HEWITT ASSOCIATES (INDIA) PVT. LTD.,GURGAON vs. DCIT, NEW DELHI

per information of the company, the IT division of the company

is mainly engaged in ITES. It qualifies all the filters applied by

him. The relevant portion of the order as under;

13.10 As per the information and Annual Repot of the company, the IT division of the company is mainly engaged in ITES. It qualifies all the filters applied by the TPO. Thus, the IT division of the company is proposed as a comparable. 21.1 The Ld. AR submitted that this company is functionally

dissimilar to the assessee as the company renders structural

engineering KPO services, it is a leading provider of engineering

and design services with specialization in civil, structural and

mechanical engineering services. He further submitted that

during the FY2007-08 the extraordinary event happened and

the arrangement involving amalgamation between Tekmen Tool

Pvt. Ltd, and Mold- Tek and demerger between Mold -Tek and

Mold-Tek Plastic Limited was simultaneously sanctioned by the

Hon’ble AP High Court vide order dated 25th July 2008. The

appointed date for amalgamation and demerger was 1st October

2006 and 1st April, 2007 respectively (pages no 66-67 of Annual

Report Compendium).

21.2 In support thereof, the assessee relied on the decision of

the assessee own case in ITA NO. 5736 /del/2011 (Hewitt

Associates (India) Private Limited. Vs. ACIT) wherein it has held

as under:

25.2 In support thereof, the assessee relied on the decision of the special Bench of the Hon’ble Tribunal in the case of Maersk Global Centre(India) Private Limited (ITA No. 7466/MUM/2012 ) wherein it has been held :- “8.1 In so far as the case of Mold -Tek Technologies is concerned, it is observed from the annual report of the said company for the financial year 2007-08 placed at page 139 to 151 of the paper book that the said company was pioneer in structural engineering KPO services and its entire business comprised of providing only structural engineering services to various clients. Further information of Mold- Tek Technologies Ltd. available on their Website is furnished in the form of printout at page 158 to 165 of the paper book and a perusal of the same shows that it is a leading provider of engineering and design services with specialization in civil, structural and mechanical engineering services. It is stated to have a strong team of skilled resources with world class resources and skill sets. It is also stated to have consistently helped the clients to cut down design and development costs of civil structural mechanical and plant design by 30-40 % and delivered technologically superior outputs to match and exceed expectations. It is claimed to have inhouse software development team, quality control training and troubleshooting facilities. M/s Mold-Tek is also rendering web design and development services with experience in tunning them into an

effective graphic design representation and creating dynamic and graphic rich web applications from IT specs, design prints ect. Keeping in view this information available in the annual report of Mold-Tek as well on its website, we are of the view that the said company is mainly involved in providing high-end services to its clients involving higher special knowledge and domain expertise in the field and the same cannot be taken as comparable to the assessee company which is mainly involved in providing low-end services.[Emphasis supplied] 21.3 We find that during the FY 2007-08 the extraordinary

event happened and the scheme of arrangement involving

amalgamation between Tekmen Tool Pvt. Ltd. and Mold-Tek

and demerger between Mod-Tek and Mold -Tek Plastic Limited

was sanctioned by the Hon’ble AP High Court vide order dated

25th July 2008. Thus, this company cannot be considered as a

comparable. Upon consideration of the submissions made by

the assessee material available on record and the decision of the

assessee’s own case we hold that this company is not a suitable

comparable to the assessee. Hence, we direct the Ld. TPO/AO to

exclude this company rom the final list of comparable

companies.

Accentia Technologies Ltd.

22 The Ld. TPO selected this company for the reason that it

qualifies all filters applied by him. The Ld. TPO’s findings is

reproduced below;

13.1 The company was not part of the companies considered by the taxpayer in the accept/reject matrix given by the taxpayer in the TP report. However, the company’s data is available in the Capitaline database. The Annual Report was not available. 133(6) notice was issued. As per the reply received from the company, it has ITES segment which is into medical transcription services and qualifies all the filters applied by the TPO. Thus, the company was proposed as a comparable. In response, the taxpayer has objected that there has been restructuring in this company. The Taxpayer has objected this comparable stating that this financial year has extraordinary circumstances. However, it is pertinent to mention here that what so ever merger took place last year has been dealt in last year order. The TPO accepts that there has been some merger and acquisition this year also however the taxpayer did not adduce any evidence from the annual report or otherwise how this event had an influence on pricing or the margin earned by the company for the FY 2007-08. In the absence of the same, the above claim of the taxpayer of extraordinary event is rejected. The TPO has analysed that this is not a peculiar activity done by the company as it doesn’t affect either the revenue of the company or margin itself.

