TMI Blog2018 (7) TMI 1878X X X X Extracts X X X X X X X X Extracts X X X X ..... s are unsustainable. Be that as it may, considering the entirety of circumstances, we deem it fit and proper to restore the matter back to the file of Assessing Officer, who shall reconsider the aforesaid addition afresh as per law - ITA No. 7280/Mum/2012 - - - Dated:- 27-7-2018 - Sri Mahavir Singh And Sri Manoj Kumar Aggarwal, JJ. Appellant by: Miss Bhavya Bansal Shri Suresh Tolani Shri Darpan Kirpalani, ARs Respondent by: Shri V Jenardhanan, Sr. DR ORDER Mahavir Singh, This appeal by the assessee is arising out of the order of Dispute Resolution Panel-1, Mumbai, [in short DRP] vide direction dated 25.09.2012 u/s 144C of the Income Tax Act, 1961(hereinafter the Act ). The Assessment was framed by the Asst. Commissioner of Income Tax, Circle 3(3), Mumbai (in short ACIT/ AO) for the AY 2008-09 order dated 04-10-2012 under section 143(3) of the Act. 2. The first issue in this appeal of assessee is against the order of AO/DRP/TPO is as regards to the making of upward adjustment to the total income of the assessee on account of international transactions relating to software development services entered into by assessee with its associate enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its associate enterprises in relation to software development services. The learned Counsel for the assessee Miss. Bhavya Bansal argued for the assessee and stated the fact that the assessee has rendered Software Development Services to its AE to the tune of ₹ 13,53,11,573/-. The relevant facts are that the assessee is a 100% subsidiary of Dialogic Inc. (Erstwhile Veraz Networks Ltd, USA). The assessee company has set up its unit for development of telecommunication software for its group entities and it also provides marketing and customer services and back office support services (ITES) to its group companies. One of the segments is provision for software development services to its AEs based in Israel and USA. In consideration of the services provided, the assessee received compensation at cost +12% markup and during the year under consideration it received a sum of ₹ 13,53,11,573/- for rendering of such services. For benchmarking the transaction, assessee used Transactional Net Margin Method ('TNMM') as the most appropriate method and the profit level indicator ( PLI ) was taken as Operating Profit to Total Cost (OP/TC). The TPO has accepted the method u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.69 21. Thirdware Solutions Ltd. 23.05 22. VGL Softech Ltd. 15.28 23. Wipro Ltd 28.56 While selecting such comparables, the TPO has put various filters as given on Page 4 Para 6.2 of TPO s order. The DRP has upheld the order of the TPO without any contrary findings. Aggrieved, now assessee is in appeal before Tribunal. 5. Before us Ld Counsel for the assessee Miss Bavya Bansal argued that in the interest of paucity of time, she would restrict the submission to 15 comparables, based on functionality and initial filters applied by the TPO for Software Development and if these comparable are excluded, the operating margin based on other comparable will be within the limit subject to bench agree by her contentions, then she will not argue on other inclusions or exclusions although she disputed all the comparable taken by the assessing officer. Out of these 15 comparables, 11 are covered by a single judgement in the case of Infor (Bangalore) P. Ltd. In ITA (TP) No.1550/Bang/2012, wherein one company has an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dialogic ITAT Order aY 2009-10 11. Infosys Technologies Ld. 39.62 Infor (Bangalore) ITA 1550 12. KALS information System Ltd. 41.94 Infor (Bangalore) ITA 1550 13. LGS Global Solutiosn Ltd. 26.46 26.46 26.46 14. Mindtree Ltd. 15.34 15.34 15. Persistent System Ltd. 27.7 Infor (Bangalore) ITA 1550 16. Quintegra Solutiosn Ltd 9.75 Infor (Bangalore) 1550 17. R System International Ltd. 15.3 15.3 18. Sasken Communication T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to para 6 (iv). It was further contended that as per the annual report of this company on page 35 of paper book, the Company has inventory worth ₹ 1.1 Crores as on 31 March 2008 and is into the business of sale of products. As per page 8 of the TPO s order, the TPO himself rejected Lucid software on the basis of its dealing in software products. The company is engaged in Education services (includes Digital Learning, Mobile Learning, education applications), Healthcare services (Patient Life cycle Management, Hospital Administration Management, Drug Discovery, Disease Life cycle Management), Manufacturing CPG and retail (R D, New Product Development, Global Supply chain management), Enterprise development. Product development and Enterprise business services. Hence, it was vehemently argued that not only the company fails two of the initial filters applied by the TPO himself, however it is also functionally not comparable to the assessee. 