ASST CIT 10(3)(2), MUMBAI vs. PANGEA3 LEGAL DATABASE P.LTD, MUMBAI

Assessee by : Shri Rajan Vora-Ld.AR Revenue by : Shri S.K. Singh-Ld.DR Date of Hearing : 03/06/2019 Date of Pronouncement : 25/06/2019 आदेश / O R D E R Per Manoj Kumar Aggarwal (Accountant Member):-

1.1 Aforesaid cross appeals for Assessment Year [AY] 2010-11 contest final assessment order dated 30/01/2015 passed by Ld. Assistant Assessment Year-2010-11 Commissioner of Income Tax-10(3)(2), Mumbai [AO] u/s 143(3) r.w.s.144C(13) r.w.s. 92CA(3) of the Act pursuant to the directions of Ld. Dispute Resolution Panel-III, Mumbai [DRP] u/s. 144C(5) dated 08/12/2014. 1.2 The grounds raised by revenue read as under: - On the facts and circumstances of the case and in law, the Hon’ble Ld. Dispute Resolution Panel erred in directing that the provisions pertaining to earlier years but written back during the current year be treated as operational income of the current year without appreciating that the benchmarking process for transfer pricing purposes has to be based only on current year operational profits.” 1.3 The grounds raised by assessee read as under: - GROUND NO. 1: The Ld. AO has erred in law and on facts and in circumstances of the case in assessing the total taxable income at Rs.3,68,15,279 as against the returned income of Rs.49,49,778 and making adjustment of Rs.3,18,65,501 in respect of the international transactions of the appellant based on the directions issued by the DRP. GROUND NO. 2: The Ld. AO/TPO/DRP ought to have accepted the operating profit margin of the comparable cases at 1.77% as worked out by the Appellant as per TP Study. GROUND NO. 3: The Ld. AO/TPO/DRP erred in holding that the data which was not available as on the due date of filing return of income could be taken into account in determining the Arm's Length Price ('ALP'). GROUND NO. 4: The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting the following companies which were selected in TP Study as comparable companies: 4.1 R Systems International Ltd. (‘R Systems') The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting functionally comparable company R Systems on the ground that the margin of this company for the year ended 31 March 2010 is not certified/audited and certain other incorrect observations. 4.2 Allsec Technologies Ltd ('Allsec') The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting functionally comparable company Allsec on the ground of "Consistent loss making" company without appreciating the facts of the case and submissions made by the appellant in this respect. GROUND NO. 5: The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting the following companies which were identified by the appellant as comparable companies during TP assessment: 5.1 Microland Ltd: Assessment Year-2010-11 The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting functionally comparable company Microland Ltd even though separate segmental data of IT Enabled Services is available in its financials 5.2 Datamatics Financial Services Ltd. ('Datamatics') The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting functionally comparable company Datamatics on the basis of consistent operating loss during past 3 years. 5.3 Jindal Intellicom Pvt Ltd (‘Jindal') The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting functionally comparable company Jindal on the ground that the financial statement of this company is available for 15 months ended 31 March 2010. 5.4 Cameo Corporate Services Ltd ('Cameo') The Ld. AO/TPO/DRP have erred in law and on facts and in circumstances of the case in rejecting functionally comparable company Cameo on the ground that segmental Profit and Loss account of ITES segment is not available GROUND NO. 6: The learned AO/TPO/DRP have erred in law and on facts and in circumstances of the case in selecting following companies as comparables, without appreciating that turnover filter as applied by the appellant is important in comparability analysis 6.1 eClerx Services Ltd. ('eClerx') 6.2 Infosys BPO Ltd. ('Infosys BPO') GROUND NO. 7: 7.1 The learned AO/TPO/DRP have erred in law and on facts and in circumstances of the case in not allowing working capital adjustment while computing average operating profit margin of the comparables, based on incorrect observations and without considering the submission of the appellant. 7.2 The learned AO/TPO/DRP have acted contrary to the record and erred in alleging that the Appellant had not demonstrated that working capital adjustment was essential in the facts/ of its case. GROUND NO. 8: The learned AO/TPO/DRP have erred in law and on facts and in circumstances of the case in not allowing suitable adjustment to account for differences in the risk profile of the appellant vis- a-vis the comparables. GROUND NO. 9: The learned AO/TPO/DRP have erred in law and on facts and in circumstances of the case in making the upward adjustment without considering inter alia the fact that during the year under consideration, the AE has incurred substantial operating loss and the appellant is STPI unit with 100% tax exemption and as such, there is no incentive to shift profit outside India. GROUND NO. 10: The orders of the Ld. AO/TPO/DRP are vitiated by errors in law and fact and on account ignoring and thereby being contrary to the material and evidence on record and on/ account of internal contradiction and inconsistencies. Each of the above grounds of appeal is distinct, independent and separate and without prejudice to the other grounds of appeal. Assessment Year-2010-11 1.4 The assessee has also raised additional grounds of appeal on 26/07/2017 and pleaded for admission of the same in terms of decision of Hon’ble Supreme Court rendered in National Thermal Power Co. Ltd. V/s CIT [229 ITR 383] & Jute Corporation of India Ltd. [187 ITR 688]. We find that these grounds are only to re-emphasize the functional dissimilarity of two comparable entities i.e. Infosys BPO Ltd. & eClerx Services Ltd. and do not require appreciation of any new facts. Therefore, the same are taken on record as ground nos. 11 &