22.1 The Hon’ble DRP has not provided any comments on this

comparable.

22.2 The assessee has prayed for the exclusion of this company

on account of extraordinary events in the form of acquisition/

merger that took place during the relevant AY. The Ld. AR

submitted that this company is not functionally comparable

because the company earns it revenue from medical

transcription billing and coding software development and

implementation (page 44and 47 of the Annual Report

Compendium). Further the segmental details are not available

and employee cost to sale ratio as 12% during the AY2008-09.

This year extraordinary events happened that Iridium

Technologies and Geosoft Technologies got amalgamated with

the company. Further during this year, the company acquired

Thunga Software Pvt. Ltd. GSR Physician’s Billing Services,

GSR Systems Denmed Inc. and various other entities.

22.3 In support thereof, the assessee relied on the decision of

the assessee own case in ITA NO. 5736 /del/2011 (Hewitt

Associates (India) Private Limited. Vs. ACIT) wherein it has held

as under:

“1. Extraordinary events during the year- Amalgamation of subsidiary resulting in growth of revenues by 75.33% Amalgamated the company Iridiun Technologies which is a software product company. 2. Functionally not comparable – The activity of medical transcription (considered by TPO), billing and coding and software development and implementation is not comparable to the services provided by the Appellant. 3 Business promotion expenses constitutes, 28.34% of the total operating revenue earned by the company.”

23.4 Keeping in view the fact that an extraordinary event in the

form of acquisition took place in this company in the year under

consideration, the other facts also establishes that the company

functionally dissimilarity between this company and the

assessee and respectfully following the decision of the

assessee’s own case we hold that this company to be not a

suitable comparable company. Accordingly, we direct the

AO/TPO to exclude this company from the list of the

Comparables.

Eclerx Services Ltd.

qualifies all filters applied by him. The Ld. TPO’s findings is

reproduced below;

13.6 The data of the company is available in Prowess database. Annual Report is available for the AY. 133(6) notice was issued to the company. As per the information submitted by the company, it qualifies all the filters applied by the TPO. Thus, the same is considered as a comparable. 24.1 The Hon’ble DRP has observed in the order that KPO is

also part of ITeS Industry. Moreover, ITAT Hyderabad case of

Deloitte Consultants covers small amounts of outsourced

activities. Rightly accepted.

24.2 The Ld. AR for the assessee submitted that this company

is functionally dissimilar to that of the assessee for the reason

that it outsources services to third party vendors which is

19.32% of the total expense (page no.60 of the Annual Report of

compendium) that is engaged in KPO/highly specialized domain

services providing data analytics and customized process

solutions to a host of global clients. On the other hand, the

assessee is a simplicitor, captive BPO service provider, does not

outsource any activities and rendered such as accounts

reconciliation payroll, maintenance of employee database etc.

28.3 The Ld. AR of the assessee relied upon the decision of the

assessee own case in ITA NO. 5736 /del/2011 (Hewitt

Associates (India) Private Limited. Vs. ACIT) wherein the co-

ordinate bench relying the decision of in the case of Maersk

Global Centre (India) Private Limited (ITA No. 7466/Mum/2012

has held as under:

“Keeping in view the nature of services rendered by M/s EClerx Services Pvt. Ltd. and its functional profile, we are of the view that this company is also mainly engaged in providing high-end services involving specialized knowledge and domain expertise in the field and the same cannot be compared with the assessee company which is mainly engaged in providing low-end services to the group concerns.” 28.4 Based on the above submissions, we are of the view that

this company is functionally dissimilar to the assessee.

Respectfully following the finding of the Tribunal in the

assessee’s own case we hold that this company be excluded

from the final list of comparable companies. Accordingly, we

direct the Ld. AO/TPO to exclude this company from the final

list of the comparable.