7. The second company was Avani Cincom Technologies Ltd. which is the company into production of products such as D-Exchange, I-Trak, Law firm Solution suite, hotel and restaurant booking engines etc as per Page 56, 57 58 of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Further there is substantial expenditure on product development of drug molecule. The company is engaged in software development services as well as ITES services, which is considered as the only segment as per AS-17. She relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 10. The Fifth company E- Infochips Ltd., is engaged in the development and maintenance of computer software and also manufacturing EVM and VDB Electronic Board (Hardware Division). As per the annual report of this company on page 86 of paper book the Company earns income from Software services and products. The representative of the assessee argued that as per page 8 of the TPO s order, the TPO himself rejected Lucid software on the basis of it dealing in software products. Further as per annual report of this company on page 87 of the paper book the company has only one reportable segment which is into software services as well as IT enabled services. No separate segmental data is available for software development services. This Company was rejected by the TPO in its order for AY 2011-12 for being fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnology Solutions, Enterprise Integration, CIS and BPO, Infrastructure Management, Cloud Services. The company also provides Business Intelligence and Data Warehousing Solutions as can be seen from Page 102 103 of Paper book. It is ITES company, and hence assessee prayed that it is functionally not comparable. This Company has been rejected by the ITAT in assessee s own case vide order for AY 2009-10 as it is functionally dissimilar to the assessee and in this regard attention was drawn to Para 5.1 of the tribunal order. This Company has been rejected by the TPO in its order for AY 2011-12 for being functionally not comparable to Dialogic. 13. The eighth company is Infosys Technologies Ltd. and it stated that Infosys's turnover is approximately 1160 times more than that of Dialogic's turnover. Considering a number of economic factors and market dynamics, Dialogic having a turnover of ₹ 13.5 crores as against that of Infosys having a turnover of around 15,653 Crores (1160 times), lacks comparability based on scale of operations. Infosys has 52 global development centers, of which 26 are located in India, 11 are in North America, 9 are in the Asia-Pacific region a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation Life Cycle Management Software, hence rendering the company functionally not comparable to the assessee. She relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 15. The tenth company is Persistent Systems Ltd., and it was stated that the company's turnover is approximately 30 times that of Dialogic's turnover. Considering a number of economic factors and market dynamics, Dialogic having a turnover of ₹ 13.5 crores as against that of Persistent having a turnover of around 406.98 Crores, lacks comparability based on scale of operations. It was also submitted that the company is engaged in four types of business segments, namely lSVs, Telecom, Enterprises and VLSI and others. The company is also engaged in the sale of products and as indicated in the annual report does not show sale of goods and income from services separately at Page 148 of Paper book. Further, the company has disclosed segment information only on the basis of the consolidated financial statements which shall be presented together with the unconsolidated financial information. The company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er book. The company has not disclosed any segmental information in the annual report. Hence the assessee prayed that the company be dropped as a comparable. The assessee relied on the Tribunal decisions for rejection of this company on the basis of being functionally not comparable to a software development service provider. 19. The fourteenth company is Wipro Ltd., which is engaged in IT Services, acquisitions, BPO services, India Asia Pacific IT Services and Products, Consumer Lighting, others. The segmental data for the above services is however not available. The company also possesses brand value. For a branded service, a customer is usually willing to pay a premium. Thus, rendering the company non comparable to the assessee. It was further submitted the company's turnover is approximately 835 times that of Dialogic's turnover. Considering a number of economic factors and market dynamics, Dialogic having a turnover of ₹ 133 crores as against that of having a turnover of around ₹ 11,276 Crores, lacks comparability based on scale of operations. In this regard, she relied on the Tribunal decisions for rejection of this company on the basis of being funct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the TPO to the same test of rigorous scrutiny. However, in assessee s case all the companies selected by the TPO to the same rigorous test of scrutiny, and for which she stated that she has filed detailed submissions for exclusion or inclusion for the comparables. However she argued for exclusion of only 15 companies. It was further submitted that in the case of Allscripts the argument of cherry picking was raised since the Ld counsel was not able to substantiate the process by which the 20 companies were finally selected by the assessee by way of the TP Study. 