TMI Blog2017 (9) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... essment Year 2008-09. 2. The assessee is a wholly owned subsidiary of Misys International, Luxemberg which is a part of Misys Group based in US. The assessee carried out software development services, IT Enabled Services (ITES) and Marketing Support Services to its Associated Enterprises (AEs). The assessee has entered into international transactions as follows : Particulars Amount in Rs. Provision of software development services 94,52,37,458/ Provision of ITES 1,10,47,711/- Provision of marketing support services 2,77,01,926/- Recharge of expenses paid 1,22,52,278/- Reimbursement of expenses received 1,39,52,326/- Thus there are three segments in which the assessee has entered into international transactions and benchmark the same by using TNMM as MAM. The TPO selected a fresh set of comparables in each of the segments and accordingly proposed the adjustment under Section 92CA in each of the segment as under : (i) Provision for software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving reasons how functions discharged, assets deployed and risks assumed of such companies were different from the assessee company. On the facts and in the circumstances of the case the learned CIT (A) erred in holding that M/s ICC International Agencies (seg) and M/s Priya International Ltd. (seg) in Marketing Support Services segment should be excluded from the list of comparables because of abnormal high profit margin, without giving reasons how functions discharged, assets deployed and risks assumed of such companies were different from the assessee company. 8. On the facts and in the circumstances of the case the learned CIT (A) has erred in holding that the TPO was not justified in applying the employee cost filter and directed to include M/s Indus Networks Ltd. which was excluded in the software development services segment by using this filter. 9. On the facts and in the circumstances of the case the learned CIT (A) has erred in rejecting the diminishing revenue filter used by the TPO to exclude companies that do not reflect the normal industry trend. 10. On the facts and in the circumstances of the case the learned CIT (A) failed to appreciate that the differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in rejecting M/s Genesys International Corporation Ltd as a comparable without identifying any extraordinary variable which would distinguish this company from the assessee in terms of functions performed, assets used and risks undertaken i.e. qualitative and quantitative analysis. 18. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 19. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above. C.O. Grounds : 1. That the learned CIT (A) erred in upholding the learned TPO's approach of rejecting the economic analysis undertaken by the Respondent and conducting a fresh economic analysis for determining the arm's length price. 2. That the learned CIT (A) erred in upholding the learned TPO's approach of disregarding application of multiple year/ prior year data as used by the Respondent in the TP documentation and holding that current year (i.e. Financial Year 2007-08) data for companies should be used for comparability. 3. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucid Software Limited, Thirdware Solutions Limited, Quintegra Solution Limited) that fail the test of comparability, as comparable to the Respondent in respect of its software development services. 11. That the learned CIT (A) erred in upholding the inclusion of Softsol India Ltd in the final list of comparables, despite the said company having related party transactions to the extent of 18.38% of its revenues during the assessment year in question. 12. That the learned CIT (A) erred in confirming the action of the learned TPO by not accepting Adithya Birla Minacs IT Services Limited that were selected in the show-cause notice but were incorrectly rejected in the TP order, as comparable to the Respondent in respect of its software development services. 13. That E-zest Solutions Ltd. ought to stand rejected as a comparable as it is functionally dissimilar to the Appellant. Information Technology Enabled Services: 14. That the learned CIT (A) ought to have held that certain companies (Coral Hub Limited, Eclerx Services Ltd., Jindal Intellicom Pvt. Ltd., Mold-Tek Technologies Ltd.) fail the test of comparability, even apart from having abnormal profits or losses and thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent in respect of its marketing support services. 23. That the learned CIT (A) erred in confirming the action of the learned TPO of rejecting certain companies (Salora International Limited, Khaitan (India) Limited, Competent Automobiles Co Limited, Times Innovative Media Limited)that does not fail the test of comparability, and thus considered as comparable to the Respondent in respect of its marketing support services. 24. That the learned CIT (A) erred in upholding the learned TPO's approach of using the commission revenue filter for the exclusion of Empire Industries Limited which is functionally comparable to the Respondent in respect of its marketing support services. 25. That the learned CIT (A) erred in failing to appreciate that the margins of the comparables and that of the Respondent would need to be recomputed by the AO after including foreign exchange loss / gain for the relevant year, as the case may be, on the basis that such gains or losses are operating in nature. 