Infosys BPO Ltd.

qualifies all filters applied by him. The Ld. TPO’s finding in para

13.9 of his order is reproduced below:

13.9 The data of the company is available in Powess data base. As per the annual report, it is into ITES qualifies all the filters applied by the TPO. Thus, the company is proposed as a comparable. 29.1 The Hon’ble DRP has observed in the order that the usage

of single year data impossibility of performance and marketing

expenses. Turnover criterion has been elaborately discussed

elsewhere in the order. Rightly accepted.

29.2 The contention of the assessee is that the revenue earned

by ACPL in ITES segment is INR 188.78 crores whereas Infosys

BPO”s revenue is INR 825.08 crores which exponentially higher

than the assessee. Further extraordinary event that the

company acquired shared service centre of Philps at Poland,

Thailand and Chennai. The company incurred substantial

expenditure on selling and marketing expenses i.e. 6.17% of the

revenue. Further the company has a heavily brand name which

has a significant value in the space (page no. 55 of the Annual

Report compendium). The Ld. AR also submitted that relying

the decision in the case of NTT Global Delivery Services Ltd. Vs.

ITO (ITA No. 5339/Del/2011) the Tribunal in the assessee’s own

case excluded this company from the final list of the

comparable. In the assessee’s case the tribunal held as under:

“5.8.2 We have perused the submission advanced by both the sides in the light of the records placed before us. From TP study at page 539- 638 of the paper book, it is observed that this company has huge turnovers, owns IPR and brand value on products and provides services to vast clientele. Under such circumstances this company cannot be accepted to be a fit comparable in case of the Assessee who is captive service provider providing services only to its group concerns. 5.8.3 Accordingly. We direct this company to be excluded from the list of comparables. [Emphasis supplied] 29.3 Considering the functional distinction brought out by the Ld. AR between this company and the assessee and respectfully following the decision of the Delhi tribunal in NTT Global Delivery Services Ltd. (supra), we direct the Ld. AO/TPO to exclude this company from the list of comparables. 29.3 Respectfully following the decision of the assessee’s own

case, we direct the Ld.AO/TPO to exclude this company from

the list of comparables.

HCL Comnet System& Services Ltd.

qualifies all filters applied by him. The relevant findings of the

Ld. TPO as under:

13.8 The data of the company is available in the Prowess database. The company’s accounting year ends with June 2008. The company was issued 133(6) notices to submit the data for 12 months period from 01-04-2007 to 31-03-2008. As per the data submitted by the company for the period from 01-04-2007 to 31-03-2008. the ITES segment qualifies all the filters applied by the TPO. Thus, the ITES segment is considered as comparable. 30.1 The Hon’ble DRP has observed in the order that

information u/s 133(6) has been obtained and segmental data

used. Usage of single year data impossibility of performance

has been elaborately discussed elsewhere in the order. Rightly

accepted.

30.2 The Ld. AR of the assessee submitted that this company is

operates in two segments (i) Telecommunication services (ii)

enabled services. Further IT enabled services comprises, of data

entre management services, end user computing services,

managed networking services and tool and process consulting

services. Further, the Ld. AR submitted that this company

owns Intangible constituting 7.11% of the revenue page No.83

of the Annual Report compendium).

30.3 The Ld. AR relied upon the decision of the assessee’s own

case ITA No. 5736/Del/2011 in this case the Co-ordinate bench

relying the decision of ICC India Ltd. vs. DCIT (ITA No.

25/Del/2012) direct the Ld. AO/TPO to exclude this company

from the list of comparable.

The CO-ordinate bench held as under:

“(v) the assessee has objected to the inclusion of this company on the ground that the company is into remote IT infrastructure management services, data centre management and user computing services managed security services net working services, tool and process consulting services and therefore functionally dissimilar. The other objections to the inclusion are that the company runs a highly capital- intensive industry, it operates 24/7 in 3 shifts, it has a significant brand value and huge assets base. It is also the assessee’s plea that the company is a full risk bearing entrepreneur whereas the assessee is a Captive Services Provide to its AE. Having considered all the aspects, it is our considered opinion that the assessee’s contention about being functionally dissimilar is

correct…. Accordingly, we direct for the exclusion of the company from the final list of comparables.” 30.4 In view of the functional dissimilarity brought out between

the assessee and this comparable company and the financial

year ending of the company is 30th June 2007 and relying the

decision of the assessee’s own case we, direct the AO/TPO to

exclude this company from the list of comparables.