23. We have heard the rival submission and carefully considered the same along with the order of the authorities below as well as the material and the documents referred to us during the course of hearing. We have also gone through the various case laws referred to during the course of hearing from both the sides. The only issue in this ground relates to the selection of comparable by TPO while computing the operating margin in the case of the assessee. The uncontroverted facts before us are that the AO made an adjustment of ₹ 1.98 crores to the international transaction of software development services rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it comes to less than 14.13%. 24. The first objection relates to Acropetal Technologies Ltd which is appearing at serial no.3. We noted that while selecting various comparables the TPO has put various filters such as export earnings less than 25%, employee cost less than 25%, RPT more than 25%, Onsite revenue more than 60% etc We do agree with the Id. Counsel that Acropetal fails to pass the employee cost to turnover filter and even fails the onsite development filter as Acropetal has employee cost of only 7.48% and the onsite development is 73%. As per the Annual Report of the Company for FY 2007-08, the total employee cost is ₹ 45130,804 and total operating revenue is ₹ 603.148,486 (Employee cost ratio of 7.48%). Also, the total Onsite Development Charges is ₹ 314.591.271 and total operating cost is ₹ 432,400,427 (Onsite development ratio of 73%). Acropetal has been rejected on the basis of failing the similar filter applied by TPO in the case of Ness Technologies (India) Private Limited Vs ACIT (ITA 7016/MUM/2012) (AV 2008-09) wherein under Para 6 (iv), it was held: In case of Acropetol Technologies Limited, we found that the total employee cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bench, we exclude this company from comparable in the case of the assessee and direct the AO accordingly. 27. The third comparable which has been disputed is Bodhtree Consulting Ltd. appearing at serial no. 6 of the above table. We noted that this company has its head office in Santa Carla, CA and has offshore delivery centres in India and is engaged in Product Engineering, Analytics Services, Cloud Services, Enterprise Services. The company has a workforce of 850+ and a Fortune 500 Customer base. This company is engaged in providing Data management and Data warehousing services which are classified as ITES. Further, we noted that during the year the company has undergone restructuring activity by hiving off its e-paper business. Thus, it is functionally non comparable. We also noted that segmental data is not available in the case of this company. Thus, it is difficult to identify the software services provided by Bodhtree which is apparent from Pg 69 of the paper book. We noted that this Company has been rejected by the ITAT in the assessee's own case for AY 200910 as it is functionally dissimilar to the assessee (Para 8). In this regard, We noted that Banglore bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under para 6(i) observes as under: In the case of Celestial 810/abs ltd., the total employee cost of the company as a percentage of total sales is only 20.05% of the total turnover and hence the company foils the employee cost to sales filter of 25% applied by the TPO himself . .............. We also found that assessee operates in the field of biotechnology and just provides services using tools developed through IT. However, the company selected by TPO appears to be functionally different, the annual report evidenced that it has developed product/ tolls and other intangibles. We further noted that this company has been regarded to be non comparable to a software development service provider on the basis of being functionally by the coordinate bench of this tribunal and hence respectfully following the same, we exclude this company also from comparable as selected by TPO and direct the AO accordingly. 29. The fifth comparable which has been disputed before us is E- Infochips Ltd. Appearing at Sr. No.8 in the above table. This is undisputed fact that this Company is engaged in the development and maintenance of computer software and also manufacturing EVM and VDB Elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be drawn up. In view of this, we have to hold that this company has to be excluded on the basis of being functionally non comparable to a software development service provide. Our aforesaid view is duly supported by the following finding given by Coordinate bench of Banglore of this tribunal in the case of lnfor(Banglore)s P . Ltd Vs ACIT (ITA 1550/Bang/2012) (AY 2008-09) under:- 25. Vis-a-vis E-Zest Solutions Ltd, findings of the Tribunal as it appears at para 14.4 of the order