipro Technologies Ltd., it had high turnover which was over 422 times that of the assessee. In respect of Infosys Technology, the assessee pleaded Infosys was a giant turnover of ₹ 21,140 crores as opposed to the assessee's turnover of ₹ 64 crores. In respect of M/s. Wipro Technologies Ltd., similar plea was raised. The DRP directed exclusion of all the five concerns being not comparable. 7. The Revenue has raised several grounds of appeal but the plea of assessee before us is that in case the order of DRP is upheld on exclusion of three concerns i.e. Infosys Technologies Ltd., M/s. Wipro Technologies Ltd. and Persistent Systems Ltd., which have very high turnover as against total turnover of the assessee at ₹ 81 crores, then the margins of assessee are within +/- 5% and no addition is warranted in the hands of assessee. 8. The learned Departmental R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The issue arising in the present appeal regarding exclusion of Accentia Technologies Ltd. from the final list of comparables has been adjudicated by the Tribunal in M/s. Aptara Technologies Pvt. Ltd. Vs. ACIT (supra) and following the same parity of reasoning, it was held as under:- 12. The first contention of the assessee was with regard to exclusion of margins of Accentia Technologies Ltd. from the final list of comparables. The learned Authorized Representative for the assessee pointed out that the said concern was picked up as comparable by the TPO in the preceding years in the case of assessee itself and the Tribunal vide its orders dated 02.02.2015 and 29.04.2015 respectively had held that the said concern Accentia Technologies Ltd. was not comparable for those years due to extraordinary events. In respect of extraordinary events taken place during the year under consideration, the learned Authorized Representative for the assessee pointed out that there was acquisition of IQ group of companies in the United Kingdom and in this regard, our attention was drawn to the Directors Report of the said concern, copy of which is placed at page 467 of the Paper Book. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2009-10 in ITA No.267/PN/2014, order dated 29.04.2015. The Tribunal vide order dated 02.02.2015 had held that the concern Accentia Technologies Ltd. could not be included in the final set of comparables holding as under:- 13. Next, assessee had contended that Accentia Technologies Ltd. has been wrongly included by the TPO as a comparable concern. As per the assessee, the said concern was engaged in functionally different activities. It was pointed out that the said concern is engaged in providing medical transaction, billing and coding services, application development customization (segmental data not available). Moreover, it was contended that the sales/turnover of the said concern was more than ₹ 50 crores for the year under consideration which did not meet with turnover filter applied by the assessee. On this point, it was pointed out that the assessee had selected sales/turnover filter of 1-50 crores i.e. any concerns having a turnover exceeding ₹ 50 crores were excluded. Thirdly, it was pointed out that the activities of the said concern were not comparable to the activities of the assessee. 14. The TPO has noted the aforesaid objections of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parables. Accordingly, we hold so. 14. Vis- -vis second concern i.e. Acropetal Technologies Ltd. , the learned Authorized Representative for the assessee pointed out that it was engaged in design engineering activities and various Benches of Tribunal including the Pune Bench of Tribunal in Vistcon Engineering Centre (India) (P.) Ltd. Vs. ACIT (2016) 70 taxmann.com 248 (Pune - Trib.), had held that the said concern is not comparable to BPO services provided by the assessee. The Tribunal vide para 26 had held as under:- 26. So far as Acropetal Technologies Ltd. is concerned it is the submission of the Ld. Counsel for the assessee that the TPO has considered overall entity level operating margin in respect of comparable segmental margin. He submitted that Acropetal Technologies Ltd. generates revenue from Engineering Design Services and Information Technology Consultancy. Therefore, only segmental profitability of Engineering Design Services needs to be considered for the comparison. The DRP held that the IT based services segment is also similar to the segment of the Engineering Design Services and accordingly rejected the ground raised by the assessee. He submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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