SYMANTEC SOFTWARE AND SERVICES INDIA PRIVATE LTD, ,CHENNAI vs. DCIT, CORPORATE CIRCLE 6(2),, CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM:

This appeal preferred by the assessee is against the final

assessment order dated 27.09.2018 passed by the Assistant

Commissioner of Income Tax, Central Circle-6(2), Chennai, u/s.143(3)

r.w.s.92CA(4) r.w.s.144C(13) of the Income Tax Act, 1961 (hereinafter

referred to as ‘the Act‘) pursuant to the directions issued by the Dispute

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Resolution Panel (hereinafter referred to as ‘DRP‘), Bangalore, dated Resolution Panel (hereinafter referred to as ‘DRP‘), Bangalore, dated Resolution Panel (hereinafter referred to as ‘DRP‘), Bangalore, dated

31.08.2018 u/s.144C(5) of the Act. 31.08.2018 u/s.144C(5) of the Act.

business of rendering software ess of rendering software development services [in short in short “SWD

services”] and Information Technology enabled Services [ Information Technology enabled Services [in short ‘ in short ‘ITES’].

During the relevant AY 2014 During the relevant AY 2014-15, the assessee rendered SWD services and the assessee rendered SWD services and

ITeS to its Non-Resident, Associated Enterprise (AE) which were reported ent, Associated Enterprise (AE) which were reported ent, Associated Enterprise (AE) which were reported

as international transaction international transactions in terms of Section 92 of the Act. The 92 of the Act. The

assessee had drawn up the internal segmental accounts of assessee had drawn up the internal segmental accounts of assessee had drawn up the internal segmental accounts of (i) SWD

services segment and (ii) segment and (ii) ITES segment and applied TNMM as Most applied TNMM as Most

Appropriate Method (MAM) riate Method (MAM) to both these segments and PLI was taken to PLI was taken to

be OP/OC. Subsequently, the case was selected for scrutiny OP/OC. Subsequently, the case was selected for scrutiny OP/OC. Subsequently, the case was selected for scrutiny and the AO

referred the matters to referred the matters to the Transfer Pricing Officer (TPO) for the Transfer Pricing Officer (TPO) for

determination of Arm's Length Price (ALP) in relation to int determination of Arm's Length Price (ALP) in relation to int determination of Arm's Length Price (ALP) in relation to international

transactions with AE. The TPO . The TPO is noted to have perused the perused the segmental

information of (i) SWD services SWD services segment and (ii) ITES segment segment, whose

PLI was computed by the assessee at 12.86% & 11.73% respectively. PLI was computed by the assessee at 12.86% & 11.73% respectively. PLI was computed by the assessee at 12.86% & 11.73% respectively. The

TPO observed that the assessee compan ed that the assessee company had undertaken an economic y had undertaken an economic

analysis and selected selected 13 (thirteen) comparables for comparables for SWD services

segment whose ALP PLI was 10.56% whose ALP PLI was 10.56% and seven (7) comparables for comparables for ITES

Segment, whose ALP PLI was % , whose ALP PLI was %. Since the PLI(s) of the assessee was Since the PLI(s) of the assessee was

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higher than the comparables higher than the comparables for both the segments, the international for both the segments, the international

transactions were claimed to be at arm’s length. transactions were claimed to be at arm’s length.

statements, application of TNMM as MAM and selection of OP/OC as the statements, application of TNMM as MAM and selection of OP/OC as the statements, application of TNMM as MAM and selection of OP/OC as the

PLI; the TPO rejected the PLI; the TPO rejected the economic analysis set out in TP study of the economic analysis set out in TP study of the

assessee. The TPO identified his own set of eleven (11) comparables for assessee. The TPO identified his own set of eleven (11) comparables for assessee. The TPO identified his own set of eleven (11) comparables for

the SWD services segment, which are as follows: the SWD services segment, which are as follows:-

Sl.No. Name of the comparable Name of the comparable Margin (OP/OC) (OP/OC) 1 CG-VAK Software & Exports Ltd. (in VAK Software & Exports Ltd. (in 9.27 millions) 2 Cigniti Technologies Limited Cigniti Technologies Limited 27.62 3 Mindtree Ltd. (in millions) Mindtree Ltd. (in millions) 21.64 4 Persistent Systems Ltd. (in millions) Persistent Systems Ltd. (in millions) 22.99 5 R S Software (India) Ltd. (in lakhs) R S Software (India) Ltd. (in lakhs) 24.11 6 Tech Mahindra Ltd. (Seg) (in Crores) Tech Mahindra Ltd. (Seg) (in Crores) 23.01 7 Thirdware Solution Ltd. (in Thirdware Solution Ltd. (in lakhs) 44.68 8 Infosys Ltd. Infosys Ltd. 36.13 9 Larsen & Toubro Infotech Ltd. Larsen & Toubro Infotech Ltd. 24.71 10 SQS India B F S I Ltd. SQS India B F S I Ltd. 22.25 11 Tata Elxsi Limited (Segmental) Tata Elxsi Limited (Segmental) 18.94 Average 25.03

services segment at 25.03% which was higher than the PLI of the services segment at 25.03% which was higher than the PLI of the services segment at 25.03% which was higher than the PLI of the

assessee and accordingly made TP adjustment of Rs.14,40,19,430/ assessee and accordingly made TP adjustment of Rs.14,40,19,430/ assessee and accordingly made TP adjustment of Rs.14,40,19,430/-. The

TPO in the ITES segment segment identified the following set of set of seven (7)

comparables and computed the arm’s length PLI at 19.10% and and computed the arm’s length PLI at 19.10% and and computed the arm’s length PLI at 19.10% and

consequently made TP adjustment of Rs.5,25,43,650/ consequently made TP adjustment of Rs.5,25,43,650/-.

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Sl.No. Name of the comparable Name of the comparable Margin (OP/OC) (%) Margin (OP/OC) (%) 1 Infosys BPO Ltd. Infosys BPO Ltd. 35.71 2 Microgenetic Systems Ltd. Microgenetic Systems Ltd. 18.06 3 Microland Ltd. Microland Ltd. 20.07 4 Jindal Intellicom Ltd. Jindal Intellicom Ltd. 7.89 5 BNR Udyog Ltd. (Seg) BNR Udyog Ltd. (Seg) 25.08 6 Crossdomain Solutions Pvt Crossdomain Solutions Pvt 21.06 Ltd 7 ACE BPO Services Private ACE BPO Services Private 5.85 Limited Limited Average Average 19.10

framed the draft assessment framed the draft assessment order u/s 144C(1) of the Act against which order u/s 144C(1) of the Act against which

the assessee filed objections before the DRP. It is noted that the DRP only the assessee filed objections before the DRP. It is noted that the DRP only the assessee filed objections before the DRP. It is noted that the DRP only

directed exclusion of one (1) comparable viz., M/s.Tech Mahindra Ltd. directed exclusion of one (1) comparable viz., M/s.Tech Mahindra Ltd. directed exclusion of one (1) comparable viz., M/s.Tech Mahindra Ltd.

(segment), identified by the TPO, from the SWD services segment and (segment), identified by the TPO, from the SWD services segment and (segment), identified by the TPO, from the SWD services segment and

corrected the margin computation of one (1) comparable in the ITES corrected the margin computation of one (1) comparable in the ITES corrected the margin computation of one (1) comparable in the ITES

segment. Consequently, in the final assessment, the upward adjustment segment. Consequently, in the final assessment, the upward adjustment segment. Consequently, in the final assessment, the upward adjustment

for for for SWD SWD SWD services services services segment segment segment and and and ITES ITES ITES segment segment segment worked worked worked out out out to to to

Rs.14,64,33,899/- & Rs.5,08,60,621/ & Rs.5,08,60,621/- respectively. Aggrieved b respectively. Aggrieved by this

final assessment order, the assessee has filed the present appeal before final assessment order, the assessee has filed the present appeal before final assessment order, the assessee has filed the present appeal before

us.

effective grounds of appeal only and supported the arguments with chart effective grounds of appeal only and supported the arguments with chart effective grounds of appeal only and supported the arguments with chart

and paper book. The Ld. AR submitt and paper book. The Ld. AR submitted that, five (5)out of the ten (10) , five (5)out of the ten (10)

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comparables are to be excluded in comparables are to be excluded in SWD services segment viz., (i) Infosys SWD services segment viz., (i) Infosys

Ltd., (ii) Persistent Systems Ltd., (iii) Thirdware Solutions Ltd., (iv) Larsen Ltd., (ii) Persistent Systems Ltd., (iii) Thirdware Solutions Ltd., (iv) Larsen Ltd., (ii) Persistent Systems Ltd., (iii) Thirdware Solutions Ltd., (iv) Larsen

& Toubro Infotech Ltd., (v) SQS India BFSI Ltd., and three (3) & Toubro Infotech Ltd., (v) SQS India BFSI Ltd., and three (3) & Toubro Infotech Ltd., (v) SQS India BFSI Ltd., and three (3)

comparables namely (i) CAT Technologies Ltd., (ii) Lucid Software Ltd., namely (i) CAT Technologies Ltd., (ii) Lucid Software Ltd., namely (i) CAT Technologies Ltd., (ii) Lucid Software Ltd.,

(iii) Akshay Software Technologies Ltd. (iii) Akshay Software Technologies Ltd. are to be included for determining are to be included for determining

the ALP. Further, he contended that, three (3) out of seven (7) . Further, he contended that, three (3) out of seven (7) . Further, he contended that, three (3) out of seven (7)

comparables were to be excluded in the ITES segm comparables were to be excluded in the ITES segment and two (2) ent and two (2)

comparables of the assessee were to be included. The Ld. AR further comparables of the assessee were to be included. The Ld. AR further comparables of the assessee were to be included. The Ld. AR further

claimed risk and working capital adjustment, which was denied by the claimed risk and working capital adjustment, which was denied by the claimed risk and working capital adjustment, which was denied by the

lower authorities. The Ld. CIT, DR, on the other hand, lower authorities. The Ld. CIT, DR, on the other hand, lower authorities. The Ld. CIT, DR, on the other hand, supported the

order(s) of the lower authorities. of the lower authorities.

We first take up the issue concerning exclusion/ inclusion of comparables We first take up the issue concerning exclusion/ inclusion of comparables We first take up the issue concerning exclusion/ inclusion of comparables

in the SWD services segment. The Ld. Counsel for the assessee brought in the SWD services segment. The Ld. Counsel for the assessee brought in the SWD services segment. The Ld. Counsel for the assessee brought

to our notice inter alia, that similar ca , that similar cases as that of assessee, who were ses as that of assessee, who were

SWD services provider, came up before the coordinate bench of this SWD services provider, came up before the coordinate bench of this SWD services provider, came up before the coordinate bench of this

Tribunal at Bangalore for the same AY 2014 Tribunal at Bangalore for the same AY 2014-15, in whose cases also the 15, in whose cases also the

Revenue had chosen similar/same set of comparables as that of the Revenue had chosen similar/same set of comparables as that of the Revenue had chosen similar/same set of comparables as that of the

assessee for the very same assessment year and therefore according to ery same assessment year and therefore according to ery same assessment year and therefore according to

him, the ratio decidendi ratio decidendi laid down in these decisions ought to be followed laid down in these decisions ought to be followed

unless any change in facts to distinguish the case of the assessee, is unless any change in facts to distinguish the case of the assessee, is unless any change in facts to distinguish the case of the assessee, is

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pointed out by the Revenue. The relevant decisions relied pointed out by the Revenue. The relevant decisions relied upon by the Ld. upon by the Ld.

AR were as follows:-

- EMC Software and S EMC Software and Services India Pvt Ltd vs. JCIT [ ervices India Pvt Ltd vs. JCIT [IT(TP)A

3375/Bang/2018] (Pages 279 ang/2018] (Pages 279 – 311 of PB)

- Microsoft Microsoft Microsoft Research Research Research Lab Lab Lab India India India Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. vs. vs. vs. DCIT DCIT DCIT [ITA

3131/Bang/2018) /2018) [Page 214 to 235 of PB]

- Citrix R&D vs. DCIT [ Citrix R&D vs. DCIT [IT(TP)A No. 3134/Bang/2014) /2014) [Page 236 to

256 of PB]

decisions (supra), we take up the five (5) comparables sought to be decisions (supra), we take up the five (5) comparables sought to be decisions (supra), we take up the five (5) comparables sought to be

excluded by the assessee. It is noted that, excluded by the assessee. It is noted that, four (4) comparables i.e., four (4) comparables i.e., (i)

Infosys Ltd. (ii) Persistent Systems Limited, (iii) L & T Infotech Limited Infosys Ltd. (ii) Persistent Systems Limited, (iii) L & T Infotech Limited Infosys Ltd. (ii) Persistent Systems Limited, (iii) L & T Infotech Limited

and (iv) Thirdware Solutions Ltd. and (iv) Thirdware Solutions Ltd. were examined and were examined and found to be

functionally dissimilar to a SWD provider [ like the assessee, in the functionally dissimilar to a SWD provider [ like the assessee, in the functionally dissimilar to a SWD provider [ like the assessee, in the

present case], by this Tribunal in the case present case], by this Tribunal in the case of EMC Software and EMC Software and

Services India Pvt. Ltd Ltd. v. JCIT (supra) in AY 2014-15. In respect of 15. In respect of

M/s Infosys Limited, it was noted by the Tribunal that, this company had M/s Infosys Limited, it was noted by the Tribunal that, this company had M/s Infosys Limited, it was noted by the Tribunal that, this company had

significant intangibles and huge revenues from software products significant intangibles and huge revenues from software products significant intangibles and huge revenues from software products and

therefore cannot be reg therefore cannot be regarded as a SWD services provider. The relevant arded as a SWD services provider. The relevant

findings taken note of by us, is as follows: findings taken note of by us, is as follows:-

