ACCENTURE SERVICES P.LTD,MUMBAI vs. DCIT CIR 3(1), MUMBAI

Shri P.J. Pardiwala, learned Sr. Counsel for the assessee, at the outset, submitted that grounds no.1, 2, 5 and 11 are general in nature, hence, do not require adjudication. Considering the above, these grounds are dismissed.

Further, on the instructions of the assessee he submitted that grounds no.3, 4, 7, 8, 9, 12, 13, 14, 16, 17, 18, 20 and 21 are not to be pressed. Considering the aforesaid submissions of the learned Sr. Counsel for the assessee, all these grounds are dismissed as not pressed.

Thus, the surviving grounds which need to be adjudicated are, grounds no.6, 10, 15, 19, 22 and 23. The major issue pertaining to the transfer pricing adjustment arises in grounds no.10 and 15 relating to selection/rejection of certain comparables for benchmarking the international transaction with Associated Enterprises (AEs)relating to provision of Information Technology Enabled Services (ITES).

Brief facts relating to this issue are, the assessee, an Indian company, is a subsidiary of M/s. Beaumont Development Centre Holding Ltd. and part of Accenture Group. The assessee basically provides services to its AEs across the globe under three segments viz. software development service (SDS), ITES, consultancy Services under IPSA. As stated, the dispute in these grounds is basically confined to the adjustment made to the arm's length price of the services provided to the AE under ITES segment. It is relevant to observe, while benchmarking the aforesaid transaction with its A.Es, the assessee had aggregated the transactions under SDS and ITES segments and benchmarked them by applying Transactional Net Margin Method (TNMM) as the most appropriate method with Operating Profit / Operating Cost (OP/OC) as the Profit Level Indicator (PLI). After aggregating these two segments, the assessee has shown the operating margin of 21.53%. In the course of transfer pricing proceedings, the Transfer Pricing Officer was of the view that international transaction relating to SDS and ITES segments have to be benchmarked separately. Accordingly, he directed the assessee to do so. In response to the query raised by the Transfer Pricing Officer, the assessee furnished the segmental results for ITES segment computing the margin at 24.61% as against the comparable’s arithmetic mean of 15.09%. Thus, the price charged for the

After considering the submissions of the assessee, learned DRP granted partial relief to the assessee by accepting assessee’s claim to include R. Systems International Ltd. as a comparable.

Before us, though, the assessee has challenged selection / rejection of eight comparables, however, the Learned Sr. Counsel put much stress for rejection of two comparables viz. Genesis International Corporation Ltd. and Cross Domain Solutions Ltd. At the outset, we will deal with the acceptability or otherwise of these two comparables.

This company, though, was selected by the assessee as a comparable in the transfer pricing study report by using multiple year data, however, before the Transfer Pricing Officer, the assessee objected to selection of the company due to functional difference and exceptional year of performance. However, rejecting the objections of the assessee, the Transfer Pricing Officer selected this company as a comparable. Learned DRP also upheld the decision of the Transfer Pricing Officer by holding that once the company was selected as comparable by the assessee, it cannot be excluded.

Objecting to the selection of this company, the learned Sr. Counsel for the assessee submitted, the company is engaged in providing engineering design services (CAD/CAM) and Geographical Information Service (GIS) which are in the nature of knowledge process outsourcing (KPO) services. Drawing our attention to the annual report of the company, he submitted, GIS is a system designed

Further, he submitted, the company had an exceptional year of performance which is reflected in the growth of revenue and net profit by 77% and 107% respectively. Thus, he submitted, the company cannot be treated as comparable to the assessee.

Shri Anand Mohan, the learned Departmental Representative submitted, the functions of the company matched with that of the assessee. Therefore, it cannot be said to be functionally dissimilar to the assessee. Further, he submitted, the aforesaid factual position is vindicated from the fact that the assessee itself had selected it as a comparable in transfer pricing study report. Thus, he submitted, it cannot be rejected as a comparable.