26. That the contention of the learned AO is bad in law and on facts while stating that the order of the learned CIT (A) is prejudicial to the interest of revenue and is opposed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lutions Ltd. 29.81% 29.69% 5. Flextronics (Aricent) 7.86% 5.73% 6. iGate Global Solution Ltd. 13.99% 11.88% 7. Infosys 40.37% 38.34% 8. Kals Information Systems Ltd. (Seg) 31.29% 28.68% 9. LGS Global Ltd. 27.52% 26.28% 10. Mindtree Ltd. (Seg) 16.41% 15.06% 11. Persistent Systems Ltd. 20.31% 20.34% 12. Quintegra Solution Ltd. 21.74% 18.28% 13. R Systems (India) Ltd. 15.30% 13.07% 14. R S Software (India) Ltd. 7.41% 8.37% 15. Sasken Communication Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the statement of learned Authorised Representative of the assessee when both the assessee as well as revenue are agreed for not applying any turnover filter, the order of the CIT (Appeals) to that extent is set aside. Further the assessee is also not objecting against the restoration of 4 companies in the set of comparables. Therefore the following 4 companies are restored to the set of comparables. (i) Flextronics (Aricent) (ii) i-Gate Global Solution Limited (iii) Mindtree Limtied (Seg.) (iv) Sasken Communication Technology Limited (Seg.) Since the rest of the 4 companies out of 8 excluded by the CIT (Appeals) on turnover filter are challenged by the assessee on functional dissimilarity therefore the issue of comparability of those 4 companies in software development services segment will be considered and decided along with the other companies which are sought to be excluded by the assessee in the cross objection. The assessee is seeking exclusion of total 13 companies out of which 8 companies are from the group of 12 companies excluded by the CIT (Appeals) and 5 companies which were retained by the CIT (Appeals). The companies which are challenged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded from the set of comparables. 11. On the other hand, the learned Departmental Representative has submitted that though the functional comparability of these companies are considered by the co-ordinate Bench of this Tribunal, however the decision in the other case cannot be super imposed in the case of the assessee without examining FAR analysis separately and independently. The ld. DR has further contended that Infosys Limited is functionally similar to the assessee as the predominant business activity of this company cannot be treated as functionally different. The learned Departmental Representative has relied upon the orders of authorities below and contended that apart from the four companies which are restored to the set of comparables, the remaining 8 companies should also be restored to the set of comparables. 12. We have considered the rival submissions as well as the relevant material on record. At the outset, we find that in the case of Telelogic India (P.) Ltd. (supra) the TPO selected an identical set of 20 companies for determining the ALP of the said assessee in software development services segment transactions. Thus when the TPO itself taken the identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a comparable. The assessee objects to the inclusion of this company as a comparable on the ground that this company is not functionally comparable to the assessee as it is into software products whereas the assessee offers software development services to its AEs. The TPO had rejected the objections of the assessee on the ground that this comparable company has categorized itself as a pure software developer, just like the assessee, and hence selected this company as a comparable. For this purpose, the TPO had relied on information submitted by this company in response to enquiries carried out under section 133(6) of the Act for collecting information about the company directly. 7.2 Before us, the learned Authorised Representative reiterated the assessee's objections for the inclusion of this company from the list of comparable companies on the ground that this company is not functionally comparable to the assessee as it is into software products. It is also submitted that the segmental details of this company are not available and the Annual Report available in the public domain is not complete. It was further contended that the information obtained by the TPO under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other relevant facts of the Triology case are equally applicable to the facts of the assessee's case also. Unless the facts and the FAR analysis of Triology case is comparable to that of the assessee in the case on hand, comparison between the two is not tenable. (ii) After demonstrating the similarity and the comparability between the assessee and the Triology case, the assessee also needs to demonstrate that the facts applicable to the Assessment Year 2007-08, the year for which the decision in case of Triology E-Business Software India Pvt. Ltd. (supra) was rendered are also applicable to the year under consideration i.e. Assessment Year 2008-09. 