in the case of 3DPLM Software Solutions Ltd. (supra), is reproduced hereunder: 14.4 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the list of comparables only on the basis of the statement made by the company in its reply to the notice under section 133(6) of the Act. It appears that the TPO has not examined the services rendered by the company to give o finding whether the services performed by this company ore similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software development services, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Considering that the segment under test before us is providing of software development services, in our view, the activities of lgate Global Solutions Ltd. are in the field of ITE services and it is not comparable with that of the assessee Thus, on this aspect also, assessee succeeds. This Company has also been rejected by the TPO in its order for AY 2011-12 for being functionally non comparable to Dialogic. We therefore hold that this company be excluded from comparable as selected by TPO and direct the AO accordingly. 32. The eight comparable, which is disputed before us is lnfosys Technologies Ltd. as Appearing at serial No. 11 of the above table. This is a fact that Infosys's turnover is approximately 1160 times more than that of assessee's turnover. The assessee is having a turnover of ₹ 13.5 crores as against that of Infosys having a turnover of around 15,653 Crores - Infosys has 52 global development centers, of which 26 are located in India, 11 are in North America, 9 are in the Asia- Pacific region and 6 are in Europe. lnfosys also has a revenue of ₹ 597 crores from the sale of products as is apparent from page 117 of paper book. Inlosys provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her it is duly supported by the decision of coordinate bench of this Tribunal in the case of Infor (Bangalore) P. Ltd Vs ACIT (ITA 1550/Bang/2012) (AY 2008-09). Further, no contrary decision was brought to our knowledge or referred to us. We therefore hold that this company be excluded from comparable as selected by TPO and we direct the AO accordingly. 34. The tenth comparable, which has been disputed before us is Persistent Systems Ltd. as appearing at serial No. 15 of the above table. We noted that this company is having a turnover of around 406.98 Crores while the assessee's turnover is only 13.5 Crores i.e. this company's turnover is approximately 30 times that of assessee s turnover. Thus this company lacks comparability based on scale of operations. This company is engaged in four types of business segments, namely ISV5, Telecom, Enterprises and VLSI and others. The company is also engaged in the sale of products and as indicated in the annual report does not show sale of goods and income from services separately as is apparent from Page 148 of Paper book. This company has disclosed segment information only on the basis of the consolidated financial statements whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -09) has held as under:- 29. As for Quintegra Solutions Ltd, findings of the Tribunal appear at paras 18.1 to 18.3.3 of the order in the case of 30PLM Software Solutions Ltd. (supra), and this is reproduced hereunder: 18.1 This case was selected by the TPO as a comparable. Before the TPO, the assessee objected to the inclusion of this company in the set of comparables on the ground that this company is functionally different and also that there were peculiar economic circumstances in the farm of acquisitions made during the year. The TPO rejected the assessee s objections holding that this company qualifies all the filters applied by the TPO. On the issue of acquisitions, the TPO rejected the assessee's objections observing that the assessee has not adduced any evidence as to how this event had an any influence on the pricing or the margin earned. 18.1.2 Before us, the assessee objected to the inclusion of this company for the reason that it is functionally different and also that there are other/actors for which this company cannot be considered as a comparable. It was submitted that, (i) Quintegro solutions Ltd., the company under consideration, is engaged in product engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . is engaged in product engineering services and is not purely a software development service provider as is the assessee in the case on hand. It is also seen that this company is also engaged in proprietary software products and has substantial R D activity which has resulted in creation of its lPRs. Having applied for trade mark registration of its products, it evidences the fact that this company owns intangible assets. The co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010 dt. 9.11.2012) has held that if a company possesses or owns intangibles or lPRs, then it cannot be considered as a comparable company to one that does not own intangibles and requires to be omitted from the list of comparables, as in the case on hand. 18.3.2 We also find from the Annual Report of Quintegro Solutions Ltd. that there have been acquisitions made by it in the period under consideration. It is settled principle that where extraordinary events have taken place, which has an effect an the performance of the company, then that company shall be removed from the list of comparables. 