12. Theses grounds read as under: - GROUND NO. 11: The learned AO/TPO/DRP have erred in law and on facts and in circumstances of the case in including Infosys BPO Ltd. ('Infosys BPO') in the final set of comparable, without appreciating that Infosys BPO cannot be compared with the appellant since it is functionally different from the appellant and owns substantial brands, IPs, Trademarks etc. GROUND NO. 12: The learned AO/TPO/DRP have erred in law and on facts and in circumstances of the case in including eClerx Services Limited ('eClerx') in the final set of comparable, without appreciating that the business model of eClerx includes outsourcing substantial work to third parties which is functionally different from the appellant. 1.5 The registry has noted a delay of 1 day in revenue’s appeal. It has been submitted that the same arise out of an inadvertent error of noting down the date of communication of DRP order. No objections were raised by the assessee against condonation of delay. Keeping in view the quantum of delay, we condone the delay and proceed for adjudication of appeal on merits. 2.1 The Ld. Authorized Representative for Assessee [AR], Shri Rajan Vora, at the outset submitted that Ground Nos. 1 to 3 of assessee’s appeal would be general in nature whereas the assessee is not pressing ground nos. 4.2, 5.2 to 5.4. Assessment Year-2010-11 By way of ground nos. 4.1, 5.1, 6.1 to 6.2, 11 & 12, the assessee is contesting the issue of following comparable entities: - No. Name of Comparable Entity

1. R Systems International Ltd.

2. Microland Limited

3. Infosys BPO Ltd. 4. 2.2 A chart has been placed before the bench to submit that the issue of most of comparable entities stood covered in assessee’s favor by the earlier order of this Tribunal is assessee’s own case for AY 2009-10 & 1958/M/2014 order dated 06/03/2017. The copy of the order has been placed on record. The Ld. DR while relying upon the stand of lower authorities, could not controvert the said position. In the above background, we proceed to adjudicate the appeals as argued before us. 3.1 Facts in brief are that the assessee being resident corporate assessee stated to be engaged in providing information technology enabled services [ITeS] was assessed for impugned AY on 30/01/2015 wherein the income of the assessee was determined at Rs.368.15 Lacs after Transfer Pricing [TP] Adjustment of Rs.318.65 Lacs as against returned income of Rs.49.49 Lacs filed by the assessee on 15/10/2010. 3.2 Certain International transactions as reported by the assessee in Form No.3CEB were referred u/s.92CA (1) to Ld. Transfer Pricing Officer-II(2), Mumbai [TPO] for determination of their Arm’s Length Price [ALP]. The assessee was engaged in providing ITeS services to its AE. As per the terms of the agreement, the remuneration to assessee was at cost plus Assessment Year-2010-11 15% mark-up. The assessee selected Transactional Net Margin Method [TNMM] as most appropriate method to benchmark the transactions, the assessee being tested party. The Profit Level Indicator [PLI] used was Operating Profits / Cost. 3.3 The assessee computed its own PLI as 14.73% which was revised by Ld. TPO to 11.72% after considering the forex losses as operating expenditure. The average mean of 5 comparable selected by the assessee was reflected as 2.42% (1.77%, after working capital adj. of 0.65%) and therefore no TP adjustment was proposed in the assessee’s TP study report. However, Ld. TPO, in the final analysis, selected 6 comparable entities, the mean margin of which was worked out to be 30.20%, which gave rise to certain TP adjustments in the hands of the assessee. 3.4 In the final list of comparable, 3 entities i.e. (i) Allsec Technologies Ltd. (ii) Optimus Global Services Ltd. (iii) R Systems International Ltd.; as selected by the assessee in its TP study got rejected whereas 4 new entities i.e. (i) Accentia Technologies Ltd. (ii) Acropetal Technologies Ltd. (iii) eClerx Services Ltd. (iv) Infosys BPO Ltd.; were introduced by Ld. TPO. The assessee’s plea to grant working capital adjustment was also rejected. Adopting PLI of 30.20%, Ld. TPO computed ALP revenue as Rs.4191.50 Lacs as against Rs.3596.50 reflected by the assessee. The differential of the two i.e. Rs.595.20 Lacs was proposed as TP adjustment by Ld. TPO in its order u/s 92CA(3) dated 29/11/2013. The same was incorporated in the draft assessment order dated 04/03/2014 which was subjected to objections before Ld. DRP. Assessment Year-2010-11 4.1 Before Ld. DRP, the assessee raised a plea that Ld. TPO erred in treating the provisions for expenses written back as non-operating in nature whereas the provisions were for regular business expenses which were provided in earlier years on estimated basis. Once the same were quantified, the excess provisions made in earlier years was written back. These expenses were part of the regular operating expenses of the assessee and the accounting treatment of booking expenses on an estimated basis at the time of closing of the financial accounts and passing adjustment entries at the time of crystallization of the concerned expenses was a regular accounting practice adopted by the assessee. Concurring with assessee’s stand, Ld. DRP directed Ld. AO to modify the computation of the operating profit margin of the assessee to that extent. Aggrieved, the revenue is in further appeal before us 4.2 Before Ld. DRP, the assessee also contested the selection of comparable entities. After considering assessee’s objections, Ld. DRP directed for exclusion of two entities i.e. Acropetal Technologies Ltd. & Accentia Technologies Ltd. but upheld the other comparable entities as selected by Ld. TPO. The assessee had pleaded for inclusion of an entity namely Microland Ltd. on the ground of functional similarity but the same was rejected by Ld. TPO. The assessee raised same plea before Ld. DRP, however, the same was also rejected, in view of the fact that this entity was engaged primarily in IT infrastructure Management. The assessee had also pleaded for inclusion of an entity namely R Systems International Ltd. as selected by the assessee in its own TP study which was also rejected by Assessment Year-2010-11 Ld. DRP. The exclusion of Infosys BPO Ltd. & eClerx Services from the final set of comparable was sought on the grounds of economies of scale which was rejected by Ld. DRP. 4.3 The directions of Ld. DRP revised the PLI of final set of 5 comparable entities to 21.61% as against assessee’s revised PLI of 13.91%. The aforesaid adjustments reduced the TP adjustment to Rs.318.65 Lacs. The directions of Ld. DRP as incorporated in final assessment order has given rise to the cross-appeals before us. 5.1 We have carefully heard the rival submissions and perused relevant material on record. So far as the revenue’s appeal is concerned, we find that write-back of provisions for expenses was normal business / accounting practice adopted by the assessee. It emanates that certain provisions for expenses were made in earlier years which got crystallized resulting into write-back of excess provision no longer required. The fact that these expenses were part of the regular operating expenses of the assessee’s business remain uncontroverted before us. The revenue’s reliance on the decision of Bangalore Tribunal in Tecnotree Convergence Pvt. Ltd. [TS-925-ITAT -2018(Bang)-TP] would be misplaced since that case dealt with provisions of doubtful debts which was distinct from provision for expenses. In fact, the decision of Hon’ble Bombay High Court rejecting revenue’s appeal In Pr.CIT V/s Petro Araldite Pvt. Ltd. [ITA No,.368 of 2015 06/06/2018] supports the assessee’s case. Therefore, we do not find any infirmity in the directions of Ld. DRP, in this regard. Resultantly, the revenue’s appeal stands dismissed. Assessment Year-2010-11 5.2 So far as the issue of comparable entities as raised in assessee’s appeal is concerned, our findings on following 4 comparable entities as agitated before us would be as follows: - No. Name of Comparable Entity

1. R Systems International Ltd.

2. Microland Limited

3. Infosys BPO Ltd. 4. 5.3.1 R Systems International Ltd. This entity was selected by assessee in its TP study. However, Ld. TPO rejected the same on the ground that it had different financial year and the corresponding financials were not certified / audited and the revenue in BPO segment was only 10% of total revenue. The Ld. AR has drawn our attention to the fact that quarterly audited results of the entity were available and the revenue from BPO segment was quite comparable to assessee’s revenue and therefore, the entity was comparable entity. We find that all the aforesaid arguments of the revenue have duly been met by co-ordinate bench of Tribunal in assessee’s own case for AY 2009-10 and this entity was directed to be included in final set of comparable. The observation of the bench, for ease of reference, could be extracted in the following manner: - (iv) R-Systems International Ltd. 29.11 The assessee had selected this comparable in its TP Study based on the financials for the accounting year ending 31.12.2008. The assessee had also submitted the copy of Annual Report of the company as at 31.12.2009 and results as on 31st March 2009 also. The TPO has rejected this comparable on the ground that it has reported financials for the year ending 31.12.2008, whereas the period for comparability analysis is 31.03.2009. Before us, the Ld. Counsel submitted that as per the supplementary details available, R-Systems is engaged in BPO/ITES business and it is undisputed fact that it is functionally comparable to the assessee. The assessee had also submitted the operating profit Assessment Year-2010-11 margin of R-System for the year ending 31.12.2009 which was calculated from the audited financials for the year ending 31.12.2008 and also audited accounts for the quarter ending on 31st March, 2008-09. The working of which has been given in the following manner: Particulars For the year For the quarter For the quarter For the year ended ended ended ended 31-Dec-08 31-Mar-08 31-Mar-09 31-Mar-09 (Audited) (Audited) (Audited) (Audited) A B C D = (A+B+C) Revenue 2,606 566 576 2,616 Cost (Revenue (-) PBIT) 2,229 520 466 2,175 Unallocable expense 105 49 18 74 (Refer note-1) Total cost 2,334 569 484 2,249 Operating profit 272 (3) 92 367 OP/OC 11.65% 0.53% 19.06% 16.33% Note-1: Unallocable expenses calculated on the basis of proportion of revenue from BPO segment to total revenue. Thus, it was pointed out that from the aforesaid figures which are from the audited accounts, it can be seen that operating margin of R- Systems for the year ending 31st March 2009 can be calculated and based on such audited figures this comparable company cannot be rejected simply on the ground that it is following financial year from January to December. In support of this contention and cases where R Systems has been accepted despite following calendar year, reliance was placed on the following decisions: • Maersk Global Service Centre India (P.) Ltd. (supra); • Mercer Consulting (India) (P.) Ltd. v. Dy. CIT[2014] 47 taxmann.com 84/150 ITD 1 (Delhi - Trib.); • CIT v. Mercer Consulting India (P.) Ltd.[2016] 76 taxmann.com 153/[2017] 390 ITR 615 (Punj. & Har.) • CISCO Systems India Private Limited [ITA No. 271/Bang/2014, AY 2009-10], dated 30 July 2014; • Aegis Ltd. (supra) 29.12 On the other hand, the Ld. CIT, DR has placed reliance on the decision of Hon'ble Bombay High Court in the case of CIT v. PTC Software India (P.) Ltd.[2016] 75 taxmann.com 31 , wherein the Hon'ble High Court has held that there is no basis to consider a comparable that does not have the data relating to financial year. In the rejoinder, the Ld. Counsel for the assessee submitted that the comparables under consideration before the Hon'ble High Court was following July to June financial year and quarterly results were not publicly available so as to compute the margin of the financial period April to March. Further, Hon'ble P&H High Court in the case of Mercer Consulting India (P.) Ltd. (supra) had dealt the issue in connection with R-Systems International Ltd. only. 29.13 We have heard rival submissions and also perused the relevant finding given in the impugned orders. This comparable company has been rejected not on the ground of functionality but on the ground that it is following the financial year from January to December (i.e., calendar year). Though a comparable company following a different financial year may not be generally taken for comparability analysis, however, if financial data is available for all the quarters including January to March and it is Assessment Year-2010-11 otherwise possible to determine the value of the transaction as well as the profitability during the corresponding period, then it suffices the comparability criteria. Because, ultimately the core point in comparability analysis is to benchmark the margin of a given period of a comparable uncontrolled transaction with controlled transaction. If the financials of the corresponding period is available then it cannot be rejected simply on the ground that it has a different financial year. As brought out on record by the Ld. Counsel before us that the audited accounts of R-Systems for the year ending 31.12.2008 and for the quarter starting from 31.01.2008 to 31.03.2009 is available and once such an audited statement is available, then the proportionate working for 31.03 2009 can easily be deduced. If there are no major incidents of factors disturbing the profit margin in that quarter, whose results are being worked out and the transactions of the Company are carried out in the normal course of business, then we do not find any reason to reject the comparable out rightly on the aforesaid ground. The working of PLI based on audited accounts as incorporated above clearly clinches the point. The Hon'ble P&H High Court in the context of R-Systems only had made a very important observation which reads as under: "27. The TPO excluded the case of R-Systems International Limited from the list of comparables. The ITAT included the same. The Transfer Pricing Officer excluded the case of R-Systems International Limited on the ground that it follows the calendar year i.e. 1st January to 31st December for maintaining its annual account whereas the accounting year of the assessee is 1st April to 31st March. The Transfer Pricing Officer followed an order passed by the Mumbai Bench of the Tribunal in ACIT v. Hapag Lloyd Global Services Ltd. 2013-TH-68-ITATMUM-TP in which it had been held that a company with a different financial year ending cannot be compared.

28. We are unable to agree with the decision of the Transfer Pricing Officer and of the DRP that affirmed it. The view taken by the Tribunal commends itself to us. It is not the financial year per se that is relevant. Even if the financial years of the assessee and of another enterprise are different it would make no difference. If it is possible to determine the value of the transactions during the corresponding period, the purpose of comparables would be served. The question in each case is whether despite the financial years of the assessee and of the other enterprise being different, the financials of the corresponding period of each of them are available. If they are, the Transfer Pricing Officer must refer to the corresponding period of both the entities in determining whether the two are comparable or not for the purpose of determining the ALP.

29. As noted by the Tribunal, the audit accounts of R System International Ltd. for the year ending 31.12.2008 had been given under one column and the data for the quarter ending 31.03.2009 and 31.03.2008 (both audited) had been given in two other columns. Thus, as rightly held by the Tribunal, if from the yearly data ending 31.12.2008, the results of the quarter ending 31.03.2008 are excluded and if the results for the quarter ending 31.03.2009 are included, it is possible to obtain the data for the financial year 01.04.2008 to 31.03.2009.

30. This view is not contrary to Rule 10(B)(4) which reads as under:- 10B(4) The data to be used in analysing the comparability of an international transaction shall be the data relating to the financial year in which the international transaction has been entered into.

31. The Rule does not exclude from consideration the data of an entity merely because its financial year is different from the financial year of the assessee. What the Rule requires is that the data to be used in analyzing the financial results of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Thus, so long as the data relating to the financial year is available, it matters Assessment Year-2010-11 not, if the financial year followed is different. In the case before us the data relating to the relevant financial year of R-Systems International Limited is available.

32. We are, therefore, entirely in agreement with the decision of the Tribunal that if the data relating to the financial year in which the international transaction has been entered into is directly available from the annual accounts of that comparable, the same cannot be held as not passing the test of sub-rule (4) of Rule 108." 29.14 So far as the decision of Hon'ble Bombay High Court as relied upon by Ld. CIT DR is concerned, in that case the revenue was contesting that the difference between two financial years was only of three months, therefore, same should be ignored. It was not brought before the Hon'ble High Court or anything was on record that the data for relevant two months was available or can be worked out on the proportionate basis based on audited accounts; then in that case whether it can be ignored or not. Nothing is borne out that, whether the assessee has provided the audited accounts of the intervening period and the proportionate working of two consecutive calendars years in which the said quarter results fell, like in the present case. Here in this case, once the audited data is available for the quarter 01.01.2009 to 31.03.2009 then same is liable to be accepted. Accordingly, we hold that this company is to be accepted as comparable company for the purpose of benchmarking the assessee's margin. The case laws of Hon’ble High Court of Delhi in CIT V/s Nortel Networks India Pvt. Ltd. [375 ITR 183] further supports the proposition that when no turnover filter was applied at initial stages, the revenue could not take advantage of the same. In the absence of any contrary decision on record, respectfully following the above binding judicial precedents, we direct for inclusion of this entity. 5.3.2 Microland Ltd. This entity was rejected by Ld. TPO on the ground of functional dissimilarity in view of the fact that the said entity was engaged in providing IT services. The Ld. DRP confirmed the same. However, Ld. AR has drawn our attention to the fact that segmental results of this entity are available on record and this entity has been found to be a comparable entity in AY 2009- 10 in the earlier order of the Tribunal. We find that this entity was found to be a comparable entity by Ld. DRP in AY 2009-10. The revenue contested the inclusion of this entity before this Assessment Year-2010-11 Tribunal wherein the revenue’s plea was rejected by the Tribunal by making following observations: - (vi). Microland Ltd. (subject matter of Department's appeal):- 29.18 This comparable was selected by the assessee which has been rejected by the TPO but reinstated by the DRP. Such an inclusion of this comparable has been challenged by the department in its appeal. The TPO rejected this company mainly on the ground that ITES activity is not its main activity and the said company is primarily engaged in infrastructure management function which generates 80% of its revenue. This company has been reinstated by the DRP for the reason that separate profitability of ITES segment was available. Ld. CIT, DR pointed out that margin of this company's ITES segment is (-) 19.51% and this company has been consistent loss making company in the subsequent year, i.e., year ending 2010 and even prior to this year also this company was into loss. She pointed out that this comparable company has come up for consideration before ITAT, Hyderabad and Bangalore Benches in the following cases: S. Name of the Rulling Citation Revenue's paper Relevant para No. book Reference of judgment S & P Capital IQ (India) [2016] 72 taxmann.com (i) III-1 Para 28.2 (P.) Ltd. v. Dy. CIT 326 (Hyd. - Trib.) ITO v. Interwoven [2016] 74 taxmann.com (ii) Software Services (India) III-2 Para 26 103 (Bang. - Trib.) (P.) Ltd. 29.19 On the other hand, Ld. Counsel submitted that TPO has rejected the Microland on the ground that it was not selected by the assessee in its TP Study Report and income from ITES business is less than 75% of the total turnover. The DRP has upheld the selection of this company, because the supplementary data of ITES segment was available. Hence, this comparable company cannot be ignored for the reasons given by the TPO or by the Ld. CIT, DR. 29.20 After considering the aforesaid submissions and on perusal of the relevant finding given in the impugned order, we find that this company has been rejected by the TPO for the reason that firstly, it was not selected by the assessee in its original TP Study Report; and secondly, it has incurred loss during the year. The Ld. CIT, DR has also pointed out that the ITES segment was into loss in earlier year also. As regard the contention that the assessee has not selected the company in the T.P. Study Report, therefore, it is precluded from being considered as comparable by assessee at a later stage, we are unable to subscribe to the views of the TPO, because once the TPO has rejected most of the comparables and asked the assessee to furnish fresh comparables, then TPO is bound to consider the comparables as submitted by the assessee. Apart from that, once the separate segment of ITES services are available in public domain or made available, then such segment needs to be benchmarked with the assessee. Further, we are unable to subscribe to the view that, since this comparable company had incurred loss in this year as well as in the earlier year, the same should be excluded, because the loss making and profit is in the normal course of business and unless certain peculiar factors have not been pointed out for loss, a comparable company cannot be rejected simply on the ground that it is loss making company. Once a separate segment is available and the profitability of such a segment is determinable, then the same should be adopted for the comparability analysis. Hence, we uphold the order of the DRP for accepting the said comparable in the final list of comparables. Accordingly, the revenue's ground on this comparable is treated as dismissed. Assessment Year-2010-11 Taking a consistent view in the matter, we direct for inclusion of the same. 5.3.3 Infosys BPO Ltd. This comparable was introduced by Ld. TPO. The assessee’s plea to exclude the same has been rejected by Ld. DRP. Before us, Ld. AR has pleaded that this entity could not be a comparably entity for more than one reason viz. it had a very high turnover and economies of scale operated in its favor and secondly, it owned brands / intangibles and had strong market reputation, high risk raking abilities and therefore, could not be compared with the functions performed by the assessee. We find that the fact that this entity had turnover of more than 10 times than that of assessee, has not been disputed by the revenue before us. This being so, the ratio of decision of Hon’ble Bombay High Court in in CIT V/s Pentair Water India (P.) Ltd. [supra] would become applicable wherein Hon’ble Court has observed as under: -

5. On perusal of the impugned Order passed by the Tribunal dated 23.05.2014, we find that the Tribunal has recorded the reasons for not accepting the said three companies are comparable by stating as follows : (i) HCL Comnet Systems & Services Ltd :- We find force in the submission of the ld. AR that this company cannot be a comparable as the turnover of this company is 260.18 crores while in the case of the Assessee, the turnover is around Rs. 11 crores only. While making the selection of comparables, the turnover filter, in our opinion, has to be the basis for selection. A company having turnover of Rs. 11 crores cannot be compared with a company which is having turnover of Rs. 260 crores which is more than 23 times the turnover of the Assessee. This company cannot be regarded to be in equal size to the Assessee. We, accordingly, direct the AO to exclude this company out of the comparables. (ii) Infosys BPO Ltd.:- In this case also we noted the turnover in respect of this Company is Rs. 649.56 crores while the turnover of the Assessee company is around Rs. 11 crores which is much more than 65 times of the Assessee's turnover. We, therefore, do not find any illegality or infirmity in the order of CIT (A) in excluding this Company out of the comparables. Accordingly, we confirm the order of the CIT (A). (iii) Wipro Ltd. :- After hearing the rival submissions, we noted that the CIT (A) applying Assessment Year-2010-11 the turnover filter has excluded this company out of the comparables. The turnover reported in the case of Wipro Ltd. Is Rs. 939.78 crores while in the case of the Assessee the turnover is around Rs. 11 crores. Therefore, on the basis of the turnover filter itself this company cannot be regarded to be comparable to the Assessee company and accordingly, we do not find any infirmity in the finding of CIT (A) while he excluded this company on the turnover criteria following the decision of this tribunal in : Sony India (P.) Ltd. v. Dy. CIT [2008] 114 ITD 448 (Delhi) E-Gain Communication (P.) Ltd. v. ITO [2008] 23 SOT 385 (Pune) Deloittee Consulting India (P.) Ltd. v. Dy. CIT [2013] 144 ITD 451/36 taxmann.com 68 (Hyd.) Genisys Integrating System (India) (P.) Ltd. v. Dy. CIT [2012] 53 SOT 159/20 taxmann.com 715 (Bang.)

6. The said findings of the Tribunal in respect of the said three Companies are on the basis of appreciation of evidence on record. We find no infirmity in the said findings of the Tribunal on that count. In fact, the Tribunal has endorsed the views of the CIT Appeals whilst coming to such conclusions. The concurrent findings of facts arrived at by the Authorities below, cannot be re- appreciated by this Court in the present Appeal.

7. In this connection, the Apex Court in the Judgment reported in the case of Vijay Kumar Talwar v. CIT [2011] 1 SCC 673 has observed at Para 23 thus : "23. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See Madan Lal v. Gopi, Narendra Gopal Vidyarthi v. Rajat Vidyarthi, Commr. of Customs v. Vijay Dasharath Patel, Metroark Ltd. v. CCE and W.B. Electricity Regulatory Commission v. CESC Ltd)"

8. In the present Appeal, the Appellant-Revenue has not been able to controvert or deny the data relied upon by the Authorities below to come to such conclusion. The said Companies are no doubt large and distinct companies where the area of development of subject services are different and as such the profit earned therefrom cannot be a bench-marked or equated with the Respondent- Company.

9. Shri Jain, learned Counsel has rightly relied upon the Judgment of the Delhi High Court in the case of CIT v. Agnity India Technologies (P.) Ltd. [2013] 219 Taxman 26/36 taxmann.com 289. Learned Counsel has also brought to our notice the Order of the Income Tax Appellate Tribunal whilst examining similar circumstances for the assessment year 2005-06. He has taken us through the findings therein to point out that the conclusions arrived at are based on a comparison that the condition in any uncontrolled transaction between an independent enterprise for the purpose of such comparison, economically relevant characteristics must be sufficiently comparable if two parties are to be placed in a similar situation. Learned Counsel as such submitted that it is not open for the appellant to now contend a different criterion to ascertain the comparability. In fact the Tribunal whilst passing the impugned Order has considered the said principles whilst coming to the conclusion that the said three Companies cannot be treated to be comparable to the Respondent-Assessee Company. The turn over is obviously a relevant factor to consider the comparability.

10. In view of the above, we find that the said two substantial questions of law proposed by the learned Counsel appearing for the Appellant do not arise in the present Appeal taking note of the concurrent findings of fact arrived at by the Authorities below. The Appeal stands accordingly rejected. Assessment Year-2010-11 Another reason to exclude this entity would be the decision of Hon’ble Bombay High Court rendered in CIT V/s Principal Global Services Ltd. [ITA No.57 of 2016 12/06/2018] dismissing revenue’s appeal by confirming the decision of the Tribunal in the following manner: -

8. Re Question (d): - (i) M/s Infosys BPO Ltd. was excluded by the Tribunal from the list of comparable to determine ALP in respect of international transaction of the Respondent’s activity of rendering of back office support services to its AE. (ii) The impugned order of the Tribunal noted that fact that the turnover of the comparable was to the tune of R.9028 Crores while the turnover of the Respondent Assessee, as noted by the TPO was only Rs.18 Crores. (iii) The impugned order further records that in view of the difference in turnover between M/s Infosys BPO Ltd., and the Assessee, the two are not comparable. In fact, the impugned order placed reliance upon the decision of the Delhi High Court in CIT v. Agnity India Technologies (P.) Ltd. [2013] 36 taxmann.com 289/219 Taxman 26 wherein, it was held that the huge turnover difference between the comparable in that case, M/s. Infosys Technologies Ltd., with the Assessee therein, coupled with the fact that the Assessee therein was providing only services to its AE while M/s. Infosys Technologies (P) Ltd., provided services to out siders, make it not comparable. These facts are identical to the present facts and would make Infosys BPO Ltd., not comparable. No difference is shown to us which would warrant a different view in the present facts. Moreover, this Court in CIT v. Pentair Water India (P.) Ltd. [2016] 69 taxmann.com 180/381 ITR 216 has taken a view that huge difference in turnover between the tested party and the comparable would necessarily require the proposed comparable to be excluded. (iv) We find that the view taken on the aforesaid finding of fact is a possible view.

Keeping in mind the turnover difference as well as functional dissimilarity, we direct for exclusion of this entity. 5.3.4 Eclerx Services Ltd. This comparable was introduced by Ld. TPO. The assessee’s plea to exclude the same has been rejected by Ld. DRP. The Ld. AR has submitted that this entity’s operating income was approx. 51 times than that of the assessee and therefore, the same could not be termed as proper comparable. Reliance has been placed on the decision of Hon’ble Bombay Assessment Year-2010-11 High Court in CIT V/s Pentair Water India (P.) Ltd. [2016 69 taxmann.com 180] as followed by Mumbai Tribunal in Integreon Managed Solutions India Pvt. Ltd. Vs ACIT [2019 101 Taxmann.com 289]. Another point raised is the fact that this entity has outsourced substantial work to the third parties whereas the assessee as done work in-house. Therefore, there was difference in business model. We find that the issue of this comparable was restored back to the file of Ld. TPO by the earlier order of the Tribunal in assessee’s own case. The Ld. AR has submitted that in the set aside proceedings, this entity has been found to be non-comparable. In view of the said fact, we direct Ld. TPO to verify the said fact and exclude this entity if found non-comparable in AY 2009-10.

Order pronounced in the open court on 25th June, 2019. (Saktijit Dey) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member