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“..(1) Infosys Limited: Infosys Limited: This company is functionally dissimilar and This company is functionally dissimilar and provides end to and business solutions like business consulting provides end to and business solutions like business consulting provides end to and business solutions like business consulting technology engineering and outsourcing services and no segmental technology engineering and outsourcing services and no segmental technology engineering and outsourcing services and no segmental details in respect of services are available and made investments and details in respect of services are available and made investments and details in respect of services are available and made investments and products to establish as a tradable IPO owner. Further the comparable establish as a tradable IPO owner. Further the comparable establish as a tradable IPO owner. Further the comparable owns significant brand value products and focus on brand building and owns significant brand value products and focus on brand building and owns significant brand value products and focus on brand building and incurred expenditure on R & D. The company owns 7 edge incurred expenditure on R & D. The company owns 7 edge incurred expenditure on R & D. The company owns 7 edge products/platforms and six other product based solutions. The company products/platforms and six other product based solutions. The company products/platforms and six other product based solutions. The company leverages on its premium banking solution and during the year the erages on its premium banking solution and during the year the erages on its premium banking solution and during the year the company merged with its wholly owned subsidiary Infosys Consulting company merged with its wholly owned subsidiary Infosys Consulting company merged with its wholly owned subsidiary Infosys Consulting India Limited. We found that the company was excluded from the final India Limited. We found that the company was excluded from the final India Limited. We found that the company was excluded from the final list of comparables in assessee's own case for the Assess list of comparables in assessee's own case for the Assess list of comparables in assessee's own case for the Assessment Year 2011-12 by the DRP and revenue has accepted. The Learned Authorised 12 by the DRP and revenue has accepted. The Learned Authorised 12 by the DRP and revenue has accepted. The Learned Authorised Representative supported his arguments relying on the decisions in the Representative supported his arguments relying on the decisions in the Representative supported his arguments relying on the decisions in the case of CIT Vs. Agnity (India) Technologies Pvt. Ltd. (2013); CGI case of CIT Vs. Agnity (India) Technologies Pvt. Ltd. (2013); CGI case of CIT Vs. Agnity (India) Technologies Pvt. Ltd. (2013); CGI Systems and Management Ltd. Vs. ACIT (201 Systems and Management Ltd. Vs. ACIT (2015) 94 taxman.com The 5) 94 taxman.com The learned Authorised Representative also substantiated that for the learned Authorised Representative also substantiated that for the learned Authorised Representative also substantiated that for the Assessment Year 2014 Assessment Year 2014-15, the co-ordinate Bench of the Tribunal in the ordinate Bench of the Tribunal in the case of LG Soft India Pvt. Ltd. Vs. DCIT in IT(TP)A No.3122/Bang/2018 case of LG Soft India Pvt. Ltd. Vs. DCIT in IT(TP)A No.3122/Bang/2018 case of LG Soft India Pvt. Ltd. Vs. DCIT in IT(TP)A No.3122/Bang/2018 for the Assessment Year 2014 for the Assessment Year 2014-15 D128.5.2019. We support our views 15 D128.5.2019. We support our views relying on the LG Soft India Pvt. Ltd. Vs. DCIT (supra) where the relying on the LG Soft India Pvt. Ltd. Vs. DCIT (supra) where the relying on the LG Soft India Pvt. Ltd. Vs. DCIT (supra) where the Tribunal has observed at paras 6 and 6.1 as under: Tribunal has observed at paras 6 and 6.1 as under: 6. We notice that the co 6. We notice that the co-ordinate bench bas excluded Mis. Infosys Ltd in ordinate bench bas excluded Mis. Infosys Ltd in A.Y 2008-09 by following the 09 by following the decision rendered by another co decision rendered by another co-ordinate bench in the case of 3DPLM Software Solutions Ltd (IT(TP)A No. bench in the case of 3DPLM Software Solutions Ltd (IT(TP)A No. bench in the case of 3DPLM Software Solutions Ltd (IT(TP)A No. 1303/Bang/2012 dated 28.11.2013, wherein the decision, rendered in 1303/Bang/2012 dated 28.11.2013, wherein the decision, rendered in 1303/Bang/2012 dated 28.11.2013, wherein the decision, rendered in the case of Triology E Business Software India P Link (ITA No. the case of Triology E Business Software India P Link (ITA No. the case of Triology E Business Software India P Link (ITA No. 1054/Bang/2011) was fo 1054/Bang/2011) was followed and it was held that M/s. Infosys llowed and it was held that M/s. Infosys Technologies Lad is not functionally comparable since it owns significant Technologies Lad is not functionally comparable since it owns significant Technologies Lad is not functionally comparable since it owns significant intangible and has huge revenues from software products. It was intangible and has huge revenues from software products. It was intangible and has huge revenues from software products. It was observed that the breakup of revenue from software services and observed that the breakup of revenue from software services and observed that the breakup of revenue from software services and software product is not available. uct is not available. 6.1 It was stated that there is no change in facts. Accordingly, following 6.1 It was stated that there is no change in facts. Accordingly, following 6.1 It was stated that there is no change in facts. Accordingly, following the decision rendered in the assessee's own case in A.Y 2008 the decision rendered in the assessee's own case in A.Y 2008 the decision rendered in the assessee's own case in A.Y 2008-09, we direct exclusion of Ms. Infosys Ltd." direct exclusion of Ms. Infosys Ltd." We found that the Infosys Ltd. has significant intan We found that the Infosys Ltd. has significant intangibles and huge gibles and huge revenues from software products and was considered by the co revenues from software products and was considered by the co revenues from software products and was considered by the co-ordinate Bench of the Tribunal for exclusion in the Assessment Year 2014 Bench of the Tribunal for exclusion in the Assessment Year 2014 Bench of the Tribunal for exclusion in the Assessment Year 2014-15. Accordingly, we direct the TP exclude the Infosys Ltd. from the final list Accordingly, we direct the TP exclude the Infosys Ltd. from the final list Accordingly, we direct the TP exclude the Infosys Ltd. from the final list of comparables for determin of comparables for determination of ALP.” 9. We further find that in the same decision rendered in the case of We further find that in the same decision rendered in the case of We further find that in the same decision rendered in the case of

EMC Software and Services India Pvt EMC Software and Services India Pvt. Ltd. v. JCIT (supra) v. JCIT (supra), M/s

Persistent Systems Limited Persistent Systems Limited and M/s L & T Infotech Limited L & T Infotech Limited were found to

be software product companies whose be software product companies whose segmental information on SWD egmental information on SWD

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services was not available services was not available and were therefore excluded from the list of and were therefore excluded from the list of

comparables. The findings rendered by the Tribunal, in relation thereto, comparables. The findings rendered by the Tribunal, in relation thereto, comparables. The findings rendered by the Tribunal, in relation thereto,

are noted to be as follows: are noted to be as follows:-

“(ii) L&T Infotech Limited: “(ii) L&T Infotech Limited: The company has a margin of 24.61% and f 24.61% and has high brand value and is a market leader, high presence and the has high brand value and is a market leader, high presence and the has high brand value and is a market leader, high presence and the intangible income in proprietary products. Significant expenditure in intangible income in proprietary products. Significant expenditure in intangible income in proprietary products. Significant expenditure in foreign currency to the extent of 57.13%. During the year the product foreign currency to the extent of 57.13%. During the year the product foreign currency to the extent of 57.13%. During the year the product engineering business service of the engineering business service of the company was transferred to its company was transferred to its subsidiary. The company segments are divided into service cluster, subsidiary. The company segments are divided into service cluster, subsidiary. The company segments are divided into service cluster, industrial cluster and telecom business. As per the Annual Report of the industrial cluster and telecom business. As per the Annual Report of the industrial cluster and telecom business. As per the Annual Report of the company, the company has a significant capital work company, the company has a significant capital work-in-progress and progress and the company has d the company has developmental products. The comparable was evelopmental products. The comparable was excluded from the final list of comparable in assessee's own case for the excluded from the final list of comparable in assessee's own case for the excluded from the final list of comparable in assessee's own case for the Assessment Year 2011 Assessment Year 2011-12 by the DRP and further the comparable 12 by the DRP and further the comparable company was excluded by the co company was excluded by the co-ordinate Bench of Delhi Tribunal in the ordinate Bench of Delhi Tribunal in the case of Pitney Bowes Software India Pvt. Ltd. Vs. ACIT 101 Tasman.com Pitney Bowes Software India Pvt. Ltd. Vs. ACIT 101 Tasman.com Pitney Bowes Software India Pvt. Ltd. Vs. ACIT 101 Tasman.com 350. The learned Authorized Representative also relied on CGI 350. The learned Authorized Representative also relied on CGI 350. The learned Authorized Representative also relied on CGI Information Systems & Management Consultants (P) Ltd. Vs. ACTT Information Systems & Management Consultants (P) Ltd. Vs. ACTT Information Systems & Management Consultants (P) Ltd. Vs. ACTT (2018) 94 man.com 97 and DCTT Vs. Taman India Pvt. L.sd. (2016) 74 (2018) 94 man.com 97 and DCTT Vs. Taman India Pvt. L.sd. (2016) 74 (2018) 94 man.com 97 and DCTT Vs. Taman India Pvt. L.sd. (2016) 74 Taxmann.com 88 (Del). We found that the co axmann.com 88 (Del). We found that the co-ordinate Bench of Tribunal ordinate Bench of Tribunal in in in M.P. M.P. M.P. No.95/Bang/2019 No.95/Bang/2019 No.95/Bang/2019 IT(TP)A IT(TP)A IT(TP)A No.3122/Bang/2018 No.3122/Bang/2018 No.3122/Bang/2018 for for for the the the Assessment Year 2014 Assessment Year 2014-15 has dealt on the sue at page 2 para 4 as 15 has dealt on the sue at page 2 para 4 as under: “4. We heard Ld.DR and perused the record. We find mer “4. We heard Ld.DR and perused the record. We find mer “4. We heard Ld.DR and perused the record. We find merit in the miscellaneous petition filed by the assessee. Accordingly following miscellaneous petition filed by the assessee. Accordingly following miscellaneous petition filed by the assessee. Accordingly following paragraph is inserted after paragraph 10 in the impugned order of paragraph is inserted after paragraph 10 in the impugned order of paragraph is inserted after paragraph 10 in the impugned order of the Tribunal, which will adjudicate the issue relating to "L&T Infotech the Tribunal, which will adjudicate the issue relating to "L&T Infotech the Tribunal, which will adjudicate the issue relating to "L&T Infotech Lid": “10A The assessee has sought exclu “10A The assessee has sought exclusion of M/s.L&T Infotech Ltd on sion of M/s.L&T Infotech Ltd on the ground that there were extraordinary events during the year, it the ground that there were extraordinary events during the year, it the ground that there were extraordinary events during the year, it possesses brand and intangibles, it has not provided segmental possesses brand and intangibles, it has not provided segmental possesses brand and intangibles, it has not provided segmental information and it has got sub information and it has got sub-contracting expenses. The Ld A.R contracting expenses. The Ld A.R submitted that the above said submitted that the above said company has been excluded by the co company has been excluded by the co- ordinate bench in the case of Metric Stream Infotech P Ltd., (IT(TP)A ordinate bench in the case of Metric Stream Infotech P Ltd., (IT(TP)A ordinate bench in the case of Metric Stream Infotech P Ltd., (IT(TP)A No.1418 & 2735/Bang/2017) relating to AY 2013 No.1418 & 2735/Bang/2017) relating to AY 2013-14 and also in the 14 and also in the case case case of of of Electronics Electronics Electronics for for for Imaging Imaging Imaging India India India P P P Ltd., Ltd., Ltd., (IT(TP)A (IT(TP)A (IT(TP)A No.1506/Bang/2016 relating to No.1506/Bang/2016 relating to AY 2011-12). The Ld.AR submitted 12). The Ld.AR submitted that there is no change in facts in this year also and accordingly that there is no change in facts in this year also and accordingly that there is no change in facts in this year also and accordingly prayed for exclusion of the above said company. prayed for exclusion of the above said company. 10A.1 We heard Ld D.R and perused the record. We notice that 10A.1 We heard Ld D.R and perused the record. We notice that 10A.1 We heard Ld D.R and perused the record. We notice that M/s.L&T Infotech Ltd has been excluded by the M/s.L&T Infotech Ltd has been excluded by the co-ordinate bench in ordinate bench in the case of Metric Stream Infotech P Lad (supra) for AY 2013 the case of Metric Stream Infotech P Lad (supra) for AY 2013 the case of Metric Stream Infotech P Lad (supra) for AY 2013-14 and also in the case of Electronics for Imaging India P Ltd (supra) for AY also in the case of Electronics for Imaging India P Ltd (supra) for AY also in the case of Electronics for Imaging India P Ltd (supra) for AY 2011-12. The Ld A.R submits that there is no change in facts 12. The Ld A.R submits that there is no change in facts 12. The Ld A.R submits that there is no change in facts