9.5.3 It is a well settled principle that the assessee is required to perform FAR analysis for each year and it is quite possible that the FAR analysis can be different for each of the years. That being so, the principle applicable to one particular year cannot be extrapolated automatically and made applicable to subsequent years. To do that, it is necessary to first establish that the facts and attendant factors have remained the same so that the factors of comparability are the same. Viewed in that context, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable to the year under consideration as well. 7.5 Per contra, the learned Departmental Representative supported the order of the TPO / DRP for inclusion of this company Avani Cincom Technologies Ltd. in the final set of comparables. 7.6.1 We have heard both parties and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the final set of comparables only on the basis of information obtained under section 133(6) of the Act. In these circumstances, it was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables. Non furnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable. 7.6.2 We also find substantial merit in the contention of the learned Authorised Representative that this company has been selected by the TPO as an additional comparable only on the ground that this company was selected in the earlier year. Even in the earlier year, it is seen that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Multi Industry Data Anomaly) which was made available for customers as SaaS (Software as a Service). 8.3 Per contra, the learned Departmental Representative opposed the exclusion of this company from the list of comparable companies. The learned Departmental Representative contended that since the assessee had accepted the TPO's proposal for inclusion of this company in the set of comparables and had not objected to its inclusion even before the DRP, the objections raised by the assessee in this regard, at this stage, ought to be rejected. 8.4.1 We have heard both parties and perused and carefully considered the material on record. Admittedly, there is no disputing the fact that the assessee had never objected to the inclusion of this company in the set of comparbales in earlier proceedings before the TPO and the DRP. It is also seen that even in the grounds of appeal raised before us, the assessee has not raised any grounds challenging the inclusion of this company in the list of comparbales. In fact in the assessee's own case for Assessment Year 2007-08, this company was selected as a comparable by the assessee itself. We, therefore, find no merit in the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. There has been no attempt to identify, eliminate and make adjustment of the profit margins so that the difference in functional comparability can be eliminated. By not resorting to such a process of making adjustments, the TPO has rendered this company as not qualifying for comparability. We therefore accept the plea of the assessee in this regard. (iv) The rejection/exclusion of this company as a comparable for Assessment Year 2007-08 for software service providers has been upheld by the co-ordinate benches of this Tribunal in the cases of LG Soft India Pvt. Ltd. in ITA No.112/Bang/2011, CSR India Pvt. Ltd. in IT (TP)A No.1119/Bang/2011 and by the ITAT, Delhi Bench in the case of Transwitch India Pvt. Ltd. in ITA No.6083/Del/2010. (v) The facts pertaining to this company has not changed from Assessment Year 2007- 08 to Assessment Year 2008-09 and therefore this company cannot be considered for the purpose of comparability in the instant case and hence ought to be rejected. In support of this contention, the assessee has also referred to and quoted from various parts of the Annual Report of the company. 9.3 Per contra, the learned Departmental Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oftware India Pvt. Ltd. in ITA No.1054/Bang/2011, we hold that this company ought to be omitted form the list of comparables. The A.O./TPO are accordingly directed. 10. KALS Information Systems Ltd. 10.1 This is a comparable selected by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the set of comparables on grounds of functional differences and that the segmental details have not been provided in the Annual Report of the company with respect to software services revenue and software products revenue. The TPO, however, rejected the objections of the assessee observing that the software products and training constitutes only 4.24% of total revenues and the revenue from software development services constitutes more than 75% of the total operating revenues for the F.Y. 2007-08 and qualifies as a comparable by the service income filter. 10.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee and ought to be rejected /excluded from the list of comparables for the following reasons:- (i) This company is functionally different from the software activity of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both parties and perused and carefully considered the material on record. We find from the record that the TPO has drawn conclusions as to the comparability of this company to the assessee based on information obtained u/s.133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as pointed out by the learned Authorised Representative. We also find that the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) and in the case of Triology E-Business Software India Pvt. Ltd. (supra) have held that this company was developing software products and was not purely or mainly a software service provider. Apart from relying of the above cited decisions of coordinate benches of the Tribunal (supra), the assessee has also brought on record evidence from various portions of the company's Annual Report to establish that this company is IT(TP)A 1380/Bang/2012 Page 9 of 34 functionally dis-similar and different form the assessee and that since the findings rendered in the decisions of the coordinate benches of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the break up of such revenues is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition of IPRs in 'AUTOLAY', a commercial application product used in designing high performance structural systems. In view of the above reasons, the learned Authorised Representative pleaded that, this company i.e. Infosys Technologies Ltd., be excluded form the list of comparable companies. 