In rejoinder, the learned Sr. Counsel for the assessee submitted, merely because the company was wrongly selected as a comparable in the transfer pricing study report, it cannot be retained as a comparable even if it is functionally dissimilar to the assessee. He submitted, though, the assessee might have selected it as a comparable initially, however, if subsequently information available in the public domain indicate that the company is functionally different, assessee cannot be prevented from objecting to the selection of the

We have considered rival submissions and perused material on record. No doubt, in the transfer pricing study report, the assessee has selected it as a comparable on the basis of multiyear data. However, in the course of proceedings before the Transfer Pricing Officer and learned DRP, the assessee has objected to selection of this company as a comparable. From the functional profile of the company as mentioned in the annual report placed in the paper book, it is noticed that this company is engaged in Engineering Design Service (CAD / CAM) and Geographical Information System (GIS) which are in the nature of KPO services. In fact, the Revenue has also identified the difference between the BPO/KPO services as clarified in CBDT

This company was introduced as a fresh comparable by the Transfer Pricing Officer. He was of the view that since the company is into payroll service, it is in the nature of ITES, hence, comparable to the assessee. Learned DRP also accepted the view of the Transfer Pricing Officer.

Objecting to the selection of this company as a comparable learned Sr. Counsel for the assessee submitted, the company is functionally different from the assessee as it provides varieties of services including KPO services. To demonstrate such fact, he drew our attention to the annual report of the company. He submitted, though, the company provides various services including KPO service, however, the segmental details relating to such services are not available in public domain. Further, he submitted, even the Profit & Loss account of the company for the impugned assessment year is not available in public domain.

The learned Sr. Counsel submitted, considering the aforesaid facts and lack of availability of adequate information relating to the company in public domain, the Tribunal in assessee’s own case for assessment year 2008–09 has excluded it as a comparable. The learned Sr. Counsel submitted, there is no change in fact in the

The learned Departmental Representative, though, agreed that the Profit & Loss account of the company for the assessment year 2008–09 is not available in public domain, however, he submitted that the functional profile of the company is available in the annual report clearly reveals that it is functionally similar to the assessee. Therefore, it was rightly included as a comparable.

We have considered rival submissions and perused material on record. As could be seen from the material placed before us, the company is engaged in rendering services relating to software

At this stage, we propose to deal with the comparability of R. Systems International ltd., which was accepted as comparable by learned DRP but is disputed before us by the Department in ground no.1 of its appeal being ITA no.1110/Mum./2014. Since, we are on the issue of selection / rejection of comparables relating to ITES segment, it will be appropriate to deal with the issue at this stage.

R. Systems International Ltd. is a comparable selected by the assessee. Though, the Transfer Pricing Officer rejected the company solely on the ground that the financial year of the company ending on 31st December does not match with financial year of the assessee ending on 31st March, however, learned DRP accepting assessee’s objection selected it as a comparable.

The learned Departmental Representative submitted, as per rule 10B(4) the data relating to financial year in which the assessee has undertaken the international transaction has to be considered for comparability analysis. Thus, he submitted, since this company’s financial year ends on 31st December, the financial results of the company for the financial year followed by the assessee are not

The learned Sr. Counsel for the assessee submitted, in pursuance to the query raised by the Transfer Pricing Officer under section 133(6) of the Act, the company has furnished its financial results for the financial year 2008–09 and 2009–10. In this context, he drew our attention to the financial results for March ending 2008 and 2009 as found place in the annual report of the company placed at Page–638 of the paper book. The learned Sr. Counsel submitted, the aforesaid information was obtained by the Transfer Pricing Officer himself in course of proceedings. Therefore, it cannot be said that the financial results of the company for the financial year followed by the assessee are not available. The learned Sr. Counsel submitted, even otherwise also if the financial data of the comparable relating to the financial year followed by the assessee can reliable to be ascertained, there is no defect in accepting the company as a comparable if otherwise it is functionally similar to the assessee. In support of such contention, he relied upon the following decisions:–