18.3.3 Respectfully following the decision of the co-ordinate bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) visual computing labs as is reflected in the annual report of the company. The learned Authorised Representative submitted that, (1) The co-ordinate bench of the Mumbai Tribunal in the case of Telecordia Technologies Pvt. Ltd. (supra) has held that Tata Elxsi Ltd. is not a functionally comparable for a software development service provider. (ii) The facts pertaining to Taro Elxsi Ltd. have not changed from the earlier year i.e. Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008- 09 and therefore this company cannot be considered as a comparable to the assessee in the case on hand. (iii) Taro Elxsi Ltd. is 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) Tara 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as selected by TPO and we direct the AO accordingly. 37. The thirteenth comparable under dispute is Thirdware Solutions Ltd. This company is engaged in application implementation, application management and application development. Accordingly company is not a pure software development company. This company is also engaged in trading of software which is evident from the financials of the company. It is also engaged in the purchase and sale of license as is apparent from page 167 of Paper book. We noted that this company has not disclosed any segmental information in the annual report. We therefore agree with the contention of the assessee's counsel that this company is functionally different and cannot be taken to be comparable to assessee. Our aforesaid view is duly supported by the decision of Bangalore Bench of this Tribunal in the case of Infor (Bangalore) P. Ltd Vs ACIT (ITA 1550/Rang/2012) (AY 2008-09) wherein it was held as under:- 31 Coming to Thirdware Solutions Ltd (seg), findings of the Tribunal in the above mentioned case of 3DPLM Software Solutions Ltd(supra), appear at Para nos. 15.1 to 15.3 which is reproduced hereunder: 15. 1 This company was propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this company be omitted from the list of comparables for the period under consideration in the case on hand. No contrary decision was brought to our knowledge. We therefore hold that this company be excluded from comparable as selected by TPO and we direct the AO accordingly. 38. The fourteenth comparable which has been disputed before us is Wipro Ltd. This is undisputed fact that Wipro Limited is engaged in IT Services, acquisitions, IWO services, India Asia Pacific IT Services and Products, Consumer Lighting, others. The segmental data for the above services is however not available. The company also possesses brand value. For a branded service, a customer is usually willing to pay a premium. This company's turnover is approximately 835 times that of assessee's turnover as its turnover is ₹ 11276 crores as compared to assessee's turnover of ₹ 13.5 crores. Thus this company lacks comparability based on scale of operations. Our aforesaid view is duly covered by the decision of Banglore bench of this tribunal as relied on by assessee's counsel not disputed by Id. DR in the case of Infor (Bangalore) P. Ltd Vs ACIT (ITA 1550/Bang/2012) (AY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Vic TPO is that lie adopted comparison of the consolidated financial statements of WIPRO with She standalone financials of the assessee: which is not an appropriate companies. 12 4.2 We also find that this company owns intellectual property in the form of registered patents and several pending applications for grant of patents. In this regard, the co-ordination bench of this Tribunal in the case of 24/7 Customer, Corn Pvt. Ltd. (I TA No. 227/Bang/2010 has held that a company owning intangibles cannot be compared to a low risk captive service provider who does not own any such intangib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted that the matter can be remitted to the file of the learned CIT(A) for fresh adjudication by applying uniform norms on the analysis of oil entities picked up as comparables. In assessee's case, the learned DR relied on the following noting from the order which held, in our considered view also, there cannot be cherry picking for deciding parameters of rejection of a comparable and the parameters have to be broad enough of being general application. In the case before us, however, the Ld counsel differentiated this by arguing that the assessee has analysed all the comparables identified by the TPO in detail and even filed a written submission for inclusion or exclusion of the same. Hence, in our considered opinion and on the basis of the argument of the Id counsel the above case can be differentiated since in the case before us as submitted by the Ld counsel that all the comparables have been subject to the same rigorous test of comparability analysis as demonstrated from the