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prevailing in the current year vis prevailing in the current year vis-a-vis the years considered by the vis the years considered by the co-ordinate benches in the above said cases. Accordingly. following ordinate benches in the above said cases. Accordingly. following ordinate benches in the above said cases. Accordingly. following the above said decisions, we direct exclusion of M/s.L & T Infotech the above said decisions, we direct exclusion of M/s.L & T Infotech the above said decisions, we direct exclusion of M/s.L & T Infotech Ltd.”. We considering the functional dissimilarity and judicial decisions and We considering the functional dissimilarity and judicial decisions and We considering the functional dissimilarity and judicial decisions and various facts which are not similar to the assessee's functional profile, facts which are not similar to the assessee's functional profile, facts which are not similar to the assessee's functional profile, accordingly direct the TPO to exclude M/s. L. & T Infotech Limited from accordingly direct the TPO to exclude M/s. L. & T Infotech Limited from accordingly direct the TPO to exclude M/s. L. & T Infotech Limited from the final list of comparable in determining the ALP. the final list of comparable in determining the ALP. (iii) Persistent Systems Ltd.: The company is functionally differ (iii) Persistent Systems Ltd.: The company is functionally differ (iii) Persistent Systems Ltd.: The company is functionally different as it is engaged in rendering IT services and in the development of software is engaged in rendering IT services and in the development of software is engaged in rendering IT services and in the development of software products without there being support segmental information and products without there being support segmental information and products without there being support segmental information and engaged in IP led solutions and undertakes significant R & D activities, engaged in IP led solutions and undertakes significant R & D activities, engaged in IP led solutions and undertakes significant R & D activities, owns IP. During the year the company ma owns IP. During the year the company made acquisitions. The company de acquisitions. The company has made significant investment in IP and their solutions and has a has made significant investment in IP and their solutions and has a has made significant investment in IP and their solutions and has a dedicated team for Research and IP development. The learned dedicated team for Research and IP development. The learned dedicated team for Research and IP development. The learned Authorized Representative relied on decision of Tribunal in the case of Authorized Representative relied on decision of Tribunal in the case of Authorized Representative relied on decision of Tribunal in the case of CGI Information & Managemen CGI Information & Management Systems Pvt. Ltd. Vs. ACIT 94 t Systems Pvt. Ltd. Vs. ACIT 94 Taxman.com 97 and PCIT Vs. Saxo India Pvt. Ltd. 74 taxmann.com 88 Taxman.com 97 and PCIT Vs. Saxo India Pvt. Ltd. 74 taxmann.com 88 Taxman.com 97 and PCIT Vs. Saxo India Pvt. Ltd. 74 taxmann.com 88 (Delhi). We relied on the decision of CGI Information Systems & (Delhi). We relied on the decision of CGI Information Systems & (Delhi). We relied on the decision of CGI Information Systems & Management Consultants Pvt. Lltd. (supra) at paras 28 to 30 as under: Management Consultants Pvt. Lltd. (supra) at paras 28 to 30 as under: Management Consultants Pvt. Lltd. (supra) at paras 28 to 30 as under: 28. The learned counsel 28. The learned counsel for the Assessee submitted before us that for the Assessee submitted before us that the comparability of the 3 companies out of the aforesaid 4 the comparability of the 3 companies out of the aforesaid 4 the comparability of the 3 companies out of the aforesaid 4 companies which the Assessee seeks to exclude from the list of companies which the Assessee seeks to exclude from the list of companies which the Assessee seeks to exclude from the list of comparable companies chosen by the TPO viz, Infosys Ltd., Larsen & comparable companies chosen by the TPO viz, Infosys Ltd., Larsen & comparable companies chosen by the TPO viz, Infosys Ltd., Larsen & Toubro Infotech Ltd. and Toubro Infotech Ltd. and Persistent Systems Ltd., were considered by Persistent Systems Ltd., were considered by the ITAT Delhi Bench in the case of Agilis Information Technologies the ITAT Delhi Bench in the case of Agilis Information Technologies the ITAT Delhi Bench in the case of Agilis Information Technologies India (P.) Ltd. v. Asstt. CIT [2018] 89 taxmann.com 440 (Delhi India (P.) Ltd. v. Asstt. CIT [2018] 89 taxmann.com 440 (Delhi India (P.) Ltd. v. Asstt. CIT [2018] 89 taxmann.com 440 (Delhi-Trib) for the same AY 2012 for the same AY 2012-13, is this regard it was submitted that the 13, is this regard it was submitted that the functional profile of the Assessee is same as that of the assessee in al profile of the Assessee is same as that of the assessee in al profile of the Assessee is same as that of the assessee in the case of Agilis Information Technologies India (P) Ltd., (supra), is the case of Agilis Information Technologies India (P) Ltd., (supra), is the case of Agilis Information Technologies India (P) Ltd., (supra), is identical much as the said company was also involved in providing identical much as the said company was also involved in providing identical much as the said company was also involved in providing SWD services to its AE and the TPO had chosen 16 compara SWD services to its AE and the TPO had chosen 16 compara SWD services to its AE and the TPO had chosen 16 comparable companies out of which 6 companies chosen by the TPO in the case companies out of which 6 companies chosen by the TPO in the case companies out of which 6 companies chosen by the TPO in the case of the assessee for the purpose of comparability were the same. His of the assessee for the purpose of comparability were the same. His of the assessee for the purpose of comparability were the same. His submission was that the decision rendered by the Tribunal in the case submission was that the decision rendered by the Tribunal in the case submission was that the decision rendered by the Tribunal in the case of Agilis Information Technologies India (P) Ltd. of Agilis Information Technologies India (P) Ltd., (supra) would be , (supra) would be equally applicable to the assessee in the present case also. The equally applicable to the assessee in the present case also. The equally applicable to the assessee in the present case also. The learned DR. submitted that the DRP in its directions has merely learned DR. submitted that the DRP in its directions has merely learned DR. submitted that the DRP in its directions has merely accepted with the reasoning of the IPO and therefore the issue of accepted with the reasoning of the IPO and therefore the issue of accepted with the reasoning of the IPO and therefore the issue of exclusion of these companies should be dir exclusion of these companies should be directed to be examined ected to be examined afresh by the DRP. afresh by the DRP. 29. We have considered the rival submissions. In the case of Agilis 29. We have considered the rival submissions. In the case of Agilis 29. We have considered the rival submissions. In the case of Agilis Information Technologies India (P) Ltd., (supra), this Tribunal Information Technologies India (P) Ltd., (supra), this Tribunal Information Technologies India (P) Ltd., (supra), this Tribunal considered the comparability of the 3 companies which the assessee considered the comparability of the 3 companies which the assessee considered the comparability of the 3 companies which the assessee seeks to exclude seeks to exclude from the list of comparable companies chosen by from the list of comparable companies chosen by the TPO. The functional profile of me assessee and that of the the TPO. The functional profile of me assessee and that of the the TPO. The functional profile of me assessee and that of the assessee in the case of Agilis Information Technologies India (P) Ltd., assessee in the case of Agilis Information Technologies India (P) Ltd., assessee in the case of Agilis Information Technologies India (P) Ltd., (supra) is identical inasmuch as the said company was also involved (supra) is identical inasmuch as the said company was also involved (supra) is identical inasmuch as the said company was also involved in providing SWD services to its AE and the TPO had chosen some oviding SWD services to its AE and the TPO had chosen some oviding SWD services to its AE and the TPO had chosen some

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comparable companies which were also chosen by the TPO in the comparable companies which were also chosen by the TPO in the comparable companies which were also chosen by the TPO in the case of assessee for the purpose of comparability. In the aforesaid case of assessee for the purpose of comparability. In the aforesaid case of assessee for the purpose of comparability. In the aforesaid decision, the Tribunal held on the comparability of the 3 companies decision, the Tribunal held on the comparability of the 3 companies decision, the Tribunal held on the comparability of the 3 companies which the Assessee seeks to exclude as follows: which the Assessee seeks to exclude as follows: (a) Infosys Ltd was excluded from the list of comparable companies (a) Infosys Ltd was excluded from the list of comparable companies (a) Infosys Ltd was excluded from the list of comparable companies by following the decision of the Hon'ble Delhi High Court in the case by following the decision of the Hon'ble Delhi High Court in the case by following the decision of the Hon'ble Delhi High Court in the case of CIT v Agnity India Technologies (P) Ltd (2013) 36 taxmann.com of CIT v Agnity India Technologies (P) Ltd (2013) 36 taxmann.com of CIT v Agnity India Technologies (P) Ltd (2013) 36 taxmann.com 289/219. Taxman 20. (De) The discussion is contained in paragraphs 219. Taxman 20. (De) The discussion is contained in paragraphs 219. Taxman 20. (De) The discussion is contained in paragraphs 4.5 to 4.7 of the Tribunal's order. The Tribunal accepted that Infosys 4.5 to 4.7 of the Tribunal's order. The Tribunal accepted that Infosys 4.5 to 4.7 of the Tribunal's order. The Tribunal accepted that Infosys Ltd. is a giant risk taking company and engaged in development and Ltd. is a giant risk taking company and engaged in development and Ltd. is a giant risk taking company and engaged in development and sale of software products and also owns intangible asse sale of software products and also owns intangible asse sale of software products and also owns intangible assets and therefore not comparable with a software development service therefore not comparable with a software development service therefore not comparable with a software development service provider such as the Assessee in that case. provider such as the Assessee in that case. (b) Larsent & Tourbro Infotech Ltd., was excluded from the list of (b) Larsent & Tourbro Infotech Ltd., was excluded from the list of (b) Larsent & Tourbro Infotech Ltd., was excluded from the list of comparable companies by relying on the decision of the Delhi Bench comparable companies by relying on the decision of the Delhi Bench comparable companies by relying on the decision of the Delhi Bench of ITAT in the case of Saxo India (P) Ltd. v. Asstt. CIT (20161. 67 the case of Saxo India (P) Ltd. v. Asstt. CIT (20161. 67 the case of Saxo India (P) Ltd. v. Asstt. CIT (20161. 67 taxmann.com 155 (Delhi taxmann.com 155 (Delhi-Th. The discussion is contained in Th. The discussion is contained in paragraphs 4.8 to 4.10 of the Tribunal's order. The Tribunal held that paragraphs 4.8 to 4.10 of the Tribunal's order. The Tribunal held that paragraphs 4.8 to 4.10 of the Tribunal's order. The Tribunal held that L&T Infotech Ltd., was a software product company and segmental L&T Infotech Ltd., was a software product company and segmental L&T Infotech Ltd., was a software product company and segmental information on SWD services was not available. The Tribunal also mation on SWD services was not available. The Tribunal also mation on SWD services was not available. The Tribunal also noticed that the appeal filed by the revenue against the tribunal’s noticed that the appeal filed by the revenue against the tribunal’s noticed that the appeal filed by the revenue against the tribunal’s order was dismissed by the Hon'ble Delhi High Court in ITA No order was dismissed by the Hon'ble Delhi High Court in ITA No order was dismissed by the Hon'ble Delhi High Court in ITA No 682/2016. (c) Persistent Systems Ltd., was excluded from the list (c) Persistent Systems Ltd., was excluded from the list of comparable of comparable companies on the ground that this company was a software product companies on the ground that this company was a software product companies on the ground that this company was a software product company and segmental information on SWD services was not company and segmental information on SWD services was not company and segmental information on SWD services was not available. The Tribunal in coming to the above conclusion referred to available. The Tribunal in coming to the above conclusion referred to available. The Tribunal in coming to the above conclusion referred to the decision rendered by ITAT Delhi Bench in the the decision rendered by ITAT Delhi Bench in the case of Cash Edge case of Cash Edge India (P.) Lid. v. ITO ITA No.64/Del/2015 order dated 23.9.2015 and India (P.) Lid. v. ITO ITA No.64/Del/2015 order dated 23.9.2015 and India (P.) Lid. v. ITO ITA No.64/Del/2015 order dated 23.9.2015 and the decision of Hon'ble Delhi High Court in the case of Saxo India Pvt. the decision of Hon'ble Delhi High Court in the case of Saxo India Pvt. the decision of Hon'ble Delhi High Court in the case of Saxo India Pvt. Ltd. (supra). The findings in this regard are contained in Paragraphs Ltd. (supra). The findings in this regard are contained in Paragraphs Ltd. (supra). The findings in this regard are contained in Paragraphs 4.14 to 4.16 of its order. 4.14 to 4.16 of its order. 30. Respectfully following the decision of the Tribunal we hold that 0. Respectfully following the decision of the Tribunal we hold that 0. Respectfully following the decision of the Tribunal we hold that the aforesaid 3 companies be excluded from the final list of the aforesaid 3 companies be excluded from the final list of the aforesaid 3 companies be excluded from the final list of comparable companies for the purpose of arriving at the arithmetic comparable companies for the purpose of arriving at the arithmetic comparable companies for the purpose of arriving at the arithmetic mean of comparable companies for the purpose of comparison w mean of comparable companies for the purpose of comparison w mean of comparable companies for the purpose of comparison with the profit margins. In this regard we are also of the view that the the profit margins. In this regard we are also of the view that the the profit margins. In this regard we are also of the view that the plea of the learned DR for a remand of the issue to the DRP on the plea of the learned DR for a remand of the issue to the DRP on the plea of the learned DR for a remand of the issue to the DRP on the ground that the DRP has not given any reasons in its directions ground that the DRP has not given any reasons in its directions ground that the DRP has not given any reasons in its directions cannot be accepted. The DRP has endorsed the view of cannot be accepted. The DRP has endorsed the view of the TPO in its the TPO in its directions and therefore the reasons given by the TPO should be directions and therefore the reasons given by the TPO should be directions and therefore the reasons given by the TPO should be regarded as the conclusions of the DRP. regarded as the conclusions of the DRP. We rely on judicial decisions and facts in respect of comparable We rely on judicial decisions and facts in respect of comparable We rely on judicial decisions and facts in respect of comparable Persistent Systems Ltd. and direct the Assessing Officer to exclude from Persistent Systems Ltd. and direct the Assessing Officer to exclude from Persistent Systems Ltd. and direct the Assessing Officer to exclude from the final list of comparable for determination of ALP.” the final list of comparable for determination of ALP.”