We have considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon. There is no dispute that this company is functionally similar to the assessee. The only reason for which the Transfer Pricing Officer rejected this company is, it has a different financial year compared to the assessee. However, from the facts on record, it is evident that in response to the query raised by the Transfer Pricing Officer in the course of proceedings, this company had provided the operating margins for the financial year April 2008 to March 2009 and April 2009 to March 2010. In fact, the Transfer Pricing Officer himself confronted the aforesaid information received by him to the assessee. Further, the operating margin of the company for financial year 2008–09 and 2009–10 as provided by the Transfer Pricing Officer is also placed in the paper book filed before us. On a perusal of the said information, it is very much clear that the financial result for the financial year 2008– 09 corresponding to the financial year followed by the assessee was very much available with the Transfer Pricing Officer. Therefore, there is no valid reason for the Transfer Pricing Officer to reject the company

In the course of hearing, learned Sr. Counsel for the assessee had submitted, with exclusion of Genesys International Corporation Ltd. and Crossdomain Solutions Ltd. and inclusion of R. Systems International Ltd. as comparables, the margin of the assessee would fall within ±5% change of arithmetic mean of the rest of the comparable. Therefore, issues relating to the other comparables disputed before the Tribunal would be academic. In view of the aforesaid submissions of the learned Sr. Counsel for the assessee, we do not intend to deal with the acceptability or otherwise of the following companies as comparable:–

However, we make it clear that since we have not gone into the merits of the comparability of these comparables, the issue relating to acceptability or otherwise of them are left upon for adjudication if they arise in any other assessment year relating to the assessee. Therefore, grounds no.10 and 15 raised by the assessee are partly allowed.

In ground no.6, the assessee has challenged the decision of the Departmental Authorities in holding that service provided to the AE under intellectual property service agreement (IPSA) is akin to ITES.

As discussed earlier, in the transfer pricing study report the assessee considered the consultancy services provided under IPSA as an independent transaction and benchmarked it separately. However, the Transfer Pricing Officer rejecting the benchmarking of the assessee held that services rendered under IPSA are akin to BPO services. While doing so, he referred to CBDT Notification no.890(E) dated 26th September 2010 and benchmarked it along with the ITES segment.

The learned Sr. Counsel for the assessee fairly submitted that identical issue arose in assessee’s own case for the assessment year 2008–09. He submitted, while deciding the issue, the Tribunal held that services rendered under IPSA are akin to ITES, however, the Tribunal directed the Assessing Officer to benchmark the arm's length price of such services rendered under IPSA agreement by aggregating with ITES segment and applying the same set–up comparables. Thus, he submitted, similar direction may be given in this year also. The learned Sr. Counsel further submitted, if the services provided under IPSA are considered as part of BPO service segment, the operating margin for combined BPO service segment for the impugned assessment year would stand revised to 18.33%.

The learned Departmental Representative agreed that the issue is covered by the decision of the Tribunal in assessment year 2008–09.

We have considered rival submissions and perused the material on record. As can be seen, identical dispute arose in assessee’s own case for the assessment year 2008–09. While deciding the issue in IT(TP)A no.7686/Mum./2012, dated 20th July 2018, the Tribunal has directed as under:–

Facts being identical, we direct the Assessing Officer to decide the issue following the direction of the Tribunal in assessment year

In ground no.19, the assessee has raised the issue of working capital adjustment.