Wipro Limited (Earlier known as Wipro BPO Limited)

qualifies all filters applied by him. The Ld. TPO’s finding in para

13.11 of his order is reproduced below:

13.11 Annual report is available for 2007-08. It has IT services segment consisting of both software development services and ITES. But the annual report did not contain segmental information on standalone basis. Thus, the company was asked information u/s 133(6) to submit segment details. The company submitted segmental on standalone basis. The BPO segment qualifies all the filters applied by the TP. Thus, it is considered as a comparable. 31.1 The Hon’ble DRP has observed in the order that the usage

of single year data impossibility of performance and marketing

expenses. Turnover criterion has been elaborately discussed

elsewhere in the order. Rightly accepted.

31.2 The Ld. AR submitted that this company is a giant entity

having huge asset base, brand value, goodwill and presence in

global market. The size of the operations are multifold of that of

the assessee. The Ld. AR further submitted that this company’s

R&D efforts have contributed revenues of USD 368 million

which is approximately 11% of our Global IT Services and

products revenue for the year. He also submitted that this

company incurred expenditure on selling and marketing

expenses i.e. 3.04 % of the total revenue. This company has

been granted 40 registered patents and has 62 pending

applications this includes 33 registered patents and 51 patent

applications of OKI Techno Centre Singapore Pte. Limited (page

no 86-87 of Annual report Compendium).

31.3 In support thereof, the Ld. AR placed reliance on the

decision of the assessee’s own case ITA No. 5736/Del/2011

wherein the co-ordinate bench relying the decision in the case

of H&S Software Development and Knowledge Management

Centre Pvt. Ltd. (ITANo. 6455/del/2012) directed the AO/TPO

to exclude this company from the comparable list. The CO-

ordinate bench held as under:

31.4 In view of the vast difference in the operations/ functions

of this company and having significant intangibles and relying

the assessee’s own case we direct the AO/TPO to exclude this

company from the final list of the comparables.

Acropetal Technologies Limited

reasons:

13.2 The company was not part of the companies considered by the taxpayer in the accept/reject matrix given by the taxpayer in the TP report. However, the company’s data is available in the Capitaline database. The segmental information is not available for FY 2007-08. 133(6) notice was issued. As per the reply received from the company, it has ITeS segment which qualifies all the filters applied by the TPO. XXXX As can be seen from above engineering and design services as rendered by the company are in the nature of IT enabled services. Thus, the taxpayer’s argument that engineering services rendered by the company are not IT enabled services is incorrect. Hence all the three services -engineering services, BPO, and data processing - rendered by the company for the FY 2007-08 forms part of the IT

enabled services and thus the company’s IT Division is comparable to the taxpayer. 32.1 The Hon’ble DRP has not provided any comments on this

comparable.

32.2 The Ld. AR submitted that this company is engaged in

development of computer software. Further this company holds

inventory vis-à-vis assessee is a service provider holding no

inventory ( page No. 48 of Annul Report compendium). Further

the company incurred onsite development expenditure which

constitutes 69.32% of the total expenses (page no. Annual

Report compendium). Reliance is placed on the following

decision:

(i) ITA NO. 511&512 /Del/2016 (AY2010-11) Steria India

(P.) Ltd.

(ii) PCIT vs. Evalueserve, com Pvt. Ltd. ITA No

6310/Del/ 2012

(iii) Dimension Data India vs. ACIT ITA No. 7725/

Mum/2012

32.3 This company engaged in development of computer

software and hold the inventory. The company incurred 69.32%

onsite development expenditure of the total expenses. From the

above submissions and perusal of the material on records the

factual differences between the assessee and this company are

evident. Thus, we direct the AO/TPO to exclude this company

from the final list of the comparables.

Genesys International Corporation Limited

qualifies all filters by him. The Ld. TPO’s finding in para 13.7 of

his order is reproduced below:

13.7 As the company satisfied all the filters applied by the TPO, the same is considered as comparable. The company is considered as comparable. Xxxx As discussed under the head “Verticals/ Horizontals” the taxpayer did nod consider different functional lines within IT enabled services for selection of comparable companies. Thus, the company cannot be rejected on the basis that it is into different functional line within ITES. Hence the company is retained as a comparable. The taxpayer

further contends that the company has intangibles research and development activities and it own products which make the company un comparable to the taxpayer in terms of functions. These objections of the taxpayer also deserve rejection on the same ground that the TPO has not gone into the functional and vertical lines of the comparable companies on which issue the taxpayer has not raised objections. 33.1 The Hon’ble DRP has observed in the order that the

Board’s Circular covers the areas of operation under ITES. The

presence of intangible assets has not adversely influenced the

comparability. Rghtly accepted.

33.2 The Ld. AR of the assessee submitted that the company is

functionally dissimilar to the assessee; this company is engaged

in rendering geospatial services for mapping navigation internet

portals, as well as infrastructure players including state and

local government. It provides geographical information services

viz. remote sensing cartography, data conversion related

computer based work and other related services. Further

company is engaged in research and development in the area of

intelligence and recognition, mobile mapping and LIDAR and

company holds own significant intangibles in form of computer

software and GIS database and same are used to provide

geospatial services. During the year extraordinary event and

company acquired 100 equity stake, in M/s Ladya Systech

Limited as per the expansion plan of the company. In the

pursuant of the sanctioned order dated 7th September 2007, of

the Hon’ble High Court Judicature at Mumbai the business of

Engineering and Information Technology Division has been

transferred and demerged into GI Engineering Solutions Ltd. It

was further submitted that the company has registered growth

of more than 146% in turnover from INR 19 Crores in FY 2006-

07 to INR 47 Crores in FY 2007-08 (page no. 71 to 73 of the

Annual report compendium).

33.3 The Ld. DR relied upon the order of the TPO and

submitted that the company was rightly accepted as a

comparable.

33.4 We have heard the parties and perused the material on

record. We find in the force in the contention of the assessee

that this company is functionally dissimilar to that of the

assessee and also there is an extraordinary, events of acquired

of 100 equity stake and transferred and demerged of the

business which renders this company as a non-comparable.

Hence, we direct the Ld. AO/TPO to exclude this company from

the final list of comparable companies.

Datamatics Financial services Ltd.

qualifies all filters by him. The Ld. TPO’s finding in para 13.5 of

his order is reproduced below:

13.5 The data of the company is available in Prowess database. Annual Report is available for the FY2007-08. ITES Segment results are not available. The ITES segment contributes less than 75% of the revenues. 133(6) notice was issued to submit segmental details. In response the company submitted segmental financials for ITES segment. The ITES segment qualifies all the filters applied by the TPO. Thus, the ITES segment of the company is considered as a comparable. 33.1 The Hon’ble DRP has examined the TPO’s comments on

this comparable and finds no infirmity in the same. Rightly

Accepted.

33.2 The Ld. AR of the assessee submitted that the segmental

accounts of the company are not available in the annual report

or public domain, so the accuracy of the segmental margin

remains unreliable and unverified. Reliance is placed upon the

decision of the Hon’ble Mumbai Tribunal in case of WNS Global

services (P.) Ltd. v. ITO [IT Nos. 396,631/Mum/2011 & 7378

/Mum/2012 in which the Hon’ble Court held that the

segmental details of this company are not available in the

annual report and therefore, directed for exclusion of this

company. The relevant extract is as under:

company are not available in the annual report, following the

decision of the co-ordinate bench we direct the AO/TPO to

exclude this company as a comparable.

34.In the light of the above the matter is restore back to the

AO/TPO to be deiced as direct here in above.

statistical purpose.

Order pronounced in the open court on 08.05.2026.

Sd/- Sd/- (RAMIT KOCHAR) (SUDHIR KUMAR) ACCOUNTANT MEMBER (JUDICIAL MEMBER) SR BHATNAGGR Date: 08.05.2026 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) ` 5. DR: ITAT ASSISTANT REGISTRAR ITAT DELHI