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Services India Pvt. Ltd. (supra) Services India Pvt. Ltd. (supra), also held M/s.Thirdware Sales Ltd., , also held M/s.Thirdware Sales Ltd., to

be functionally dissimilar and held it to be non be functionally dissimilar and held it to be non-compara comparable and

consequently directed exclusion of this comparable by observing as consequently directed exclusion of this comparable by observing as consequently directed exclusion of this comparable by observing as

under:

“(iv) Thirdware Solutions Ltd Thirdware Solutions Ltd. the company is functionally dissimilar . the company is functionally dissimilar and is engaged in rendering software development implementation and and is engaged in rendering software development implementation and and is engaged in rendering software development implementation and support services and engaged in the support services and engaged in the development of software products development of software products and earns revenue from sale of user licenses and purchase stock in and earns revenue from sale of user licenses and purchase stock in and earns revenue from sale of user licenses and purchase stock in trade during the year and has intangibles. trade during the year and has intangibles. Further the margins of the company fluctuate year on year basis due to Further the margins of the company fluctuate year on year basis due to Further the margins of the company fluctuate year on year basis due to different revenue recognition model which different revenue recognition model which the company has adopted. the company has adopted. The above comparable was excluded in assessee's own case on The above comparable was excluded in assessee's own case on The above comparable was excluded in assessee's own case on functional dissimilarity in the Assessment Years 2005 functional dissimilarity in the Assessment Years 2005-06 and 2007 06 and 2007-08 and learned Authorized Representative also relied on Lime Labs (India) and learned Authorized Representative also relied on Lime Labs (India) and learned Authorized Representative also relied on Lime Labs (India) Pvt. Ltd. Vs. ITO 101 Taxman.co Pvt. Ltd. Vs. ITO 101 Taxman.com 201 (Delhi Trib.). We found the co m 201 (Delhi Trib.). We found the co- ordinate Bench of the Tribunal in the case of LG Software India Pvt. Ltd. ordinate Bench of the Tribunal in the case of LG Software India Pvt. Ltd. ordinate Bench of the Tribunal in the case of LG Software India Pvt. Ltd. Vs. DCIT in IT(TP)A No.3122/Bang/2018 dt.28.05.2019 for the Vs. DCIT in IT(TP)A No.3122/Bang/2018 dt.28.05.2019 for the Vs. DCIT in IT(TP)A No.3122/Bang/2018 dt.28.05.2019 for the Assessment Year 2014 Assessment Year 2014-15 has excluded the comparable as observed at 15 has excluded the comparable as observed at paras 8 & 8.1 at p paras 8 & 8.1 at page 4 as under: "8. We also notice that in A.Y 2008 "8. We also notice that in A.Y 2008-09, the co-ordinate bench has ordinate bench has excluded M/s.Thirdware Solutions Ltd also by following the decision excluded M/s.Thirdware Solutions Ltd also by following the decision excluded M/s.Thirdware Solutions Ltd also by following the decision rendered in the case of 3DPLM Software Solutions Ltd (supra), where in rendered in the case of 3DPLM Software Solutions Ltd (supra), where in rendered in the case of 3DPLM Software Solutions Ltd (supra), where in it was held that M/s.Thirdware Solu it was held that M/s.Thirdware Solutions Ltd. is engaged in product tions Ltd. is engaged in product development and earns revenue from sale of licenses and subscription development and earns revenue from sale of licenses and subscription development and earns revenue from sale of licenses and subscription Further, the segmental details were not available. Further, the segmental details were not available. 8.1 It was stated that there is no change in facts. Accordingly. following 8.1 It was stated that there is no change in facts. Accordingly. following 8.1 It was stated that there is no change in facts. Accordingly. following the decision rendered in the the decision rendered in the assessee's own case in A.Y 2008 assessee's own case in A.Y 2008-09, we direct exclusion of M/s. Thirdware Solutions Ltd." direct exclusion of M/s. Thirdware Solutions Ltd." The comparable Thirdware Solutions Ltd., has to be excluded as it is The comparable Thirdware Solutions Ltd., has to be excluded as it is The comparable Thirdware Solutions Ltd., has to be excluded as it is predominant in activity and segmental details are not available. predominant in activity and segmental details are not available. predominant in activity and segmental details are not available. Accordingly we direct the TPO/A Accordingly we direct the TPO/AO to exclude this comparable from the O to exclude this comparable from the list of comparables for determining the ALP.” list of comparables for determining the ALP.” 11. Following the above decision (supra) and having regard to the fact Following the above decision (supra) and having regard to the fact Following the above decision (supra) and having regard to the fact

that the assessee is also providing similar SWD services and there being that the assessee is also providing similar SWD services and there being that the assessee is also providing similar SWD services and there being

no change of fact pointed out by the Ld. CIT, DR, we find merit in the no change of fact pointed out by the Ld. CIT, DR, we find merit in the no change of fact pointed out by the Ld. CIT, DR, we find merit in the

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contention of the Ld. AR of the assessee and contention of the Ld. AR of the assessee and direct the TPO to exclude the direct the TPO to exclude the

four (4) comparables i.e. (i) Infosys Ltd., (ii) four (4) comparables i.e. (i) Infosys Ltd., (ii) Persistent Systems Ltd. Persistent Systems Ltd.,(iii)

Thirdware Solutions Ltd., & (iv) L&T Infotech Ltd., Thirdware Solutions Ltd., & (iv) L&T Infotech Ltd.,from the final list of from the final list of

comparable in determining the ALP comparable in determining the ALP.

SQS India BFSI Ltd. It is noted that, the assessee has not objected for SQS India BFSI Ltd. It is noted that, the assessee has not objected for SQS India BFSI Ltd. It is noted that, the assessee has not objected for

exclusion of this comparable before the TPO as well as before the DRP, exclusion of this comparable before the TPO as well as before the DRP, exclusion of this comparable before the TPO as well as before the DRP,

but has now raised this claim by filing an additional ground before us. but has now raised this claim by filing an additional ground before us. but has now raised this claim by filing an additional ground before us.

According to the assessee, this comparable fails related party transaction g to the assessee, this comparable fails related party transaction g to the assessee, this comparable fails related party transaction

(RPT) filter of 25% since the RPT to revenue from operations works out to (RPT) filter of 25% since the RPT to revenue from operations works out to (RPT) filter of 25% since the RPT to revenue from operations works out to

be 33.168 %. The Ld. AR took us through the relevant Page No.38 & 55 be 33.168 %. The Ld. AR took us through the relevant Page No.38 & 55 be 33.168 %. The Ld. AR took us through the relevant Page No.38 & 55

of its Annual Report, which was placed at Page of its Annual Report, which was placed at Page 718 of the Paper Book. He 718 of the Paper Book. He

accordingly urged us to exclude this comparable as well. accordingly urged us to exclude this comparable as well.

of this additional ground raised by the assessee. According to him, when of this additional ground raised by the assessee. According to him, when of this additional ground raised by the assessee. According to him, when

the assessee had not disputed the assessee had not disputed this comparable before the Ld. DRP & the this comparable before the Ld. DRP & the

TPO, then this objection cannot be raised at this stage. On merits, he TPO, then this objection cannot be raised at this stage. On merits, he TPO, then this objection cannot be raised at this stage. On merits, he

further submitted that, the assessee was a 100% captive service provider further submitted that, the assessee was a 100% captive service provider further submitted that, the assessee was a 100% captive service provider

for its foreign AE and therefore the RPT filter had no relevance. for its foreign AE and therefore the RPT filter had no relevance. for its foreign AE and therefore the RPT filter had no relevance.

admissibility of this claim raised by the assessee. admissibility of this claim raised by the assessee. It is noted that similar It is noted that similar

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objection as raised by Ld. CIT, DR (supra) was raised by the Revenue in objection as raised by Ld. CIT, DR (supra) was raised by the Revenue in objection as raised by Ld. CIT, DR (supra) was raised by the Revenue in

the case of M/s. Citrix R&D India Pvt. Ltd. v Citrix R&D India Pvt. Ltd. v. DCIT (supra) . DCIT (supra), wherein

also, as in the present case, the assessee did not object to the also, as in the present case, the assessee did not object to the also, as in the present case, the assessee did not object to the

inclusion/exclusion of comparable before the DRP but agitated the same inclusion/exclusion of comparable before the DRP but agitated the same inclusion/exclusion of comparable before the DRP but agitated the same

before this Tribunal. The Tribunal is noted to have repelled this objection before this Tribunal. The Tribunal is noted to have repelled this objection before this Tribunal. The Tribunal is noted to have repelled this objection

raised by the Ld. DR, by holding as under: , by holding as under:

“12. As far as CG Vak Software & 12. As far as CG Vak Software & Exports Ltd. is concerned, the TPO Exports Ltd. is concerned, the TPO excluded the aforesaid company for the reason that this company was excluded the aforesaid company for the reason that this company was excluded the aforesaid company for the reason that this company was engaged in both SWD services and ITeS and no segmental details were engaged in both SWD services and ITeS and no segmental details were engaged in both SWD services and ITeS and no segmental details were available. Before the DRP, the assessee did not challenge the exclusion available. Before the DRP, the assessee did not challenge the exclusion available. Before the DRP, the assessee did not challenge the exclusion of this company from the list of comparable companies by the TPO. pany from the list of comparable companies by the TPO. pany from the list of comparable companies by the TPO. However, before the Tribunal, the assessee has sought inclusion of this However, before the Tribunal, the assessee has sought inclusion of this However, before the Tribunal, the assessee has sought inclusion of this company in the final list of comparables on the ground that segmental company in the final list of comparables on the ground that segmental company in the final list of comparables on the ground that segmental details between SWD services and ITeS is available in the details between SWD services and ITeS is available in the public domain public domain and 98.12% of income of this company is from rendering SWD services. and 98.12% of income of this company is from rendering SWD services. and 98.12% of income of this company is from rendering SWD services. In this regard, our attention was drawn to PB page 1646 of the annual In this regard, our attention was drawn to PB page 1646 of the annual In this regard, our attention was drawn to PB page 1646 of the annual report compendium, which shows that total revenue from operation is report compendium, which shows that total revenue from operation is report compendium, which shows that total revenue from operation is Rs.8.95 crores out of which 8.78 c Rs.8.95 crores out of which 8.78 crores is revenue from software rores is revenue from software services. It is the plea of assessee that for AY 2013 services. It is the plea of assessee that for AY 2013-14, this company 14, this company was regarded as a comparable company by the TPO himself. was regarded as a comparable company by the TPO himself. was regarded as a comparable company by the TPO himself. 13. We have given careful consideration to the submission made by the 13. We have given careful consideration to the submission made by the 13. We have given careful consideration to the submission made by the ld. counsel for the as ld. counsel for the assessee and are of the view that the issue of sessee and are of the view that the issue of comparability of this company needs to be looked into afresh by the comparability of this company needs to be looked into afresh by the comparability of this company needs to be looked into afresh by the TPO, in the light of facts brought to our notice by the ld. counsel for the TPO, in the light of facts brought to our notice by the ld. counsel for the TPO, in the light of facts brought to our notice by the ld. counsel for the assessee. The fact that the assessee did not object to the exclus The fact that the assessee did not object to the exclus The fact that the assessee did not object to the exclusion of this company by the TPO before the DRP cannot be the basis, not to this company by the TPO before the DRP cannot be the basis, not to this company by the TPO before the DRP cannot be the basis, not to consider the claim of assessee before the Tribunal. We derive support consider the claim of assessee before the Tribunal. We derive support consider the claim of assessee before the Tribunal. We derive support for the above conclusion from the decision of Special Bench Chandigarh for the above conclusion from the decision of Special Bench Chandigarh for the above conclusion from the decision of Special Bench Chandigarh in DCIT Vs. Quark Systems Pvt. Ltd. 38 in DCIT Vs. Quark Systems Pvt. Ltd. 38 SOT 307 (SB)(Chandigarh) SOT 307 (SB)(Chandigarh) wherein it was held that the Revenue authorities, including TPO were wherein it was held that the Revenue authorities, including TPO were wherein it was held that the Revenue authorities, including TPO were required to apply statutory provisions and consider for purposes of required to apply statutory provisions and consider for purposes of required to apply statutory provisions and consider for purposes of comparison functions, assets and risks (turnover), profit and technology comparison functions, assets and risks (turnover), profit and technology comparison functions, assets and risks (turnover), profit and technology employed by the te employed by the tested party and other enterprises taken as sted party and other enterprises taken as comparable. Statutory duty is cast on them to undertake above . Statutory duty is cast on them to undertake above . Statutory duty is cast on them to undertake above exercise. If this has not been, the Tribunal as a fact exercise. If this has not been, the Tribunal as a fact-finding body has to finding body has to take into account all the relevant material and determine the question take into account all the relevant material and determine the question take into account all the relevant material and determine the question as per the statutory regulations. We therefore remand the question of the statutory regulations. We therefore remand the question of the statutory regulations. We therefore remand the question of inclusion of this company as a comparable company to the TPO for fresh inclusion of this company as a comparable company to the TPO for fresh inclusion of this company as a comparable company to the TPO for fresh consideration in the facts brought to our notice referred to above and consideration in the facts brought to our notice referred to above and consideration in the facts brought to our notice referred to above and after affording due opportunity of being heard to after affording due opportunity of being heard to the assessee. the assessee.” [emphasis given] [emphasis given]

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Revenue to the admissibility of the contention seeking exclusion of Revenue to the admissibility of the contention seeking exclusion of Revenue to the admissibility of the contention seeking exclusion of

M/s.SQS India BFSI Ltd from the final list of comparables, is rejected. On SQS India BFSI Ltd from the final list of comparables, is rejected. On SQS India BFSI Ltd from the final list of comparables, is rejected. On

merits, it was brought to our notice that, the Ld. DRP in their decision was brought to our notice that, the Ld. DRP in their decision was brought to our notice that, the Ld. DRP in their decision

rendered in the case of rendered in the case of M/s. Citrix R&D India Pvt. Ltd. (supra) M/s. Citrix R&D India Pvt. Ltd. (supra) had

excluded M/s.SQS India BFSI Ltd from the final list of comparables, for SQS India BFSI Ltd from the final list of comparables, for SQS India BFSI Ltd from the final list of comparables, for

failing the RPT filter. However, in the fitness of th failing the RPT filter. However, in the fitness of the matters, we deem it fit e matters, we deem it fit

and appropriate to remit this matter back to the file of the TPO/AO for de and appropriate to remit this matter back to the file of the TPO/AO for de and appropriate to remit this matter back to the file of the TPO/AO for de

novo consideration of the claim of the taxpayer seeking exclusion of M/s. novo consideration of the claim of the taxpayer seeking exclusion of M/s. novo consideration of the claim of the taxpayer seeking exclusion of M/s.

SQS India BFSI Ltd, after giving an opportunity of being heard. We order SQS India BFSI Ltd, after giving an opportunity of being heard. We order SQS India BFSI Ltd, after giving an opportunity of being heard. We order

accordingly.

Technologies, (ii) M/s.Lucid Software Ltd., & (iii) Akshay Software Technologies, (ii) M/s.Lucid Software Ltd., & (iii) Akshay Software Technologies, (ii) M/s.Lucid Software Ltd., & (iii) Akshay Software

Technologies Ltd., which are sought to be included by the assessee. Technologies Ltd., which are sought to be included by the assessee. Technologies Ltd., which are sought to be included by the assessee.