submission filed by the assessee. Finally. We are of the opinion that in fact it is now well established by various judgements, that the representative of the argues for exclusion of a few co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of 6 comparables by way of its TP Study. However, the TPO identified a set of 21 companies after undertaking a fresh search on the databases prowess' and capitaline as reproduced in the table below: Sr. No. Name of the Company Margins 1. Accentia Technologies Ltd. 41.76 2. Acropetal Technologies Ltd. 35.3 3. Aditya Birla Minacs worldwide Ltd. 2.2 4. Asit C Mehta Financial Services Ltd. 9.42 5. Caliber Point Business Solutions Ltd. 10.97 6. Coral Hubs Ltd. (Earlier known as Vishal Technologies Ltd.) 50.68 7. Cosmic Global Ltd. 23.3 8. Crossdomain Solutions ltd. 26.96 9. Datamatics Financial Services 34.87 10. E4e Healthca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Flextronics Technologies 1559 2. Acropetal Technologies Ltd. 35.3 Flextronics Technologies 1559 3. Aditya Birla Minacs worldwide Ltd. 2.2 2.2 2.2 2.2 4. Asit C Mehta Financial Services Ltd. 9.42 9.42 9.42 9.42 5. Caliber Point Business Solutions Ltd. 10.97 10.97 10.97 10.97 6. Coral Hubs Ltd. (Earlier known as Vishal Technologies Ltd.) 50.68 Flextronics Technologies 1559 7. Cosmic Global Ltd. 23.3 23.3 23.3 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Flextronics Technologies 1559 Mean Margins 29.25 9.18 13.18 16.63 Within +/- 5% Range Yes Yes Yes She further filed detailed submissions on these 11 comparables during the course of hearing. 43. The first comparable taken up by Ld Counsel for assessee is Accentia Technologies Ltd. We find that assessee s counsel statedthe facts that Accentia has undergone reconstruction in the relevant Assessment year. It acquired Oak Technologies Inc. Trans Services which in turn has an impact on the profits of the company. Further it was highlighted that Accentia's major revenue is from Medical transcription business (64%), Medical billing coding (17%) software devel implementation (19%) as per Page 208 of Paper book. It operates in a single segment (Healthcare receivable management) as per page 209 of Paper book. The company has their own line of products which they sell to the customers including iRTS, iAMS, iIMS, iPMS, iHMS. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is under dispute is Coral Hubs Ltd. (Earlier known as Vishal Technologies Ltd). Before us, the learned counsel for the assessee stated the facts that the company is rejected by TPO in assessee's own case for AY 2009-10. It is engaged in data digitization, print on demand, e-Publishing as per page 215-217 of paper book. It Incurred negligible employee cost of 2.92% of operating revenue, signifying that it is engaged in trading of services instead of providing services. It has an outsourcing of services model, hence non comparable to assessee. In this regard the learned Counsel for the assessee relie don the decision of co-ordinate Bench of this Tribunal In the case of Flextronics Technologies (India) Pvt Ltd v DCIT (IT(TP)A No.1559/Bang/2012, wherein it is held as under:- In case of Maersk Global service Centre India (P.) Ltd.(supra), the ITAT Mumbai Bench has also directed for exclusion of the aforesaid company, by observing in the following manner Insofar as the cases of tulsyan Technologies Limited and Vishol Information Technologies Limited are concerned, it is noticed from their annual accounts that these companies outsourced a considerable portion of their business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee lacks comparability based on scale of operations.IN THIS regard she relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. We find from the above facts and the case law relied on by the learned Counsel for the assessee that this issue is covered by the decision of co-ordinate bench in the case of Flextronics Technologies (India) Pvt. Ltd ITA(TP) No. 1559/Bang/2012 (Para 15) Symphony Marketing Solutions India Pvt. Ltd. Vs ITO ITA No. 1316/Bang/2012 (Para 18). No contrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 47. The fifth comparable under dispute is Datamatics Financial Services Ltd. Before us the learned Counsel for the assessee stated the facts that Datamatics is engaged in providing registrar transfer agency services. Further, the company also offers issue management services and IT enabled services in India. However, the company has not disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icted that the company has related party transactions of ₹ 29.107 crores. The operating revenue of the company is ₹ 116.9 crores. Hence, related party transactions is 25% of operating revenues. The assessee relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. Before us the learned counsel for the assessee relied on the case law of co-ordinate Bench of this Tribunal in the case of Flextronics Technologies (India) Pvt. Ltd ITA(TP) No. 1559/BangJ2012 (Para 16), Lionbridge Technologies Pvt. Ltd. vs ITO - 8(2)(2) - ITA No. 7498/Mum/2012- AY 2008-09 (Para 8) Symphony Marketing Solutions India Pvt. Ltd, Vs