We have considered rival submissions and perused the material on record. It has been brought to our notice by the learned Sr. Counsel for the assessee that while deciding similar issue in assessee’s own case for the A.Y. 2008–09 in ITA no.7686/Mum./ 2012, dated 20th July 2018, the Tribunal has issued the following directions:–

In view of the aforesaid, we direct the Assessing Officer to consider assessee’s claim of working capital adjustment keeping in

In ground no.22, the assessee has challenged the decision of the Assessing Officer in allowing assessee’s claim of deduction under sections 10A and 10AA, on consolidated basis after set–off of losses. 36. Brief facts are, in the return of income filed for the impugned assessment year, the assessee claimed deduction under sections 10A / 10AA of the Act unit–wise against the profit earned by the respective STPI/SEZ units. In respect of STPI/SEZ units which suffered losses, the assessee did not claim any deduction under sections 10A/10AA of the Act. The Assessing Officer, however, did not accept the aforesaid claim of the assessee. Following his order for the assessment year 2007–08, the Assessing Officer held that deduction under sections 10A/10AA of the Act should be allowed from the aggregated total income of the assessee after setting–off of losses of other eligible units against the income of all eligible units. In other words, the Assessing Officer discarded the unit–wise computation of deduction under sections 10A / 10AA of the Act followed by the assessee. Learned DRP also approved the decision of the Assessing Officer. The learned Sr. Counsel submitted, while deciding identical issue in assessee’s own case for assessment year 2008–09 cited supra, the Tribunal has

The learned Departmental Representative fairly agreed that in assessment year 2008–09, the Tribunal has decided the issue in favour of the assessee.

We have considered rival submissions and perused the material on record. As could be seen, while deciding identical issue arising in assessee’s own case for the assessment year 2008–09, the Tribunal following the decision of the Hon'ble Supreme Court in Yokogawa India Ltd., 391 ITR 274 (SC) has allowed assessee’s claim of deduction under section 10A of the Act unit–wise. The observations of the Tribunal in his regard are as under:–

The ratio laid down in the aforesaid decision will also apply to the deduction claimed under section 10AA of the Act. Therefore, respectfully following the decision of the Co–ordinate Bench as referred to above; we direct the Assessing Officer to compute the deduction under sections 10A / 10AA of the Act accordingly. This ground is allowed.

In ground no.23, the assessee has challenged disallowance of deduction claimed under section 10A / 10AA of the Act on income derived under the IPSA.

During the year under consideration, the assessee provided service under the IPSA from its units located in Software Technical Park of India (STPI) and Special Economic Zone (SEZ). The assessee claimed the aforesaid deduction under section 10A / 10AA of the Act only in respect of STPI / SEZ units which made profits during the year. The assessee did not claim any deduction under section 10A / 10AA of the Act in respect of IPSA revenue earned by STPI/SEZ units which had incurred losses. While completing the assessment, the Assessing Officer, however, did not allow assessee’s claim of deduction under section 10A / 10AA in respect of IPSA revenue by holding that they are

The DPR also upheld the decision of the Assessing Officer.

The learned Sr. Counsel for the assessee submitted, while deciding identical issue in assessment year 2008–09, the Tribunal has held that the services rendered under IPSA being in the nature of ITES, the assessee is eligible to claim deduction under section 10A of the Act. Further, he submitted, insofar as SEZ units are concerned, the assessee is eligible to claim deduction under section 10AA of the Act in respect of all revenue earned under IPSA including ITES. He submitted, this is because, section 10AA of the Act does not restrict only to income earned from ITES. He submitted, the aforesaid claim of the assessee has been accepted by the DRP in assessment year 2013– 14 and 2014–15.

The learned Departmental Representative also agreed that the issue is covered by the decision of the Tribunal.

We have considered rival submissions and perused the material on record. While deciding identical issue in assessee’s own case for the assessment year 2008–09, the Tribunal has held as under:–

It is also noticed that learned DRP in assessee’s own case for assessment year 2013–14 and 2014–15, has directed the Assessing Officer to allow assessee’s claim of deduction under section 10AA of the Act in respect of revenue earned under IPSA. In view of the aforesaid, we direct the Assessing Officer to compute deduction under

Grounds no.24, 25, 26 and 27 are not pressed, hence, dismissed.