16.1 M/s.CAT Technologies M/s.CAT Technologies - The TPO was of the view The TPO was of the view that this

company is engaged in medical transcriptions, etc., and no segmental company is engaged in medical transcriptions, etc., and no segmental company is engaged in medical transcriptions, etc., and no segmental

details are available, and therefore he didn’t include this company as a details are available, and therefore he didn’t include this company as a details are available, and therefore he didn’t include this company as a

comparable. The finding of the TPO was confirmed by Ld. DRP which held comparable. The finding of the TPO was confirmed by Ld. DRP which held comparable. The finding of the TPO was confirmed by Ld. DRP which held

that the activity of medical tran that the activity of medical transcription cannot be characterized as scription cannot be characterized as

software development and also this comparable fails the persistent software development and also this comparable fails the persistent software development and also this comparable fails the persistent-

operation loss filter. To this, the Ld. AR took us through the financials of operation loss filter. To this, the Ld. AR took us through the financials of operation loss filter. To this, the Ld. AR took us through the financials of

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M/s.CAT Technologies [Page No.1152 of the PB M/s.CAT Technologies [Page No.1152 of the PB-2] to show that it was not 2] to show that it was not

engaged in any medical transcription activity during the year under aged in any medical transcription activity during the year under aged in any medical transcription activity during the year under

consideration [AY 2014 consideration [AY 2014-15]. He also showed that this company had 15]. He also showed that this company had

reported profit in AY 2012 reported profit in AY 2012-13 and therefore, according to him, this 13 and therefore, according to him, this

company cannot be classified as a persistent loss company cannot be classified as a persistent loss-making c making company. He

referred the decision of the Hon’ble Bombay High Court in the case of referred the decision of the Hon’ble Bombay High Court in the case of referred the decision of the Hon’ble Bombay High Court in the case of CIT

v. Goldman Sachs (India) Securities Pvt. Ltd., [ITA No.2222 of v. Goldman Sachs (India) Securities Pvt. Ltd., [ITA No.2222 of v. Goldman Sachs (India) Securities Pvt. Ltd., [ITA No.2222 of

2013] wherein the Hon’ble High Court held that a company cannot be wherein the Hon’ble High Court held that a company cannot be wherein the Hon’ble High Court held that a company cannot be

termed as a persistent loss making, if it termed as a persistent loss making, if it has earned operating profit in one has earned operating profit in one

out of previous three years. Per contra, the Ld. CIT, DR supported the out of previous three years. Per contra, the Ld. CIT, DR supported the out of previous three years. Per contra, the Ld. CIT, DR supported the

action of the TPO/DRP and doesn’t want us to interfere. action of the TPO/DRP and doesn’t want us to interfere.

16.2 Having gone through the submissions put forth by the assessee and Having gone through the submissions put forth by the assessee and Having gone through the submissions put forth by the assessee and

the orders of the lowe the orders of the lower authorities, we note that, this company had r authorities, we note that, this company had

reported profit in one of the preceding three years i.e. AY 2012 reported profit in one of the preceding three years i.e. AY 2012 reported profit in one of the preceding three years i.e. AY 2012-13, as

noted above, and therefore, following the decision of Hon’ble Bombay noted above, and therefore, following the decision of Hon’ble Bombay noted above, and therefore, following the decision of Hon’ble Bombay

High Court in the case of High Court in the case of Goldman Sachs (India) Securities Pvt. Ltd., Goldman Sachs (India) Securities Pvt. Ltd.,

(supra), we agree with the assessee that this company cannot be , we agree with the assessee that this company cannot be , we agree with the assessee that this company cannot be

excluded by applying the persistent loss excluded by applying the persistent loss-making filter. Further, perusal of making filter. Further, perusal of

their financials for the relevant year reveals that, this company was their financials for the relevant year reveals that, this company was their financials for the relevant year reveals that, this company was

rendering SWD services and hence, is seen to rendering SWD services and hence, is seen to be functionally comparable. be functionally comparable.

It was also brought to our notice that, this company was accepted as It was also brought to our notice that, this company was accepted as It was also brought to our notice that, this company was accepted as

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functionally comparable by the Ld. DRP in the preceding AY 2013 functionally comparable by the Ld. DRP in the preceding AY 2013 functionally comparable by the Ld. DRP in the preceding AY 2013-14. As

there is no change in the functions and business profile of M/s.CAT there is no change in the functions and business profile of M/s.CAT there is no change in the functions and business profile of M/s.CAT

Technologies during the year, for the reasons discussed in the foregoing, the year, for the reasons discussed in the foregoing, the year, for the reasons discussed in the foregoing,

we direct inclusion of this company as comparable. we direct inclusion of this company as comparable.

16.3 M/s.Lucid Software Ltd M/s.Lucid Software Ltd – This company was rejected by the This company was rejected by the

lower authorities by applying the persistent loss lower authorities by applying the persistent loss-making filter. The Ld. making filter. The Ld.

DRP had also observed that this company derives income from service served that this company derives income from service served that this company derives income from service

and products and therefore, was not functionally similar. It was brought and products and therefore, was not functionally similar. It was brought and products and therefore, was not functionally similar. It was brought

to our notice that, this company had reported profit in the AY 2012 to our notice that, this company had reported profit in the AY 2012 to our notice that, this company had reported profit in the AY 2012-13.

Our attention was drawn to Page No.778 of the PB which sho Our attention was drawn to Page No.778 of the PB which sho Our attention was drawn to Page No.778 of the PB which showed that this

company had earned operating profit of Rs.51,20,424/ company had earned operating profit of Rs.51,20,424/- and book profit of and book profit of

Rs.41,16,808/- in AY 2012 in AY 2012-13. Therefore, as the company had reported 13. Therefore, as the company had reported

profit in one of the preceding three years, following the decision of the profit in one of the preceding three years, following the decision of the profit in one of the preceding three years, following the decision of the

Hon’ble Bombay High Court Hon’ble Bombay High Court in the case of Goldman Sachs (India) Goldman Sachs (India)

Securities Pvt. Ltd., (supra) Securities Pvt. Ltd., (supra) we hold that this company cannot be we hold that this company cannot be

rejected on the ‘persistent loss rejected on the ‘persistent loss-making’ filter.

16.4 On the functional comparability, we note that the Ld. DRP in On the functional comparability, we note that the Ld. DRP in On the functional comparability, we note that the Ld. DRP in

assessee’s own case for AY 2013 assessee’s own case for AY 2013-14 had accepted this company as 14 had accepted this company as

functionally comparable even though rejected by TPO. It was also brought functionally comparable even though rejected by TPO. It was also brought functionally comparable even though rejected by TPO. It was also brought

to our notice that the Bangalore Bench of this Tribunal in to our notice that the Bangalore Bench of this Tribunal in the case of the case of M/s.

Microsoft Microsoft Microsoft Research Research Research Lab Lab Lab India India India Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. [IT(TP)A [IT(TP)A [IT(TP)A No. No. No.

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3131/Bang/2018] dated 05.02.2020 3131/Bang/2018] dated 05.02.2020 for AY 2014-15 in the context of 15 in the context of

assessee rendering SWD services had held this company as comparable assessee rendering SWD services had held this company as comparable assessee rendering SWD services had held this company as comparable

by observing as under:- -

“(v) Lucid Software Limited Lucid Software Limited, has a margin of (-) 0.57% and the ) 0.57% and the turnover is Rs.3.60 Crores. It was rejected on the ground that it is turnover is Rs.3.60 Crores. It was rejected on the ground that it is turnover is Rs.3.60 Crores. It was rejected on the ground that it is engaged in the business of software development and rendering engaged in the business of software development and rendering engaged in the business of software development and rendering software services to the global non software services to the global non-destructive testing and material destructive testing and material sciences industry and sciences industry and further the company has incurred losses for the further the company has incurred losses for the previous year ending March, 2013 and March, 2014. The Ld.AR submit previous year ending March, 2013 and March, 2014. The Ld.AR submit previous year ending March, 2013 and March, 2014. The Ld.AR submit that the comparable is functionally similar and is engaged in the that the comparable is functionally similar and is engaged in the that the comparable is functionally similar and is engaged in the business of software development and passes all the filters, and business of software development and passes all the filters, and business of software development and passes all the filters, and whereas persistent loss filters has been incorrectly applied. The learned ersistent loss filters has been incorrectly applied. The learned ersistent loss filters has been incorrectly applied. The learned Authorized Representative relied on the decision of Pune Bench Tribunal Authorized Representative relied on the decision of Pune Bench Tribunal Authorized Representative relied on the decision of Pune Bench Tribunal Yazaki India Pvt Ltd Vs DCit in ITA No.621/Pune/2014 Dt.11.7.2019 at Yazaki India Pvt Ltd Vs DCit in ITA No.621/Pune/2014 Dt.11.7.2019 at Yazaki India Pvt Ltd Vs DCit in ITA No.621/Pune/2014 Dt.11.7.2019 at paras 21 to 23 which is read as under: paras 21 to 23 which is read as under: "21. The Hon'ble jurisdictional High Court in CIT Vs. Goldman Sachs n'ble jurisdictional High Court in CIT Vs. Goldman Sachs n'ble jurisdictional High Court in CIT Vs. Goldman Sachs (India) Securities (P) Ltd. (2016) 290 CTR 236 (Bom.) considered a (India) Securities (P) Ltd. (2016) 290 CTR 236 (Bom.) considered a (India) Securities (P) Ltd. (2016) 290 CTR 236 (Bom.) considered a similar issue of persistent loss making companies. In that case, the similar issue of persistent loss making companies. In that case, the similar issue of persistent loss making companies. In that case, the TPO excluded Capital Trust Ltd. on the ground of persistent los TPO excluded Capital Trust Ltd. on the ground of persistent los TPO excluded Capital Trust Ltd. on the ground of persistent loss making company. The Tribunal included this company by noticing making company. The Tribunal included this company by noticing making company. The Tribunal included this company by noticing that it was not a persistent loss making company as for the A.Y. that it was not a persistent loss making company as for the A.Y. that it was not a persistent loss making company as for the A.Y. 2005-06 it made profit although it was loss for subsequent two years, 06 it made profit although it was loss for subsequent two years, 06 it made profit although it was loss for subsequent two years, namely, A.Y. 2006 namely, A.Y. 2006-07 and 2007-08. Considering the factua 08. Considering the factual position obtaining in the instant case, it is seen that though FCI Technology obtaining in the instant case, it is seen that though FCI Technology obtaining in the instant case, it is seen that though FCI Technology Services Ltd. suffered loss for the A.Y. 2008 Services Ltd. suffered loss for the A.Y. 2008-09 and the year under 09 and the year under consideration but, in fact, there was profit for the AY. 2007 consideration but, in fact, there was profit for the AY. 2007 consideration but, in fact, there was profit for the AY. 2007-08 at 5.08%. As this company earned profit of 5.08%. As this company earned profit of 5.08% for the A.Y. 2007 5.08% for the A.Y. 2007-08, it ceases to be a persistent loss making company in so far as the A.Y. it ceases to be a persistent loss making company in so far as the A.Y. it ceases to be a persistent loss making company in so far as the A.Y. 2009-10 is concerned, since one of the three years is in profit though 10 is concerned, since one of the three years is in profit though 10 is concerned, since one of the three years is in profit though the other two years are in loss. the other two years are in loss. 22. The Id. DR invited our attention towards the dire 22. The Id. DR invited our attention towards the direction given by ction given by the DRP on page 12 in which it has returned a categorical finding that the DRP on page 12 in which it has returned a categorical finding that the DRP on page 12 in which it has returned a categorical finding that FCI Technology Services Ltd. started manufacturing connectors FCI Technology Services Ltd. started manufacturing connectors FCI Technology Services Ltd. started manufacturing connectors during the A.Y. 2008 during the A.Y. 2008-09 and there was no manufacturing of 09 and there was no manufacturing of connectors during the A.Y. 2007 connectors during the A.Y. 2007-08, for which the 08, for which the assessee is claiming that this company has positive PLI. claiming that this company has positive PLI. 23. We have gone through the Annual report of this company 23. We have gone through the Annual report of this company 23. We have gone through the Annual report of this company relevant for the A.Yrs. 2009 relevant for the A.Yrs. 2009-10 and 2008-09. Page 467 of the paper 09. Page 467 of the paper book for the assessment year under consideration gives details of book for the assessment year under consideration gives details of book for the assessment year under consideration gives details of stock, production and sales for the year ending 31 production and sales for the year ending 31-12 12-2007 which has opening stock of connectors as well. Similar is the position for the has opening stock of connectors as well. Similar is the position for the has opening stock of connectors as well. Similar is the position for the preceding year as well, which depicts that there was opening stock of preceding year as well, which depicts that there was opening stock of preceding year as well, which depicts that there was opening stock of connectors. In that view of the matter, it becomes evid connectors. In that view of the matter, it becomes evid connectors. In that view of the matter, it becomes evident that this company was already into manufacturing of connectors, which company was already into manufacturing of connectors, which company was already into manufacturing of connectors, which

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product has been considered as similar by the DRP. Ex consequenti, product has been considered as similar by the DRP. Ex consequenti, product has been considered as similar by the DRP. Ex consequenti, the relevant contrary finding recorded by the DRP about that the relevant contrary finding recorded by the DRP about that the relevant contrary finding recorded by the DRP about that company not engaged in manufacturing of connectors dur company not engaged in manufacturing of connectors dur company not engaged in manufacturing of connectors during the A.Y. 2007-08 is, therefore, not correct. As FCI Technology Services Ltd. is 08 is, therefore, not correct. As FCI Technology Services Ltd. is 08 is, therefore, not correct. As FCI Technology Services Ltd. is not a persistent loss making company and further the functional not a persistent loss making company and further the functional not a persistent loss making company and further the functional similarity has not been disputed by the TPO, we order to include this similarity has not been disputed by the TPO, we order to include this similarity has not been disputed by the TPO, we order to include this company in the list of comparables." company in the list of comparables." We found this comparable was included by the Pune Bench of the e found this comparable was included by the Pune Bench of the e found this comparable was included by the Pune Bench of the Tribunal for the Assessment Year 2009 Tribunal for the Assessment Year 2009-10. whereas in the present case, 10. whereas in the present case, the Assessment Year is 2014 the Assessment Year is 2014-15 and also the observations of the TPO 15 and also the observations of the TPO that it is a loss making company for the year ending M that it is a loss making company for the year ending March, 2013 and arch, 2013 and March, 2014. Considering the functionality and precedent losses and the March, 2014. Considering the functionality and precedent losses and the March, 2014. Considering the functionality and precedent losses and the decision of the co decision of the co-ordinate Bench of the Tribunal, we restore this ordinate Bench of the Tribunal, we restore this comparable to the file of TPO to examine and verify the functional profile comparable to the file of TPO to examine and verify the functional profile comparable to the file of TPO to examine and verify the functional profile for inclusion in determinat for inclusion in determination of ALP.” 16.5 Since the Revenue was unable to point out any distinguishable facts Since the Revenue was unable to point out any distinguishable facts Since the Revenue was unable to point out any distinguishable facts

and particularly because the Ld. DRP had also included this comparable in and particularly because the Ld. DRP had also included this comparable in and particularly because the Ld. DRP had also included this comparable in

the final list for AY 2013 the final list for AY 2013-14, we direct inclusion of this company as a 14, we direct inclusion of this company as a

comparable.