ITO ITA No. 1316/Bang/2012 (Para 20). No contrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 49. The seventh comparable under dispute is Gensys International Corporation Ltd. Before us, the learned counsel for the assessee stated the facts that Genesys is enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect a comparable which has a yearend different from March 2008, since it will automatically get rejected while undertaking the search on the databases. Hence, HCL Comnet having year end of June 2008 ought to be rejected ion these grounds. Further it was submitted that the scale of operation (Rs 495 cr) is very different from the assessee (1.43 cr), hence it should be rejected. After hearing both the sides and going through the facts, we are of the view that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 51. The ninth comparable under dispute is Infosys BPO ltd. Before us, the learned Counsel for the assessee stated that lnfosys BPO has a turnover of ₹ 825.08 Crores as against that of the assessee having a turnover of around 1.43 Crores which is around 577 times that of the assessee, lacks comparability based on scale of operations. It was also submitted that Infosys BPO s.r.o. was incorporated on February 4, 2004 in the Czech Republic as a wholly owned subsidiary to provide business process management and transitioning services. During the year the company acquired IL Financial Services Holding B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that Mold-Tek Technologies Ltd. ('Mold-tek') primarily operates under two business segments Plastic division: The plastic division is engaged in the manufacture of plastic containers, pet bottles, blow moulding, tube oils, paints, pet products, consumer products, etc. IT (KPO) division. The IT division specializes in providing structural engineering and design services for construction of buildings. (Pg 29 of the AR for FY 2007-08). Thus it was submitted that Mold-tek performs a completely different set of functions than those performed by the Appellant. It is engaged in providing Structural Engineering and Design KPO services for construction of building by using design tools like CAD/ CAM, Stadd Pro by employing highly skilled software engineers for the purpose. Thus, the learned Counsel for the assessee requested to drop Mold-Tek as a comparable. In this regard, she relied on the judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. Before us the learned counsel for the assessee relied on the case law of co-ordinate Bench of this Tribunal in the case of Flextronics Technologies (India) Pvt Ltd IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been granted 40 registered patents and has 62 pending applications. Hence, the assessee submits that Wipro should not be considered as comparable. In this regard, she relied on the following judicial precedents for rejection of this company on the basis of being functionally non comparable to a ITES provider. Before us the learned counsel for the assessee relied on the case law of co-ordinate Bench of this Tribunal in the case of Flextronics Technologies (India) Pvt. Ltd ITA(TP) No. 1559/l3ang/2012 (Para 20) Symphony Marketing Solutions India Pvt Ltd. Vs ITO ITA No. 1316/Bang/2012 (Para 26). No contrary decision is brought before us by the leaned Sr. DR, and we therefore respectfully following the decision of co-ordinate Bench of this tribunal hold that this company cannot be regarded as comparable and direct the AO to exclude the same from comparables as selected by the TPO. 54. The next issue in this appeal of assessee is against the order of AO/DRP/ is as regards to disallowing the claim of deduction under section 10A of the Act in respect of expenditure of ₹ 33,95,873/-. For this assessee has raised the following grounds: - Re: Disallowance of expenditure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the rival submissions, one thing that is clearly discernible is that the disallowance has been made on an adhoc basis without pointing out any particular item of expenditure which is relatable to the non PSE division. It is also emerging from the record that the action of the Assessing Officer is based on similar addition made in assessment year 2008- 09. Before us, nothing has been brought out to show the finality of the addition made in preceding assessment year 2008-09. However, additions made on mere conjectures and surmises are unsustainable. Be that as it may, considering the entirety of circumstances, we deem it fit and proper to restore the matter back to the file of Assessing Officer, who shall reconsider the aforesaid addition afresh as per law, after allowing the assessee a reasonable opportunity of being heard in support of its stand. Thus, on this aspect assessee succeeds for statistical purposes. 56. Respectfully, following the Tribunal order in assessee s own case for immediate preceding year, exactly on same lines, we set aside the issue to the file of the AO for re-adjudication. This issue of assessee s appeal is allowed for statistical purposes. 57. In t ..... 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