In view of our decision in ground no.23, the additional grounds being grounds no.28 and 29, have become infructuous, hence, dismissed.

In the result, assessee’s appeal is partly allowed.

Ground no.1, has already been dealt with while deciding grounds no.10 and 15 of assessee’s appeal in ITA no.1671/Mum./2014, in the earlier part of the order. Therefore, separate adjudication is not required.

In ground no.2,the Revenue has challenged the decision of learned DRP in directing that the adjustment to be made by the Transfer Pricing Officer is to be restricted only to the international transaction

Having considered rival submissions, we do not find any infirmity in the decision of learned DRP on the issue as the arm's length price of the transaction which requires adjustment is the international

In the result, Revenue’s appeal is dismissed.

Grounds no.1, 2 and 6, being general in nature, do not require adjudication.

In grounds no.13 to 19, the assessee has challenged selection / rejection of certain comparables under Information Technology (IT) Service and Information Technology Enabled Services (ITES) segments. At first, we will deal with the comparables disputed under Information Technology Service segment.

In its transfer pricing analysis, the assessee benchmarked the international transaction with the AE by applying TNMM as the most appropriate method. The assessee selected eleven comparables with arithmetic mean of 12.83% as against the margin shown by it at13.33%. The Transfer Pricing Officer rejected some of the comparables selected by the assessee and introduced some fresh

Before learned DRP, the assessee challenged selection / rejection of certain comparables. After considering the submissions of the assessee, learned DRP accepted R.S. Software Ltd., selected by the assessee as a comparable and rejected FCS Software Solutions Ltd., selected by the Transfer Pricing Officer.

Before us, the learned Sr. Counsel submitted, though in the grounds raised the assessee has raised dispute against a number of comparables, however, if three of the comparables selected by the Transfer Pricing Officer viz. Thirdware Solutions Ltd., Persistent Systems Ltd. and CAT Technologies Ltd., are accepted and further if DRP’s order rejecting FCS Software Solutions Ltd. is upheld, the issue relating to other comparables would become academic as the assessee’s margin would fall within ±5% of the remaining comparables. Considering the aforesaid submissions of the learned Sr. Counsel, at the outset, we proceed to examine the comparability of the aforesaid four comparables.

This company was introduced by the Transfer Pricing Officer as a fresh comparable and upheld by learned DRP. Objecting to the selection of this company, learned Sr. Counsel for the assessee submitted, the company is functionally different from the assessee as it is engaged in trading of software product apart from rendering software services. He submitted, considering the fact that the company is engaged in multiple activities, the Tribunal in assessee’s own case has rejected this company as comparable in assessment years 2005–06 and 2008–09. Thus, he submitted, the company should be rejected as a comparable. In this regard, he relied upon the following decisions:–

The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and learned DRP.

We have considered rival submissions and perused the material on record. From the annual report of the company it is noticed that the company is also engaged in development of products and complete information relating to segmental details are not available. For this reason, learned Commissioner (Appeals) rejected this company as a comparable in assessee’s own case in assessment year 2005–06. Further, the Tribunal also while deciding assessee’s appeal in assessment year 2008–09 supra, has rejected this company as comparable for the very same reason. In various other decisions cited before us by the learned Sr. Counsel pertaining to the impugned assessment year, the company has been rejected as a comparable to an IT service provider. In fact, the Hon'ble Delhi High Court in PCIT v/s S.T. Ericson India Pvt. Ltd, vide order dated 31st January 2018, has upheld the decision of the Tribunal in rejecting this company as a comparable to an IT service provider. In view of the aforesaid, we direct the Assessing Officer to exclude this company as a comparable.