16.6 M/s.Akshay Software Technologies Ltd. hay Software Technologies Ltd. - According to the TPO, According to the TPO,

based on website of this company, it is functionally different. Though the based on website of this company, it is functionally different. Though the based on website of this company, it is functionally different. Though the

DRP did not dispute the functional comparability but rejected this DRP did not dispute the functional comparability but rejected this DRP did not dispute the functional comparability but rejected this

company on the ground that the revenue model of this compan company on the ground that the revenue model of this compan company on the ground that the revenue model of this company is

different as foreign branch expenditure is 85%. The Ld. AR took us different as foreign branch expenditure is 85%. The Ld. AR took us different as foreign branch expenditure is 85%. The Ld. AR took us

through the Annual report of M/s through the Annual report of M/s.Akshay Software Technologies for FY Akshay Software Technologies for FY

2013-14, which shows the break 14, which shows the break-up of revenue generated by it from up of revenue generated by it from

rendering software development services and sell rendering software development services and selling ERP products and it ing ERP products and it

is observed that 98.55% of its revenue is generated from software is observed that 98.55% of its revenue is generated from software is observed that 98.55% of its revenue is generated from software

development services and only 1.19% is from selling ERP products [Refer development services and only 1.19% is from selling ERP products [Refer development services and only 1.19% is from selling ERP products [Refer

note 19 on page 1054, 1056 0f PB note 19 on page 1054, 1056 0f PB-2]. The Ld. AR has rightly pointed out 2]. The Ld. AR has rightly pointed out

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that, neither TPO nor DRP had applied a filter to reject the companies r DRP had applied a filter to reject the companies r DRP had applied a filter to reject the companies

having substantial branch expenses. Accordingly, the reasoning given by having substantial branch expenses. Accordingly, the reasoning given by having substantial branch expenses. Accordingly, the reasoning given by

DRP to reject this comparable is found to be untenable. The Ld.AR further DRP to reject this comparable is found to be untenable. The Ld.AR further DRP to reject this comparable is found to be untenable. The Ld.AR further

brought to our notice that Bangalore Tribunal in the case o brought to our notice that Bangalore Tribunal in the case o brought to our notice that Bangalore Tribunal in the case of M/s.

Microsoft Research Lab India Pvt. Ltd. (supra) Microsoft Research Lab India Pvt. Ltd. (supra) and in the case of and in the case of

M/s. M/s. M/s. Verizon Verizon Verizon Data Data Data Services Services Services India India India Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. ( ( (IT(TP)A

No.56/Chny/2018)for AY 2014 for AY 2014-15has directed inclusion of M/s. Akshay has directed inclusion of M/s. Akshay

Software Technologies Ltd in the same SWD segment on similar fa Software Technologies Ltd in the same SWD segment on similar fa Software Technologies Ltd in the same SWD segment on similar facts and

circumstances as involved in the present case. The relevant findings circumstances as involved in the present case. The relevant findings circumstances as involved in the present case. The relevant findings

rendered in the case of M/s. Microsoft Research Lab India Pvt. Ltd., is rendered in the case of M/s. Microsoft Research Lab India Pvt. Ltd., is rendered in the case of M/s. Microsoft Research Lab India Pvt. Ltd., is

noted as under:

“(i) Akshay Software Technologies Ltd., the company's margin is 1.81% (i) Akshay Software Technologies Ltd., the company's margin is 1.81% (i) Akshay Software Technologies Ltd., the company's margin is 1.81% and was rejected by t and was rejected by the DRP as a foreign brand expenditure is 85% of he DRP as a foreign brand expenditure is 85% of total cost. Whereas RPT is 3.49% of total sales and Ld.AR referred to total cost. Whereas RPT is 3.49% of total sales and Ld.AR referred to total cost. Whereas RPT is 3.49% of total sales and Ld.AR referred to page 1705 and 1714 of paper book. Further the company was rejected page 1705 and 1714 of paper book. Further the company was rejected page 1705 and 1714 of paper book. Further the company was rejected by the TPO on the RPT filter and the observations are incorrect, The by the TPO on the RPT filter and the observations are incorrect, The by the TPO on the RPT filter and the observations are incorrect, The company is functionally similar and is engaged in providing Software mpany is functionally similar and is engaged in providing Software mpany is functionally similar and is engaged in providing Software Development Services including procurement, implementation and Development Services including procurement, implementation and Development Services including procurement, implementation and maintenance of ERP Products and also services in India and overseas maintenance of ERP Products and also services in India and overseas maintenance of ERP Products and also services in India and overseas which does not have impact on functional operations. Where which does not have impact on functional operations. Where which does not have impact on functional operations. Whereas in assessee own case for the Assessment Year 2016 assessee own case for the Assessment Year 2016-17 it was accepted as 17 it was accepted as comparable. Accordingly, considering the functional profile, and it was comparable. Accordingly, considering the functional profile, and it was comparable. Accordingly, considering the functional profile, and it was accepted by the Revenue in subsequent Asst Years, we direct the TPO to accepted by the Revenue in subsequent Asst Years, we direct the TPO to accepted by the Revenue in subsequent Asst Years, we direct the TPO to include the comparable company in the include the comparable company in the final list for determination of final list for determination of ALP.” 16.7 We also gainfully refer to the following observations made by this We also gainfully refer to the following observations made by this We also gainfully refer to the following observations made by this

Tribunal in the case of Tribunal in the case of M/s. Verizon Data Services India Pvt. Ltd. M/s. Verizon Data Services India Pvt. Ltd.

(supra) while dealing with the comparable M/s. Akshay Software while dealing with the comparable M/s. Akshay Software while dealing with the comparable M/s. Akshay Software

Technologies Ltd., which is as under: Technologies Ltd., which is as under:

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“8.1 The Ld. TPO excluded this entity on the ground that this entity was 8.1 The Ld. TPO excluded this entity on the ground that this entity was 8.1 The Ld. TPO excluded this entity on the ground that this entity was functionally dissimilar as it was engaged in product development. The functionally dissimilar as it was engaged in product development. The functionally dissimilar as it was engaged in product development. The Ld. DRP confirmed the same against which the assessee is in further Ld. DRP confirmed the same against which the assessee is in further Ld. DRP confirmed the same against which the assessee is in further appeal before us. appeal before us. 8.2 The Ld. AR has submitt 8.2 The Ld. AR has submitted that the inference of Ld. TPO is erroneous ed that the inference of Ld. TPO is erroneous since the extract made from annual report of this entity are not with since the extract made from annual report of this entity are not with since the extract made from annual report of this entity are not with respect to the assessee but with respect to assessee’s wholly owned respect to the assessee but with respect to assessee’s wholly owned respect to the assessee but with respect to assessee’s wholly owned subsidiary vis. Akshay Software International Inc. The Ld. AR submitted subsidiary vis. Akshay Software International Inc. The Ld. AR submitted subsidiary vis. Akshay Software International Inc. The Ld. AR submitted that this entity is functionally similar since it is engaged in providing that this entity is functionally similar since it is engaged in providing that this entity is functionally similar since it is engaged in providing professional professional professional services, services, services, procurement, procurement, procurement, installation, installation, installation, implementation, implementation, implementation, support and maintenance of ERP products and services in India and support and maintenance of ERP products and services in India and support and maintenance of ERP products and services in India and overseas. The revenue from software services is mo overseas. The revenue from software services is more than 75% of total re than 75% of total revenues which is one of the filter applied by Ld. TPO. The Ld. AR revenues which is one of the filter applied by Ld. TPO. The Ld. AR revenues which is one of the filter applied by Ld. TPO. The Ld. AR submitted that this entity has been accepted by Bangalore Tribunal in submitted that this entity has been accepted by Bangalore Tribunal in submitted that this entity has been accepted by Bangalore Tribunal in the decision of Mercedes the decision of Mercedes-Benz Research & Development India (P.) Ltd. Benz Research & Development India (P.) Ltd. (95 Taxmann.Com 134) as well (95 Taxmann.Com 134) as well as Kolkata Tribunal in the decision of as Kolkata Tribunal in the decision of Labvantage Solution Pvt. Ltd. (ITA No.1051/Kol/2015 & ors. dated Labvantage Solution Pvt. Ltd. (ITA No.1051/Kol/2015 & ors. dated Labvantage Solution Pvt. Ltd. (ITA No.1051/Kol/2015 & ors. dated 19.10.2016). The Ld. CIT-DR opposed inclusion of the same on the ground that it was DR opposed inclusion of the same on the ground that it was DR opposed inclusion of the same on the ground that it was a low-profile company carrying out functionally different activitie profile company carrying out functionally different activitie profile company carrying out functionally different activities and its turnover could not be compared with assessee’s turnover. its turnover could not be compared with assessee’s turnover. its turnover could not be compared with assessee’s turnover. 8.3 We find that the observation made by Ld. TPO, as rightly pointed out 8.3 We find that the observation made by Ld. TPO, as rightly pointed out 8.3 We find that the observation made by Ld. TPO, as rightly pointed out by Ld. AR, are erroneous. The observations have been made in the by Ld. AR, are erroneous. The observations have been made in the by Ld. AR, are erroneous. The observations have been made in the Annual Report not with respect to the assessee bu Annual Report not with respect to the assessee but with respect to t with respect to another entity. This entity meets filters applied by Ld. TPO while another entity. This entity meets filters applied by Ld. TPO while another entity. This entity meets filters applied by Ld. TPO while carrying out comparable analysis. In the cited decision of Bangalore carrying out comparable analysis. In the cited decision of Bangalore carrying out comparable analysis. In the cited decision of Bangalore Tribunal in Mercedes Tribunal in Mercedes-Benz Research & Development India (P.) Ltd. Benz Research & Development India (P.) Ltd. (supra), this entity has been accepte (supra), this entity has been accepted to be a comparable entity. d to be a comparable entity. Therefore, we direct Ld. TPO to accept this entity as comparable entity. Therefore, we direct Ld. TPO to accept this entity as comparable entity. Therefore, we direct Ld. TPO to accept this entity as comparable entity. The corresponding grounds raised b The corresponding grounds raised by the assessee stand allowed.” y the assessee stand allowed.” 16.8 In view of the above, we direct the TPO/AO to include this company In view of the above, we direct the TPO/AO to include this company In view of the above, we direct the TPO/AO to include this company

in the list of comparables for computing the ALP. mparables for computing the ALP.

comparables in the ITES segment. At the time of hearing, the assessee comparables in the ITES segment. At the time of hearing, the assessee comparables in the ITES segment. At the time of hearing, the assessee

sought exclusion of three (3) comparables viz., (i) M/s. Infosys BPO Ltd., sought exclusion of three (3) comparables viz., (i) M/s. Infosys BPO Ltd., sought exclusion of three (3) comparables viz., (i) M/s. Infosys BPO Ltd.,

(ii) M/s. Cross domain Solutions Pvt. Ltd. & (iii) M/s. Micro land Ltd. and ross domain Solutions Pvt. Ltd. & (iii) M/s. Micro land Ltd. and ross domain Solutions Pvt. Ltd. & (iii) M/s. Micro land Ltd. and

inclusion of two comparables i.e., (i) M/s All sec inclusion of two comparables i.e., (i) M/s All sec Technologies Ltd Technologies Ltd and (ii)

M/s Informed Technologies. M/s Informed Technologies.

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rendered by the Hyderabad Bench of this Tribunal in the case of he Hyderabad Bench of this Tribunal in the case of he Hyderabad Bench of this Tribunal in the case of M/s.