11.3 Per contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the brand attributable profit margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies. 11.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assessee has brought on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. No information is available on the segmental bifurcation of revenue from sale of products and software services. (vi) the TPO has adopted consolidated financial statements for comparability purposes and for computing the margins, which is in contradiction to the TPO's own filter of rejecting companies with consolidated financial statements. 12.3 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 12.4.1 We have heard both parties and carefully perused and considered the material on record. We find merit in the contentions of the assessee for exclusion of this company from the set of comparables. It is seen that this company is engaged both in software development and product development services. There is no information on the segmental bifurcation of revenue from sale of product and software services. The TPO appears to have adopted this company as a comparable without demonstrating how the company satisfies the software development sales 75% of the total revenue filter adopted by him. Another major flaw in the comparability analysis carried out by the TPO is that he adopted comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... predominantly engaged in product designing services and is not purely a software development service provider. In the Annual Report of this company the description of the segment ' software development services' relates to design services and are not to software services provided by the assessee. (iv) Tata Elxsi Ltd. invests substantial funds in research and development activities which has resulted in the 'Embedded Product Design Services Segment' of the company to create a portfolio of reusable software components, ready to deploy frameworks, licensable IPs and products. The learned Authorised Representative pleads that in view of the above reasons, Tata Elxsi Ltd. is clearly functionally different/dis-similar from the assessee and therefore ought to be omitted form the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the stand of the TPO in including this company in the list of comparables. 13.4 We have heard both parties and carefully perused and considered the material on record. From the details on record, we find that this company is predominantly engaged in product designing services and not purely software de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this company is engaged in 'e-Business Consulting Services', consisting of Web Strategy Services, I T design services and in Technology Consulting Services including product development consulting services. These services, the learned Authorised Representative contends, are high end ITES normally categorised as knowledge process Outsourcing ('KPO') services. It is further submitted that this company has not provided segmental data in its Annual Report. The learned Authorised Representative submits that since the Annual Report of the company does not contain detailed descriptive information on the business of the company, the assessee places reliance on the details available on the company's website which should be considered while evaluating the company's functional profile. It is also submitted by the learned Authorised Representative that KPO services are not comparable to software development services and therefore companies rendering KPO services ought not to be considered as comparable to software development companies and relied on the decision of the co-ordinate bench in the case of Capital IQ Information Systems (India) (P.) Ltd. v. Dy. CIT (Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been pointed out from the Annual Report that the company has not provided any separate segmental profit and loss account for software development services and product development services. (ii) In the case of E-Gain Communications (P.) Ltd. v. ITO [2009] 118 ITD 243/[2008] 23 SOT 385 (Pune), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company. The learned A.R. prayed that in the light of the above facts and in view of the afore cited decision of the Tribunal (supra), this company ought to be omitted from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase for Assessment Year 2007-08 and other cases cited above, it is clear that this company being into product development cannot be considered as a comparable to the assessee in the case on hand who is a software service provider and therefore this company i.e. Lucid software Ltd., ought to be omitted from the list of comparables. 16.2 per contra, the learned Departmental Representative supported the action and finding of the TPO in including this company in the list of comparables. 16.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that the company i.e. Lucid software Ltd., is engaged in the development of software products whereas the assessee, in the case on hand, is in the business of providing software development services. We also find that, co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 (IT (TP) A No.845/Bang/2011), LG Soft India (P.) Ltd. (supra), CSR India (P.) Ltd. (supra); the ITAT, Mumbai Bench in the case of Telcordia Technologies India (P.) Ltd (supra) and the Delhi ITAT in the case of Transwitch India (P.) Ltd. (supra) have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises. (iii) Website extracts indicate that this company is in the business of product design services. (iv) The ITAT, Mumbai Bench in the case of Telcordia Technologies India (P.) Ltd. (supra) while discussing the comparability of another company, namely Lucid Software Ltd. had rendered a finding that in the absence of segmental information, a company be taken into account for comparability analysis. This principle is squarely applicable to the company presently under consideration, which is into product development and product design services and for which the segmental data is not available. The learned Authorised Representative prays that in view of the above, this company i.e. Persistent Systems Ltd. be omitted from the list of comparables. 17.2 Per contra, the learned Departmental Representative support the action of the TPO in including this company in the list of comparables. 17.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that this company i.e. Persistent Systems Ltd., is engaged in product development and product design services while the assessee is a software de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Annual Report of the company for the period under consideration, which is as under : Quintegra has taken various measures to preserve its intelectual property. Accordingly, some of the products developed by the company have been covered by the patent rights. The company has also applied for trade mark registration for one of its products, viz. Investor Protection Index Fund (IPIF). These measures will help the company enhance its products value and also mitigate risks. (iv) The TPO has applied the filter of excluding companies having peculiar economic circumstances. Quintegra fails the TPO's own filter since there have been acquisitions in this case, as is evidenced from the company's Annual Report for F.Y. 2007-08, the period under consideration. The learned Authorised Representative prays that in view of the submissions made above, it is clear that inter alia, this company i.e. Quintegra Solution Ltd. being functionally different and possessing its own intangibles/IPRs, it cannot be considered as a comparable to the assessee in the case on hand and therefore ought to be excluded from the list of comparables for the period under consideration. 18.3 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee was also a provider of software development services. Before us, in addition to the plea that the company was functionally different, the assessee submitted that this company was excluded from the list of comparables by the order of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (ITA No. 845/Bang./2011) on the ground that the 'Related Party Transactions ('RPT') is in excess of 15%. The learned Authorised Representative submitted that for the current period under consideration, the RPT is 18.3% and therefore this company requires to be omitted from the list of comparables. 19.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables as this company was a pure software development service provider like the assessee. 19.3 We have heard both parties and perused and carefully considered the material on record. We find that the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 has excluded this company from the set of comparables for the reason that RPT is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td (Seg.) 6 Lucid Software Ltd 7 Persistent Systems Ltd 8 Quintegra Solutions Ltd 9 Softsole India Ltd 10 Tata Elxsi Ltd (Seg.) 11 Thirdware Solutions Ltd (Seg 12 Wipro Ltd (Seg.) As regards the additional grounds raised by the assessee, the co-ordinate bench of the Tribunal also dealt with an identical issue in para 24 (supra) and therefore when the functional comparability of these two companies have been examined by the Tribunal and it was found that these companies are not comparable with the software development services provider because of different activities as well as engaged in the software products, R D activities and resulting in creation of Intellectual Property Rights (IPRs) then, even if these companies are selected by the assessee in its T.P. Analysis the same shall be excluded from the comparables. The comparability of these companies was already tested by this Tribunal, then the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t whereas the expenditure is recognized when it is incurred towards software development. Therefore, there is no match between the expenditure and the revenue from software development segment. Thus once this company is in the software development, the same cannot be compared with the assessee being software development services provided to its AEs. 5.2 On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below and further submitted that the co-ordinate bench of this Tribunal in the case of Ariba Technologies India Pvt. Ltd. v. ITO in IT (TP) A Nos.441 442/Bang/2012 Dt.2.2.2016 has found this company to be comparable with software development service provider. 5.3 We have considered the rival submissions and the relevant material on record. In case of Ariba Technologies India Pvt. Ltd. (supra), the objections against this company was on the ground of extra-ordinary profit and therefore the Tribunal has no occasion to examine the functional comparability of this company except the ground raised by the assessee regarding extra-ordinary profit margin. The learned Authorised Representative of the assessee has referred to the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration. Accordingly, this company is directed to be excluded from the set of comparables. Hence we direct the TPO/A.O. to exclude all these 13 companies from the set of comparables as under : (i) Avanicin Cincom Technologies Ltd. (ii) Bodhtree Consutling Limited (iii) Celestial Bio-labs Limited (iv) e-Zest Solutions Limited (v) Infosys Limited (vi) Kals Information Systems Limited (Seg.) (vii) Persistent Systems Limited (viii) Quintegra Solution Limited (ix) Tata Elxsi Limited (Seg.) (x) Thirdware Solution Limited (xi) Wipro Limited (Seg.) (xii) Softsol India Limited (xiii) Lucid Software Limited. 13. The revenue has also challenged the decision of the CIT (Appeals) in respect of the company Indus Network Limited which was excluded by the TPO by applying the employee cost filter. 14. We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. This company was selected by the assessee in its TP Study but excluded by the TPO on the ground that this company fails the employee cost filter of 25%. As regards the employee cost filter is a proper c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Geographical Information System (GIS) Services. Even the information provided in response to Notice under Section 133(6), this company stated that it provides high end GIS Services which includes the generation, processing, management and maintenance of data or GIS. Thus the assessee contended that functions performed by this company are not functionally comparable with the assessee which is providing only ITES to its AE. The CIT (Appeals) accepted this contention of the assessee and directed the Assessing Officer to exclude this company from the set of comparables. 17. We have heard the learned Departmental Representative as well as learned Authorised Representative and considered the relevant material on record. At the outset, we find that the co-ordinate Bench of this Tribunal vide decision dt.14.08.2013 in the case of Symphony Marketing Solutions India (P.) Ltd. v. ITO [2013] 38 taxmann.com 55 (Bang. - Trib.) for the same assessment year has examined the functional comparability of this company in paras 22 and 23 as under : 'Genesys International Corporation Ltd. 22. This company is listed at Sl. No.12 in the list of comparable companies chosen by the TPO. As far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated the BPO as equivalent to KPO services. 40. We have to now consider whether a BPO and KPO are functionally similar and are comparable to each other. BPO is a sub- set of outscoring and involves the contracting of the operations and responsibilities of specific business functions or process to a third party services provider. Often business processes outsourcing are information technology based and referred to as ITES-BPO. KPO is one of the sub-segment of the BPO industry. It involves outsourcing of core information related business activities which are competitively important or form an integral part of a company's value chain. It thus requires advanced analytical and technical skills as well as a high degree of specialist expertise. The KPO services include all kinds of research and information gathering. Thus it can be seen that even though both BPO and KPO are offering information Technology based services, the skill and expertise and may be even the tools required are different which may result in different economic results of both the segments. Thus, in such circumstances, we are of the opinion that they cannot be compared with each other and have to be excluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee would be well within the OP/Cost PLI of the other comparable companies chosen by the TPO. We accordingly hold that in respect of the international transactions of rendering marketing support services, the price received by the assessee is at arm's length and no adjustment is called for. Ground No.5 raised by the assessee is accordingly allowed. We find that there is no change in the functional profile of this company for the year under consideration. Accordingly, by following the earlier decision of this Tribunal, we do not find any reason to interfere with the order of the CIT (Appeals) qua this issue. 20. As regards the functional comparability of Priya International we find that the co-ordinate Bench of Delhi Tribunal in the case of Metso Minerals (India) (P.) Ltd. v. Dy. CIT [2015] 62 taxmann.com 306 (Delhi - Trib.) has considered the functional comparability of this company at page 22 of the order as under : (ii) Priya International This company was selected as comparable by the Transfer Pricing Officer. It is seen from the record that the Transfer Pricing Officer included this company in the final set of comparables selected by him. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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