Though, the assessee had selected this company as a comparable on the basis of multiple year data, however, in course of

The learned Sr. Counsel for the assessee submitted, before the DRP, the assessee had specifically contended that apart from sale of software services the company is also engaged in sale of software products and no segmental details are available. In this context, he drew our attention to the objections raised before learned DRP as well as the annual report of the company. Further, he submitted, learned DRP has not at all dealt with assessee’s submissions. Thus, he submitted, the company being functionally dissimilar to the assessee cannot be treated as comparable. In support, he relied upon the following decisions:–

The learned Departmental Representative submitted, since the assessee itself had selected it as a comparable in transfer pricing study report, subsequently, it cannot claim that the company is functionally dissimilar. He submitted, before the Departmental Authorities assessee has failed to demonstrate how the company is functionally different. Therefore, there is no reason to exclude the company as a comparable.

We have considered rival submissions and perused the material on record. The main plank on which the assessee has sought exclusion of this company is, it is also engaged in sale of software products and the segmental details are not available. Though, the aforesaid objection was taken by the assessee before learned DRP, however, learned DRP, as it appears, has rejected assessee’s contention primarily for the reason that the company was selected as a comparable in transfer pricing study report. Learned DRP has not at all dealt with assessee’s contention that the company is also engaged in sale of products and segmental details are not available. In the case of Cash Edge India Pvt. Ltd. v/s ITO, ITA no.64/Del./2015, dated 23th September 2015, the Tribunal, Delhi Bench, has excluded this

Though, this company was not selected by the assessee in the transfer pricing study report due to functional difference and unavailability of data for the financial year 2010–11, however, in course of proceedings before the Transfer Pricing Officer, the assessee offered it as a comparable on the basis of current year data. However, the Transfer Pricing Officer rejected the company as a comparable since it was not selected by the assessee in the transfer pricing study report.

Learned DRP also agreed with the aforesaid decision of the Transfer Pricing Officer.

The learned Sr. Counsel for the assessee submitted, assessee had initial rejected this company as a comparable as data relating to the financial year relevant to the assessment year under dispute was not available. He submitted, subsequently, since the data relating to the current year was available, the assessee had proposed it as a comparable in the course of proceeding before the TPO.

Drawing our attention to the annual report of the company the learned Sr. Counsel for the assessee submitted, that the company is engaged in software development services has not been disputed either by the Transfer Pricing Officer or by the DRP. Further, drawing our attention to the Profit & Loss Account of the company for the impugned assessment year he submitted, major part of the revenue earned by the company, working out to almost 91%, is earned from software development and consulting services. Therefore, the company being functionally similar to the assessee is a comparable. The learned Sr. Counsel submitted, the company also does not fail the diminishing revenue filter applied by the Transfer Pricing Officer as the company has diminishing revenue only in the current year. He submitted, unless a company has diminishing revenue over the past

The Departmental Representative extensively referring to the observations of learned DRP submitted, since the rejection of the comparable is on the basis of well-founded reasoning, assessee’s contention should not be accepted.

We have considered rival submissions and perused the material on record. Undisputedly, assessee initially had not selected this company, as explained by the learned Sr. Counsel, was due to unavailability of data of the impugned assessment year. However, before the Transfer Pricing Officer, the assessee proposed it as a comparable on the basis of single year data available in public domain. Both, the Transfer Pricing Officer and learned DRP rejected the company as a comparable primarily on the reasoning that it was not selected by the assessee as comparable in the transfer pricing study report. Further, learned DRP has also observed that the company falls the diminishing revenue filter. On a perusal of the Profit & Loss Account of the company forming part of the annual report, it is noticed that a substantial part of the revenue earned by the company during the year is from software development and consulting services. Thus, prima–facie it appears that the company is functionally similar to the assessee. In case of ACIT v/s M/s. Synechron Technologies Pvt. Ltd., ITA no.536/Pun./2015, dated 16th June 2017, the Tribunal while considering the comparability of this company to an assessee engaged in software development (IT) service found that, though, in the transfer pricing study report the assessee had rejected this company as a comparable, however, subsequently, on the basis of single year data, the assessee proposed it as a comparable before the Transfer

Since we are on the issue of acceptability or otherwise of some comparables relating to software development (IT) segment, at this stage, we propose to deal with the issue relating to rejection of FCS Software Solutions Ltd. as a comparable by learned DRP which has been challenged by the Revenue in its appeal in ITA no.459/Mum./ 2015.

This company though was rejected by the assessee in its transfer pricing study report, however, the Transfer Pricing Officer accepted it

Learned Departmental Representative submitted, since the education service is provided with the aid of information technology it is part of the IT service. In this context, he strongly relied upon the observations of the Transfer Pricing Officer.

The learned Sr. Counsel for the assessee submitted, as per the information contained in the annual report, it is very much clear that the company has three segments viz. IT, consulting, education and infrastructure management. Further, referring to the annual report of the company, it was submitted, 37% of the total revenue for the year is earned from education service segment. Thus, he submitted, the company fails 75% of IT income filter applied by the Transfer Pricing Officer. Further, drawing our attention to the website extract of the company, he submitted, it provides digital content service which is in the nature of ITES as per CBDT Notification no.S.O. 890(E) dated 26th September 2000. Thus, he submitted, the company being functionally

We have considered rival submissions and perused material on record. As could be seen from the information contained in the annual report of the company placed in the paper book, it has three segments and the revenue from the IT service segment is less than 75% of the total revenue earned by the company. Thus, prima–facie, it fails the 75% IT revenue filter applied by the Transfer Pricing Officer. The contention of the learned Departmental Representative that education service is not acceptable as education service cannot be compared to IT service. Moreover, as rightly brought to our notice by the learned Sr. Counsel for the assessee, the company is also engaged in e–

In course of hearing learned Sr. Counsel has submitted, on exclusion of Thirdware Solutions Ltd., Persistent Systems Ltd. and FSC Solutions Ltd. and inclusion of CAT Technologies Ltd., assessee’s margin would fall within ±5% range of the arithmetic mean of the rest of the comparables in software development (IT) service segment. In view of the aforesaid, we do not intend to dwell upon the issues relating to the other comparables in IT service segment and leave the issue open relating to these comparables for adjudication if they arise in any other assessment year in future.

Insofar as ITES segment is concerned, at the outset, the learned Sr. Counsel for the assessee submitted, if one of the comparables, viz; Accentia Technologies Ltd., selected by the Transfer Pricing Officer and retained by the DRP is excluded, the margin of the assessee would fall within ±5% of the arithmetic mean of the rest of the comparables. Considering the above, we propose to deal with this comparable at the very outset.

Though, in the transfer pricing study report assessee had accepted it as a comparable using multiple year data, however, in course of proceedings before the Transfer Pricing Officer assessee sought exclusion of the company on account of functional difference and extra ordinary event taking place during the year. Rejecting the claim of the assessee, the Transfer Pricing Officer accepted the company as a comparable. Learned DRP also upheld the decision of the Transfer Pricing Officer on the reasoning that the assessee having selected it a comparable, cannot seek exclusion of the same.

Drawing our attention to the annual report of the company placed in the paper book, the learned Sr. Counsel for the assessee submitted, the company is engaged in providing healthcare revenue cycle management services, legal process outsourcing services and provisions of software as a service (SaaS), he submitted, separate segmental information relating to the aforesaid services are also unavailable. He submitted, the company also has software product which renders it incomparable to the assessee. He submitted, due to the aforesaid functional dissimilarity, the company was rejected as a comparable in assessee’s own case by the Tribunal in the assessment year 2008–09. Without prejudice to the aforesaid submissions, the learned Sr. Counsel for the assessee submitted, during the year under

The learned Departmental Representative relied upon the observations of the Transfer Pricing Officer and learned DRP.

We have considered rival submissions and perused material on record. On a perusal of the annual report placed in the paper book it is noticed that the company has different segments, whereas, the segmental information relating to all the segments are not available. Moreover, during the year under consideration there is an extra ordinary event by way of amalgamation of another company. Thus, by

Considering the submissions of the learned Sr. Counsel for the assessee that with exclusion of this company, operating margin of the assessee would fall within ±5% of the arithmetic mean of the rest of the comparables selected by the Transfer Pricing Officer, we do not intend to deal with the acceptability or otherwise of the rest of the comparables disputed before us under ITES segment and leave the issue relating to comparability of these comparables open for adjudication if they arise in any other assessment year in future.

Ground no.7, of this appeal is identical to ground no.6 of ITA no. 1671/Mum./2014. Our decision therein will apply mutatis mutandis to this appeal as well.

In ground no.20, the assessee has raised the issue of working capital adjustment. This ground is identical to the ground no.19 of ITA no.1671/Mum./2014. Our decision therein will apply mutatis mutandis to this appeal also.

In ground no.23, the assessee has challenged disallowance of deduction claimed under section 10A / 10AA of the Act in respect of STPI / SEZ units.

This ground is identical to ground no.23 of ITA no.1671/Mum./ 2014. Our decision in respect of the said ground will apply mutatis mutandis to this appeal also.

In ground no.24, the assessee has raised the issue of disallowance of brought forward unabsorbed depreciation amounting to ` 41,32,11,832. 89. Brief facts are, in the return of income filed for the impugned assessment year, the assessee had claimed set–off of brought forward unabsorbed depreciation relating to the assessment year 2007–08 and 2008–09. The assessee’s claim was disallowed by the Assessing Officer and learned DRP on the ground that after completion of assessment for A.Y. 2008–09, there is no unabsorbed deprecation left to be carried forward.

The learned Sr. Counsel for the assessee submitted, due to various disallowances / adjustments made in assessment year 2007– 08 the unabsorbed depreciation claimed for carry forward was nullified. However, the appeal is pending for disposal before the Tribunal. He submitted, in view of the order passed by the Tribunal in assessment year 2008–09, unabsorbed depreciation amounting to ` 37,94,78,811, is eligible for carry forward and which will be available for set–off in the impugned assessment year. Thus, he submitted, the Assessing Officer may be directed to allow set–off of brought forward unabsorbed depreciation relating to the assessment year 2007–08 and 2008–09 after giving effect to the directions of the Tribunal in these assessment years.

The learned Departmental Representative submitted that necessary directions may be issued to the Assessing Officer.

We have considered rival submissions and perused material on record. As could be seen from the facts on record, assessee’s claim of set–off of brought forward unabsorbed depreciation is dependent upon the decision of the Tribunal in assessee’s appeal relating to assessment year 2007–08 and 2008–09. Therefore, after giving effect to the orders of the Tribunal in assessment years 2007–08 and 2008– 09, the Assessing Officer should consider assessee’s claim of set–off of

Rest of the grounds are not pressed, hence, dismissed.

In the result, appeal is partly allowed.

Ground no.1, is identical to ground no.1 of ITA no.1110/Mum./ 2014. Following our decision therein, we uphold the decision of the DRP in including R. Systems Ltd. as a comparable.

Ground no.2, is against rejection of FCS Software Solutions Ltd. as a comparable.

We have dealt with this issue while deciding ground no.13 of assessee’s appeal being ITA no.501/Mum./2015. Accordingly, ground is dismissed.

Ground no.3 of this appeal is identical to ground no.2 of ITA no.1110/Mum./2014. Following our decision therein, we uphold the decision of learned DRP. Accordingly, ground is dismissed.

Grounds no.4 and 5, being general in nature, do not require adjudication.

In the result, Revenue’s appeal is dismissed.

To sum up, assessee’s appeals are partly allowed and Revenue’s appeals are dismissed. Order pronounced in the open Court on 28.06.2019