Infor (I) Pvt. Ltd. v. DCIT [2019] 109 taxmann.com 435 Infor (I) Pvt. Ltd. v. DCIT [2019] 109 taxmann.com 435 Infor (I) Pvt. Ltd. v. DCIT [2019] 109 taxmann.com 435. In the

decided case, the assessee who was similarly engaged in rendering ITES decided case, the assessee who was similarly engaged in rendering ITES decided case, the assessee who was similarly engaged in rendering ITES

services and the TPO had inter alia included the three (3) compara services and the TPO had inter alia included the three (3) compara services and the TPO had inter alia included the three (3) comparables

viz., (i) M/s. Infosys BPO Ltd., (ii) M/s. Cross domain Solutions Pvt. Ltd. & viz., (i) M/s. Infosys BPO Ltd., (ii) M/s. Cross domain Solutions Pvt. Ltd. & viz., (i) M/s. Infosys BPO Ltd., (ii) M/s. Cross domain Solutions Pvt. Ltd. &

(iii) M/s. Micro land Ltd. for benchmarking the ALP. On appeal, this (iii) M/s. Micro land Ltd. for benchmarking the ALP. On appeal, this (iii) M/s. Micro land Ltd. for benchmarking the ALP. On appeal, this

Tribunal is noted to have held these three (3) comparables to be Tribunal is noted to have held these three (3) comparables to be Tribunal is noted to have held these three (3) comparables to be

functionally dissimilar in the same AY functionally dissimilar in the same AY 2014-15, by observing as under: 15, by observing as under:-

“(i) Infosys BPO Ltd. (i) Infosys BPO Ltd. “51. As regards the comparability of Infosys BPO Services Ltd. is “51. As regards the comparability of Infosys BPO Services Ltd. is “51. As regards the comparability of Infosys BPO Services Ltd. is concerned, the learned Counsel for the assessee submitted that it is a concerned, the learned Counsel for the assessee submitted that it is a concerned, the learned Counsel for the assessee submitted that it is a large company operating at high economies of scale with turnover large company operating at high economies of scale with turnover large company operating at high economies of scale with turnover of INR 2023 crores compared to the assessee having turnover of Rs.26.25 INR 2023 crores compared to the assessee having turnover of Rs.26.25 INR 2023 crores compared to the assessee having turnover of Rs.26.25 crores only. Further, it is submitted that it has a brand value and it crores only. Further, it is submitted that it has a brand value and it crores only. Further, it is submitted that it has a brand value and it employs substantial portion of its fixed assets in intangible assets. He employs substantial portion of its fixed assets in intangible assets. He employs substantial portion of its fixed assets in intangible assets. He submitted that the comparability of the submitted that the comparability of the said company had come up for said company had come up for consideration in the assessee's own case for the earlier A.Y 2011 consideration in the assessee's own case for the earlier A.Y 2011 consideration in the assessee's own case for the earlier A.Y 2011-12 and also in 2013-14. In A.Y 2011 14. In A.Y 2011-12, the Tribunal had directed its exclusion 12, the Tribunal had directed its exclusion while in 2013-14, the DRP itself had directed its exclusion and the 14, the DRP itself had directed its exclusion and the 14, the DRP itself had directed its exclusion and the Revenue has not filed any appeal as against the same. He placed not filed any appeal as against the same. He placed not filed any appeal as against the same. He placed reliance upon the decision of the Hon'ble Delhi High Court in the case of reliance upon the decision of the Hon'ble Delhi High Court in the case of reliance upon the decision of the Hon'ble Delhi High Court in the case of Aginity India Ltd. (supra) wherein the said company has been directed Aginity India Ltd. (supra) wherein the said company has been directed Aginity India Ltd. (supra) wherein the said company has been directed to be excluded.” (ii) Cross Domain Solutions P. Ltd. (ii) Cross Domain Solutions P. Ltd. “57. As regards Cross Domain Solutions Ltd is concerned, the case of regards Cross Domain Solutions Ltd is concerned, the case of regards Cross Domain Solutions Ltd is concerned, the case of the assessee is that it is functionally dissimilar as it renders KPO the assessee is that it is functionally dissimilar as it renders KPO the assessee is that it is functionally dissimilar as it renders KPO services. The learned DR, however, supported the orders of the TPO & services. The learned DR, however, supported the orders of the TPO & services. The learned DR, however, supported the orders of the TPO & DRP. 58. As regards the services rendered by this compan 58. As regards the services rendered by this company, we find that at y, we find that at Page 172 of the Paper Book which is the Website printout, it is shown as Page 172 of the Paper Book which is the Website printout, it is shown as Page 172 of the Paper Book which is the Website printout, it is shown as a "knowledge center". The learned DR had submitted that if the contents a "knowledge center". The learned DR had submitted that if the contents a "knowledge center". The learned DR had submitted that if the contents of a Website given by a company is taken into consideration, then even of a Website given by a company is taken into consideration, then even of a Website given by a company is taken into consideration, then even the assessee would be the assessee would be falling in the same category i.e. Knowledge falling in the same category i.e. Knowledge Process Outsourcing. The learned DR, except for relying upon his Process Outsourcing. The learned DR, except for relying upon his Process Outsourcing. The learned DR, except for relying upon his

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argument that the assessee is also into high argument that the assessee is also into high-end BPO services, has not end BPO services, has not been able to point out that Cross Domain Solutions Ltd is not a BPO. been able to point out that Cross Domain Solutions Ltd is not a BPO. been able to point out that Cross Domain Solutions Ltd is not a BPO. Therefore, we direct exclusion of this company also from the final list of ore, we direct exclusion of this company also from the final list of ore, we direct exclusion of this company also from the final list of comparables.” (iii) Microland Ltd. (iii) Microland Ltd. “60. As regards Microland Ltd is concerned, the case of the assessee is “60. As regards Microland Ltd is concerned, the case of the assessee is “60. As regards Microland Ltd is concerned, the case of the assessee is that it is into business of rendering hybrid IT Infrastructure and it also that it is into business of rendering hybrid IT Infrastructure and it also that it is into business of rendering hybrid IT Infrastructure and it also undertakes R&D activities and has achieved abnormal growth of 149% takes R&D activities and has achieved abnormal growth of 149% takes R&D activities and has achieved abnormal growth of 149% during the current A.Y. without prejudice to the above, the assessee also during the current A.Y. without prejudice to the above, the assessee also during the current A.Y. without prejudice to the above, the assessee also submitted that the correct margin of this company should be considered. submitted that the correct margin of this company should be considered. submitted that the correct margin of this company should be considered. 61. The learned DR, however, submitted that this 61. The learned DR, however, submitted that this company was taken company was taken up by the Assessee itself as comparable before the TPO and further that up by the Assessee itself as comparable before the TPO and further that up by the Assessee itself as comparable before the TPO and further that in the earlier A.Y.2013 in the earlier A.Y.2013-14 this company has been accepted as a 14 this company has been accepted as a comparable. Therefore, he submitted that it should be retained as a comparable. Therefore, he submitted that it should be retained as a comparable. Therefore, he submitted that it should be retained as a comparable. 62. Having regard to 62. Having regard to the rival contentions and the material on record, the rival contentions and the material on record, we find that this company is into R & D activities and has achieved we find that this company is into R & D activities and has achieved we find that this company is into R & D activities and has achieved abnormal growth during the current A.Y. In the case of S & P Capital IQ abnormal growth during the current A.Y. In the case of S & P Capital IQ abnormal growth during the current A.Y. In the case of S & P Capital IQ (India) Ltd., we have considered the comparability of this company (India) Ltd., we have considered the comparability of this company (India) Ltd., we have considered the comparability of this company to ITeS company and has directed its exclusion. Respectfully following the ITeS company and has directed its exclusion. Respectfully following the ITeS company and has directed its exclusion. Respectfully following the same, we direct its exclusion for this A.Y as well.” same, we direct its exclusion for this A.Y as well.” 19. Following the above decision (supra) which is found to be squarely Following the above decision (supra) which is found to be squarely Following the above decision (supra) which is found to be squarely

applicable to the given facts in the present case, applicable to the given facts in the present case, we are of the view that e of the view that

the above three(3) companies should be excluded from the companies should be excluded from the companies should be excluded from the list of

comparable companies for computing the ALP of the ITES segment. comparable companies for computing the ALP of the ITES segment. comparable companies for computing the ALP of the ITES segment.

Technologies Ltd., & M/s.Informed Tech Technologies Ltd., & M/s.Informed Technologies India Ltd. nologies India Ltd., is concerned,

we deal with each of them separately below. we deal with each of them separately below.

20.1 M/s. All Sec Technologies Ltd. M/s. All Sec Technologies Ltd. – The lower authorities rejected The lower authorities rejected

this comparable for the reason that the company incurred consistent this comparable for the reason that the company incurred consistent this comparable for the reason that the company incurred consistent

losses for two out of three years. By re losses for two out of three years. By relying on the decision of Bombay in lying on the decision of Bombay in

the case of Goldman Sachs (India) Securities Pvt. Ltd., (supra), we have the case of Goldman Sachs (India) Securities Pvt. Ltd., (supra), we have the case of Goldman Sachs (India) Securities Pvt. Ltd., (supra), we have

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already held earlier, that a company cannot be held to be a ‘persistent already held earlier, that a company cannot be held to be a ‘persistent already held earlier, that a company cannot be held to be a ‘persistent

loss making company’ if the company earned operating profit in one year loss making company’ if the company earned operating profit in one year loss making company’ if the company earned operating profit in one year

out of the three previous years. On the given facts, it is noticed that, this of the three previous years. On the given facts, it is noticed that, this of the three previous years. On the given facts, it is noticed that, this

company had reported profit of Rs.5.43 Crs. company had reported profit of Rs.5.43 Crs. in FY 2013-14 4 relevant to AY

2014-15and was providing OS data services to its clients in the ITeS and was providing OS data services to its clients in the ITeS and was providing OS data services to its clients in the ITeS

Segment. Having regard to the foregoing, Segment. Having regard to the foregoing, according to us, the earlier according to us, the earlier

results/losses in preceding two assessment years cannot be reason to results/losses in preceding two assessment years cannot be reason to results/losses in preceding two assessment years cannot be reason to

exclude this company by applying persistent loss exclude this company by applying persistent loss-making filter. making filter.

20.2 The Ld. DRP is noted to have additionally held that the export The Ld. DRP is noted to have additionally held that the export The Ld. DRP is noted to have additionally held that the export

Revenue bearing to this Revenue bearing to this segment was only 50% and therefore it cannot segment was only 50% and therefore it cannot

be taken as a comparable. The Ld. AR has rightly pointed out that, the be taken as a comparable. The Ld. AR has rightly pointed out that, the be taken as a comparable. The Ld. AR has rightly pointed out that, the

export turnover filter of 25% was applied in the TP study and that the export turnover filter of 25% was applied in the TP study and that the export turnover filter of 25% was applied in the TP study and that the

TPO had not disturbed the same. Also, TPO had not disturbed the same. Also, the Ld. DRP has nowhere the Ld. DRP has nowhere

prescribed this filter of 50% instead of 25% in their order. This finding of bed this filter of 50% instead of 25% in their order. This finding of bed this filter of 50% instead of 25% in their order. This finding of

the DRP is therefore whimsical/arbitrary whimsical/arbitrary. For the foregoing reasons, we . For the foregoing reasons, we

direct inclusion of this company in the final list of comparable companies. direct inclusion of this company in the final list of comparable companies. direct inclusion of this company in the final list of comparable companies.

20.3 M/s. Informed Technologies India M/s. Informed Technologies India Ltd. - This company was This company was

excluded by the TPO on the ground that even though said company is excluded by the TPO on the ground that even though said company is excluded by the TPO on the ground that even though said company is

engaged in the business of running BPO, the Revenue from ITeS is less engaged in the business of running BPO, the Revenue from ITeS is less engaged in the business of running BPO, the Revenue from ITeS is less

than 75% of the Revenue as other income is more than 47.52%. The than 75% of the Revenue as other income is more than 47.52%. The than 75% of the Revenue as other income is more than 47.52%. The

assessee challenged the exclus assessee challenged the exclusion of this company before the DRP and ion of this company before the DRP and

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brought to its notice that the Annual Report shows more than 50 % of the brought to its notice that the Annual Report shows more than 50 % of the brought to its notice that the Annual Report shows more than 50 % of the

Revenue was from ITeS. The Ld. DRP took note from the Annual Report Revenue was from ITeS. The Ld. DRP took note from the Annual Report Revenue was from ITeS. The Ld. DRP took note from the Annual Report

that the sale of service was to the tune of Rs.2,58,53,362/ that the sale of service was to the tune of Rs.2,58,53,362/ that the sale of service was to the tune of Rs.2,58,53,362/- against the

total Revenue of Rs.3,81,86,665/ tal Revenue of Rs.3,81,86,665/- which comes to only 67.7% and which comes to only 67.7% and

accordingly fails the service income filter of 75% applied by the TPO. accordingly fails the service income filter of 75% applied by the TPO. accordingly fails the service income filter of 75% applied by the TPO.

20.4 At the time of hearing, the Ld.AR drew our attention to the Annual At the time of hearing, the Ld.AR drew our attention to the Annual At the time of hearing, the Ld.AR drew our attention to the Annual

Report of M/s. Informed Technologies India Ltd., Report of M/s. Informed Technologies India Ltd., kept at Page Nos.1918, kept at Page Nos.1918,

1920 & 1928 of Paper Book 1920 & 1928 of Paper Book-II and showed that the company is only II and showed that the company is only

engaged in BPO services and that the Schedule(s) of the P&L A/c shows engaged in BPO services and that the Schedule(s) of the P&L A/c shows engaged in BPO services and that the Schedule(s) of the P&L A/c shows

that, there is no ‘other income’ and asserted that, it has derived 100% of that, there is no ‘other income’ and asserted that, it has derived 100% of that, there is no ‘other income’ and asserted that, it has derived 100% of

its revenue from render its revenue from rendering of BPO services. He accordingly claimed that ing of BPO services. He accordingly claimed that

this comparable cannot be excluded on the pretext of failing the service this comparable cannot be excluded on the pretext of failing the service this comparable cannot be excluded on the pretext of failing the service

income filter, which though was not applied elsewhere but, in any case income filter, which though was not applied elsewhere but, in any case income filter, which though was not applied elsewhere but, in any case

resulted in incorrect rejection. The Ld. CIT, DR however does n resulted in incorrect rejection. The Ld. CIT, DR however does n resulted in incorrect rejection. The Ld. CIT, DR however does not want us

to interfere with the action of the lower authorities. to interfere with the action of the lower authorities.

20.5 Having heard both the parties, we first of all find that, there is no Having heard both the parties, we first of all find that, there is no Having heard both the parties, we first of all find that, there is no

dispute on this company being functionally comparable. Perusal of the dispute on this company being functionally comparable. Perusal of the dispute on this company being functionally comparable. Perusal of the

Annual Report of M/s. Informed Technologies Annual Report of M/s. Informed Technologies India Ltd., kept at Page India Ltd., kept at Page

Nos. 1888 to 1940, and especially Page No.1920, Para No.1.14 Segment Nos. 1888 to 1940, and especially Page No.1920, Para No.1.14 Segment Nos. 1888 to 1940, and especially Page No.1920, Para No.1.14 Segment

Reporting, it is noted that, the said company is principally engaged in the Reporting, it is noted that, the said company is principally engaged in the Reporting, it is noted that, the said company is principally engaged in the

business of Business Process Outsourcing (BPO) which is the only business of Business Process Outsourcing (BPO) which is the only business of Business Process Outsourcing (BPO) which is the only

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reportable segment as per Accounting Standard s per Accounting Standard-17 and the ‘Revenue 17 and the ‘Revenue

from operation’ is shown at Page No.1928 as Rs.2,58,53,362/ from operation’ is shown at Page No.1928 as Rs.2,58,53,362/ from operation’ is shown at Page No.1928 as Rs.2,58,53,362/-. In our

considered view therefore, this company satisfies the comparability considered view therefore, this company satisfies the comparability considered view therefore, this company satisfies the comparability

criteria and we thus direct inclusion of the same in the list of compara criteria and we thus direct inclusion of the same in the list of compara criteria and we thus direct inclusion of the same in the list of comparable

companies. Our view is supported by the decision of this Tribunal in the companies. Our view is supported by the decision of this Tribunal in the companies. Our view is supported by the decision of this Tribunal in the

case of M/s. Verizon Data Services India Pvt. Ltd., (supra) M/s. Verizon Data Services India Pvt. Ltd., (supra) M/s. Verizon Data Services India Pvt. Ltd., (supra), wherein

it was held as under:

“12. M/s Informed Technologies India Ltd. . M/s Informed Technologies India Ltd. 12.1 This entity has been excluded by Ld. TPO on the ground of 12.1 This entity has been excluded by Ld. TPO on the ground of 12.1 This entity has been excluded by Ld. TPO on the ground of functional differences. The Ld. DRP confirmed the same against which functional differences. The Ld. DRP confirmed the same against which functional differences. The Ld. DRP confirmed the same against which the assessee is in further appeal before us. the assessee is in further appeal before us. 12.2 The Ld. AR submitted that this entity operates as ITeS segment 12.2 The Ld. AR submitted that this entity operates as ITeS segment 12.2 The Ld. AR submitted that this entity operates as ITeS segment which is evident from disclosures made in the Annual Report. Reliance vident from disclosures made in the Annual Report. Reliance vident from disclosures made in the Annual Report. Reliance has been placed on the decision of Bangalore Tribunal in Ocwen has been placed on the decision of Bangalore Tribunal in Ocwen has been placed on the decision of Bangalore Tribunal in Ocwen Financial Solutions P. Ltd. (108 Taxmann.com 306) to support the Financial Solutions P. Ltd. (108 Taxmann.com 306) to support the Financial Solutions P. Ltd. (108 Taxmann.com 306) to support the arguments. The Ld. CIT arguments. The Ld. CIT-DR submitted that this entity was functionall DR submitted that this entity was functionally different. 12.3 We find that this entity has been held to be a comparable entity 12.3 We find that this entity has been held to be a comparable entity 12.3 We find that this entity has been held to be a comparable entity under ITeS segment by Bangalore Tribunal in Ocwen Financial Solutions under ITeS segment by Bangalore Tribunal in Ocwen Financial Solutions under ITeS segment by Bangalore Tribunal in Ocwen Financial Solutions P. Ltd. (supra). As per Directors’ Report (Page No.1210 of paper book), P. Ltd. (supra). As per Directors’ Report (Page No.1210 of paper book), P. Ltd. (supra). As per Directors’ Report (Page No.1210 of paper book), this entity is operating as IT this entity is operating as IT enabled Service provider and is a leading enabled Service provider and is a leading content provider to the securities and financial research industry. Its content provider to the securities and financial research industry. Its content provider to the securities and financial research industry. Its entire revenue is out of revenue information technology services (Page entire revenue is out of revenue information technology services (Page entire revenue is out of revenue information technology services (Page 1299 of the paper book). These functions are similar to assessee’s 1299 of the paper book). These functions are similar to assessee’s 1299 of the paper book). These functions are similar to assessee’s functions. Therefore, we direct for inclusion of this entity. ctions. Therefore, we direct for inclusion of this entity.” 21. The last effective grounds that remains for consideration is against effective grounds that remains for consideration is against effective grounds that remains for consideration is against

the non-grant of working capital adjustment and risk adjustment while grant of working capital adjustment and risk adjustment while grant of working capital adjustment and risk adjustment while

arriving at average arithmetic margin of comparable c arriving at average arithmetic margin of comparable companies. Both the ompanies. Both the

lower authorities are noted to have refused to allow the working capital & lower authorities are noted to have refused to allow the working capital & lower authorities are noted to have refused to allow the working capital &

risk adjustment.

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up before the Bangalore Tribunal in the case of up before the Bangalore Tribunal in the case of M/s. Citrix R&D India M/s. Citrix R&D India

Pvt. Ltd. v. DCIT (supra) Ltd. v. DCIT (supra), wherein, identical plea was raised by the , wherein, identical plea was raised by the

assessee company and the Tribunal is noted to have observed as under: assessee company and the Tribunal is noted to have observed as under: assessee company and the Tribunal is noted to have observed as under:

“18. The ld. counsel for the assessee submitted that a co 18. The ld. counsel for the assessee submitted that a co-ordinate ordinate Bench of ITAT Bangalore in the case of ITAT Bangalore in the case of Huawei Technologies India Pvt. Ltd. IT(TP)A No.1939/Bang/2017 No.1939/Bang/2017 has dealt with the issue of granting of working capital working capital adjustment. The Tribunal held that a adjustment. The Tribunal held that a reading of Rule10B(1)(e)(iii) of the reading of Rule10B(1)(e)(iii) of the Rules read with Sec.92CA of the Act, would clearly Rules read with Sec.92CA of the Act, would clearly show that the net pr the net profit margin arising in comparable uncontrolled margin arising in comparable uncontrolled transactions has to be adjusted to transactions has to be adjusted to take into account the differences, if any,between the international take into account the differences, if any,between the international take into account the differences, if any,between the international transaction and the comparable uncontrolled transaction and the comparable uncontrolled transactions, which could transactions, which could materially affect the amount of net materially affect the amount of net profit margin in the open market. The the open market. The Tribunal also referred to Tribunal also referred to Chapters I and III of the OECD Transfer Pricing OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Guidelines for Multinational Enterprises and Tax Administrations (hereafter Administrations (hereafter the “TPG”) which contains extensive guidance the “TPG”) which contains extensive guidance on comparability on comparability analyses for transfer pricing purposes. Guidance on transfer pricing purposes. Guidance on comparability adjustments is found in comparability adjustments is found in paragraphs 3.47-3.54 and in the 3.54 and in the Annex to Chapter III of the TPG. A revised Annex to Chapter III of the TPG. A revised version of this guidance was version of this guidance was approved by the Council of the OECD on 22 July approved by the Council of the OECD on 22 July 2010. In paragraph 2 of aph 2 of those guidelines it has been explained as to what is those guidelines it has been explained as to what is comparability adjustment. The guideline explains that when applying the adjustment. The guideline explains that when applying the adjustment. The guideline explains that when applying the arm’s length principle, the conditions of a controlled transaction (i.e. a principle, the conditions of a controlled transaction (i.e. a principle, the conditions of a controlled transaction (i.e. a transaction between a taxpayer and an associate between a taxpayer and an associated enterprise) are generally d enterprise) are generally compared to the conditions of comparable uncontrolled transactions. In this to the conditions of comparable uncontrolled transactions. In this to the conditions of comparable uncontrolled transactions. In this context, to be comparable means that: be comparable means that:

• None of the differences (if any) between the situations being None of the differences (if any) between the situations being None of the differences (if any) between the situations being compared could materially affect the condition be compared could materially affect the condition being examined in the examined in the methodology (e.g. price or margin), or methodology (e.g. price or margin), or • Reasonably accurate adjustments can be made to eliminate Reasonably accurate adjustments can be made to eliminate Reasonably accurate adjustments can be made to eliminate the effect of any such differences. These are called effect of any such differences. These are called “comparability “comparability adjustments.

“13. In a competitive environment, money has a time value. If “13. In a competitive environment, money has a time value. If “13. In a competitive environment, money has a time value. If a company provided, say, 60 days trade terms for payment of company provided, say, 60 days trade terms for payment of company provided, say, 60 days trade terms for payment of accounts, the price of the goods should accounts, the price of the goods should equate to the price for equate to the price for immediate payment plus 60 days of interest on the immediate immediate payment plus 60 days of interest on the immediate immediate payment plus 60 days of interest on the immediate payment price. By carrying high accounts receivable a company payment price. By carrying high accounts receivable a company payment price. By carrying high accounts receivable a company is allowing its customers a relatively long period to pay their allowing its customers a relatively long period to pay their allowing its customers a relatively long period to pay their accounts. It would need to borrow money to fun It would need to borrow money to fund the credit terms and/or suffer terms and/or suffer a reduction in the amount of cash surplus a reduction in the amount of cash surplus which it would otherwise which it would otherwise

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have available to invest. In a have available to invest. In a competitive environment, the price competitive environment, the price should therefore include an should therefore include an element to reflect these payment terms element to reflect these payment terms and compensate for the and compensate for the timing effect.

• A company will need funding to cover the time gap between A company will need funding to cover the time gap between A company will need funding to cover the time gap between the time it invests money (i.e. pays money to supplier) and the time it invests money (i.e. pays money to supplier) and the time it invests money (i.e. pays money to supplier) and the time it collects the the time it collects the investment (i.e. collects money from investment (i.e. collects money from customers) customers)

• This time gap is calculated as: the period needed to sell This time gap is calculated as: the period needed to sell This time gap is calculated as: the period needed to sell inventories to customers + (plus) the period needed to collect inventories to customers + (plus) the period needed to collect inventories to customers + (plus) the period needed to collect money from customers money from customers – (less) the period granted to pay (less) the period granted to pay debts to suppliers. debts to suppliers.

(i) The daily working capital levels of the tested party and the (i) The daily working capital levels of the tested party and the (i) The daily working capital levels of the tested party and the comparables was the only reliable basis of determining comparables was the only reliable basis of determining adjustment to adjustment to be made on account of working be made on account of working capital because that would be on the that would be on the basis of working capital deployed basis of working capital deployed throughout the year.

(ii) Segmental working capital is not disclosed in the annual (ii) Segmental working capital is not disclosed in the annual (ii) Segmental working capital is not disclosed in the annual reports of companies engaged in different segments and of companies engaged in different segments and therefore proper therefore proper comparison cannot be made. comparison cannot be made.

(iii) Disclose in the balance sheet does not contain break up of iii) Disclose in the balance sheet does not contain break up of iii) Disclose in the balance sheet does not contain break up of trade and non-trade debtors and creditors and therefore trade debtors and creditors and therefore working capital working capital

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adjustment done without such break up adjustment done without such break up would result in computation would result in computation being skewed. being skewed.

(iv) Cost of capital would be different (iv) Cost of capital would be different for different companies for different companies and therefore working capital adjustment made disregarding therefore working capital adjustment made disregarding this different based on broad approximations, estimations and based on broad approximations, estimations and assumptions may assumptions may not lead to reliable results. not lead to reliable results.

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considered the earlier decision rendered by th considered the earlier decision rendered by this Tribunal, Chennai in the , Chennai in the

case of Mobis India Ltd Vs DCIT Ltd Vs DCIT (38 taxmann.com 231 38 taxmann.com 231), which was

relied upon by the Ld. DRP to deny the impugned working capital & risk relied upon by the Ld. DRP to deny the impugned working capital & risk relied upon by the Ld. DRP to deny the impugned working capital & risk

adjustment. We find merit in the contention of the assessee that the adjustment. We find merit in the contention of the assessee that the adjustment. We find merit in the contention of the assessee that the

decision in the case of decision in the case of Mobis India Ltd (supra)was passed on their was passed on their

peculiar facts, as the assessee was u peculiar facts, as the assessee was unable to demonstrate as to how nable to demonstrate as to how

working capital adjustment was arrived by it, which is not the case before working capital adjustment was arrived by it, which is not the case before working capital adjustment was arrived by it, which is not the case before

us. Therefore, we are inclined to follow the decision of the Bangalore us. Therefore, we are inclined to follow the decision of the Bangalore us. Therefore, we are inclined to follow the decision of the Bangalore

Tribunal in the case of Tribunal in the case of Citrix R&D India Pvt. Ltd., (supra) Citrix R&D India Pvt. Ltd., (supra) and set

aside this issue back to the file of the TPO and direct him to re issue back to the file of the TPO and direct him to re issue back to the file of the TPO and direct him to re-consider

the issue of grant of working capital adjustment in the light of the the issue of grant of working capital adjustment in the light of the the issue of grant of working capital adjustment in the light of the

decision of Citrix R&D India Pvt. Ltd (supra). Thus, Ground Citrix R&D India Pvt. Ltd (supra). Thus, Ground Citrix R&D India Pvt. Ltd (supra). Thus, Ground Nos. 9 & 10

are answered accordingly. are answered accordingly.

IT (TP) A No.77/Chny/201 /Chny/2018 (AY 2014-15) M/s. Symantec Software & Services India Pvt. Ltd. M/s. Symantec Software & Services India Pvt. Ltd. :: 30 ::

compute ALP as per the directions given above, after affording compute ALP as per the directions given above, after affording compute ALP as per the directions given above, after affording

opportunity of being heard to the assessee. opportunity of being heard to the assessee.

Order pronounced on the 13th day of June, 2025, in Chennai. Order pronounced on the , in Chennai.

Sd/- Sd/ Sd/- (अिमताभ शु�ा) (एबी टी. . वक�) (ABY T. VARKEY ABY T. VARKEY) (AMITABH SHUKLA AMITABH SHUKLA) लेखासद�य/ACCOUNTANT MEMBER �याियकसद�य/JUDICIAL MEMBER /ACCOUNTANT MEMBER /JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 13th June, 20 , 2025. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to Copy to: