SAP LABS INDIA PVT. LTD.,,BANGALORE vs. ADDL.C.I.T.,

M/s.SAP Labs India Pvt. Ltd. No.138, Export Promotion, Industrial Park, Whitefield, Bengaluru-560 066. … Appellant PAN:AAFCS 3649P Vs. Addl. Commissioner of Income-tax, Range-12, Bengaluru. … Respondent AND IT(TP)A No.1070/Bang/2013 (Assessment year: 2008-09) (By the revenue) ***** Assessee by : S/ShriKanchun Kaushal & Aliasger Rampurawala, CAs Revenue by : Shri Ch.Sundar Rao, CIT(DR) Date of hearing : 09/01/2008 Date of pronouncement : 06/04/2018 O R D E R Per INTURI RAMA RAO, AM : These are cross appeals filed by the revenue as well as the assessee directed against the order of the learned Commissioner of Income-tax (Appeals)-IV, Bangalore, dated 23/04/2013 for the assessment year 2008-09. The assessee also filed cross objections in (revenue appeal).

IT(TP)A Nos.981 & 1070/Bang/2013 Page 2 of 51 2. Brief facts of the case are that the assessee is a company duly incorporated under the provisions of the Companies Act, 1956. The assessee is a subsidiary of SAP AG, Germany. It is engaged in the business of providing software development and other related support services to SAP AG and other Group companies. It is a captive service provider and conducts its operation from various undertakings registered with the Software Technology Parks of India (STPI) scheme at Bangalore, Gargaon and Chandigarh. The return of income for the assessment year 2008-09 was filed electronically on 30/09/2008 declaring total income of Rs.4,73,84,630/-. The assessee-company also reported the following international transactions in Form 3CEB:

IT(TP)A Nos.981 & 1070/Bang/2013 Page 3 of 51 4. The Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO) for the purpose of bench marking the above international transactions.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 4 of 51 6. The TPO computed average profit margin of the comparables finally selected at 23.65% after giving working capital adjustment of 1.7%, adjusted margin of 21.95%. On the above basis, the TPO made the TP adjustment as follows:

IT(TP)A Nos.981 & 1070/Bang/2013 Page 5 of 51 Turnover Sr. Name of Company (in crore) No.

9. Being aggrieved, the revenue is in appeal in IT(TP)A No.1070/Bang/2013 against that part of the order of the ld.CIT(A) which is against the revenue and the assessee is in appeal in IT(TP)A No.981/Bang/2013 against that part of the order of the ld.CIT(A) which is against the assessee.

10. Now we shall take up revenue appeal. The revenue raised the following grounds of appeal:

IT(TP)A Nos.981 & 1070/Bang/2013 Page 6 of 51

IT(TP)A Nos.981 & 1070/Bang/2013 Page 7 of 51

11. Ground Nos.1 & 12 are general in nature and do not require adjudication. Groundno.2 & 3 challenge direction of the CIT(A) to exclude expenditure on travel and insurance and telecommunication, incurred in foreign currency, from export turnover as well as total turnover. This issue is no longer res integra as the Hon’ble jurisdictional High Court in the case of CIT vs. Tata Elxsi (349 ITR 98). held that such expenditure incurred in foreign currency should be deducted from export turnover as well as total turnover. Hence, this ground of appeal filed by the revenue is dismissed.

12. Ground No.4 challenges the findings of the ld.CIT(A) granting benefit u/s 80JJA of the Act in respect of salaries paid to newly employed employees. AO denied the claim on the ground that software engineers are not workmen. On appeal before the ld. CIT(A), the ld.CIT(A) directed the AO to grant the benefit of deduction u/s 80JJ following this Tribunal’s decision in the Texas Instruments Ltd. reported in 115 TTJ 976, wherein it was held that software engineers, who are not in supervisory position, were eligible to be considered as workmen. However, the ld.CIT(A) had restricted the deduction to non-10A unit.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 8 of 51 14. On the other hand, learned counsel for assessee contended that software engineers are ‘workmen’ as defined under the Industrial Disputes Act and thus are eligible for deduction u/s 80JJA of the Act. He further contended that 80JJA claim can be allowed even in respect of 10A unit.

“24. We have perused the orders and considered the rival contentions. The claim of assessee with regard to additional wages paid to new workman was denied for a reason that engineers who were newly employed by the assessee were not considered as workers by the lower authorities. However, in a similar situation in the case of Texas Instruments India P.Ltd, (supra), it was held by the coordinate bench at para 6 and 7 of its order, as under : 6. We have heard the rival submissions and carefully perused the records. Considering the factual position after referring to the various documents filed by the assessee, the learned CIT(A) held as under : "According to the AO if an employee or workman is getting a salary of more than Rs. 1,600 per month he is not covered by the definition of workman. However as per cl. (iv) of s. 2(s) of the Industrial. Disputes Act a worker, employed in supervisory capacity and getting a salary of more than Rs. 1,600 per month only be excluded from the definition of workman. In appellant's case the software engineers in respect of whom deduction under s. 80JJAA has been claimed have not been employed in a supervisory capacity even though they may be getting a salary of more than Rs. 1,600 per month. As the software engineers were not employed in supervisory capacity they cannot be excluded from the definition of workman. Further as per the notification of the Karnataka Government, the appellant company engaged in the development of software is covered by the Industrial Disputes Act. As such, I am of the considered opinion that the appellant has satisfied all the conditions for claiming relief under s. 80JJAA. However, I find that the appellant has claimed deduction of Rs.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 9 of 51 2,55,81,220 with reference to the additional wages of Rs. 8,52,70,736 which included the wages of Rs. 4,87,64,029 in respect of the new workmen employed during the year ended 31st March, 2000 relevant to the asst. yr. 2000- 01. As there was no claim for relief under s. 80JJAA for the asst. yr. 2000-01, the relief in respect of the workers employed in asst. yr. 2000-01 cannot be considered for relief under s. 80JJAA in the asst. yr. 2001-02. As such the appellant will be entitled for relief under s. 80JJAA of Rs. 1,09,52,012 being 30 per cent of the additional wages of Rs. 3,65,06,707 (Rs. 8,52,70,736 Rs. 4,87,64,029) in respect of the new workmen employed during the previous year relevant to the asst. yr. 2001-02. Similarly, for asst. yr. 2002-03 the appellant has claimed deduction of Rs. 4,78,05,176 being 30 per cent of the wages of Rs. 1,59,30,588 which also included the wages of Rs. 4,38,68,182 pertaining to the new workers employed in the previous year 1999- 2000. For the reasons mentioned above the appellant is not entitled for relief under s. 80JJAA in respect of the wages pertaining to the workers employed in the previous year 1999-2000. As such the appellant would be eligible for relief of Rs. 3,46,44,722 being 30 per cent of the additional wages of Rs. 11,54,82,406 (Rs. 15,93,50,588 Rs. 4,38,68,182) in respect of the workmen employed in previous years 2000-01 and 2001-02. The learned Authorised Representatives of the appellant vide order-sheet noting dt. 24th Aug., 2004 agreed that the relief under s. 80JJAA in respect of the employees who joined in the previous year relevant to the asst. yr. 2001- 02 onwards only may be considered and in respect of the employees who joined in earlier years the appellant is not pressing for relief under s. 80JJAA. In the circumstances, the AO is directed to allow the relief under s. 80JJAA of Rs. 1,09,52,012 and Rs. 3,46,44,722 for asst. yrs. 2001-02 and 2002-03 respectively."

7. As stated earlier the assessee had filed the details of the software engineers employed during the years under consideration containing the names of the employees, designation and date of joining. Further, in the same list the details of total number of employees joined during both the assessment years, number of employees without supervisory roles, workmen joined, number of supervisors joined and workmen joined and relieved during the years under consideration. A cursory perusal of this list shows that the assessee had claimed deduction in respect of employees, who had joined as engineers in their respective field such as systems engineer, test engineer, software design engineer, IC design engineer, lead engineer etc. A cursory perusal of those lists establishes that the assessee had claimed deduction in respect of the engineers employed not in the category of supervisory control. All these details were filed before the AO during assessment IT(TP)A Nos.981 & 1070/Bang/2013 Page 10 of 51 proceedings. These facts were not properly considered by the AO. Further, from the order of the CIT(A), it is seen that he had taken note of the notification issued by the Government of Karnataka and concluded that as per the notification issued, the assessee company engaged in the development of software is covered by the Industrial Disputes Act, 1947. Further it is not the case of the Revenue that the assessee did not fulfil the conditions extracted elsewhere in this order. Considering all those factual matters we do not find any infirmity in the order of CIT(A) according relief to the assessee. In fact he had clarified the relevant portions related to Industrial Disputes Act, 1947 and IT Act while granting relief to the asssessee which are extracted at pp. 5 and 6 of this order. After carefully considering the same, we are inclined to accept the reasons shown by the learned CIT(A). The learned CIT- Departmental Representative could not assail the finding IT(TP)A.1006/Bang/2011 Page - 44 reached by the learned CIT(A) by bringing in any valid materials. The order of the CIT(A) is confirmed. It is ordered accordingly. There is no case for the Revenue that assessee had failed to file details of software engineers employed by it. In our opinion software engineers newly employed by it fell within the meaning of the word 'workmen'.

26. A reading of the above section would show that once an assessee's claim is allowed under section 10A, 10AA, 10B or 10BA, then to the extent such deduction has been allowed, no other deduction could be allowed under any other provision of the Act. Assessee had claimed deduction of its income u/s.10A of the Act in respect of its units 2, 3 and 4. As per the assessee even if deduction under section 10A of the Act is allowed for these units, a further deduction u/s.80JJA of the Act, is also allowable. Argument of the assessee's counsel is that the limitation put in by Section 80A(4) of the Act, would apply only to profit linked deductions. There can be no dispute that deduction under Section 10A of the Act, is profit linked. In so far as deduction u/s.80JJA IT(TP)A Nos.981 & 1070/Bang/2013 Page 11 of 51 is concerned, a look at sub-section (1) of the said section is required, which is reproduced below : 80JJAA(1) : Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture of production of article or thing, there shall, subject to the conditions specified in sub-section (2)m be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

16. Ground No.5 challenges the direction of the ld.CIT(A) directing the AO to allow deduction u/s 10A of the Act with respect to the unit acquired viz. Virsa Systems Pvt. Ltd. which had STP unit in Chandigarh after obtaining necessary approval from STPI. This unit was acquired by the assessee-company as part of global acquisition on a slump sale basis. Thereafter, the assessee-company had applied to STPI for transfer of this undertaking from Versa Systems Pvt. Ltd., to the assessee-company. In the light of this approval, the assessee made a claim u/s 10A in respect of profits earned by that unit. However, the AO had disallowed the claim placing reliance on the provisions of sub-section (7A) of section 10A of the Act. On appeal before the ld.CIT(A), the claim came to be allowed after placing reliance on CBDT circular No.1 of 2013

IT(TP)A Nos.981 & 1070/Bang/2013 Page 12 of 51 dated 17/01/2013 wherein it was clarified that the benefit u/s 10A will be continued in case of slump sale.

“42. We have perused the orders and heard the rival contentions. It is not disputed that the Chandigarh unit came to the assessee through a slump sale. M/s. Virsa had given this undertaking to the assessee as a going concern. That such transaction was a slump sale has not been disputed by any of the lower authorities. It is also not disputed that the said M/s. Virsa was eligible for deduction u/s.10A of the Act and was claiming such deduction in the earlier years for such unit. Hon'ble Bombay High Court in the case of Sonata Software Ltd, (supra) in a similar situation had held as under : 8. The issue before the court is whether the two requirements, cast in negative terms, have been fulfilled. Clause (ii) of sub-section (1) of section 10A stipulates that the industrial undertaking must not be formed by splitting up or reconstruction of a business already in existence. In other words, the test in law is as to whether the undertaking is formed by splitting up or reconstruction of a business already in existence. In CIT v. Gaekwar Foam and Rubber Co. Ltd. [1959] 35 ITR 662 (Bom) a Division Bench of this court construed the provisions of section 15C of the Indian Income-tax Act, 1922, section 15C(2)(i) contained a similar provision that the section would apply to an industrial undertaking which is not formed by the splitting up or the reconstruction of a business already in existence or by the transfer to a new business of building, machinery or plant used in a business which was being carried on before April 1, 1948. In that case, there was a IT(TP)A.1006/Bang/2011 Page - 55 partnership firm and its assets and goodwill were taken over by the assessee for a stated consideration and against the allotment of shares to the three partners in the assessee-company. The Assessing Officer had IT(TP)A Nos.981 & 1070/Bang/2013 Page 13 of 51 rejected the claim of exemption under section 15C on the ground that the assessee was formed by the reconstruction of the business already in existence. The Appellate Commissioner took a different view which was affirmed by the Tribunal. The Division Bench of this court held that the reconstruction of a business connotes that the original business is not to cease functioning and the undertaking must continue to carry on the same business in an altered form. On the other hand, if the ownership of a business or an undertaking is transferred that would not constitute a reconstruction. The Division Bench held as follows (page 669) : "The reconstruction of a business or an industrial undertaking must necessarily involve the concept that the original business or undertaking is not to cease functioning, and its identity is not to be lost or abandoned. The concept essentially rests on changes but the changes must be constructive and not destructive. There must be something positive about the whole matter as opposed to negative. The underlying idea of a reconstruction evidently must be--and this is brought out by the section itself--of a 'business already in exist ence'. There must be a continuation of the activities and business of the same industrial undertaking. The undertaking must continue to carry on the same business though in some altered or varied form. If the alterations and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. Thus, for instance, if the ownership of a business or an undertaking changes hands not ostensibly but in reality and effectively, that would not be reconstruction or if the very nature of the business is changed, that again would not be reconstruction. On the other hand, reorganization of the business on sounder lines or alter ations in the mode or method or scope of the activities of the business or in its personnel or infusion of new blood in the management or control of the business which may even be by some changes in the constitution of persons interested in the undertaking would certainly be no more than reconstruction of the business if it is substantially the same business carried on by substantially the same persons." Reconstruction, the Division Bench held, means that substantially the same business is carried on and substantially the same persons carry it on (page 671) : "The emphasis, it will be noticed, is on two things--when substantially the same business was carried on and substantially the same persons were carrying it on. It is also to be noticed that the learned judge draws a clear distinction between a reconstruction and a sale of an undertaking. In the case of a sale, there can be no question of reconstruction. Now, in these matters, we have to look at the substance of the transaction and not the form. If looking at the substance of the transaction, it is a sale, then the concept of recon IT(TP)A Nos.981 & 1070/Bang/2013 Page 14 of 51 struction must be ruled out for in such a case there is no scope for speaking about any reconstruction of an existing business."

9. The judgment of the Division Bench of this court in Gaekwar Foam [1959] 35 ITR 662 (Bom) was approved by the Supreme Court in a judgment in Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC). The Supreme Court, in that case, dealt with the issue as to whether within the meaning of section 15C(2)(i) of the Indian Income-tax Act, 1922, the industrial undertakings which consisted of a steel foundry division and jute mill division were not formed by the reconstruction of a business already in existence. The Supreme Court observed that in order to be entitled to the benefit of section 15C the following facts would have to be established by the assessee (page 206) : "(1) investment of substantial fresh capital in the industrial under taking set up ; (2) employment of requisite labour therein ; (3) manufacture or production of articles in the said undertaking ; (4) earning of profits clearly attributable to the said new under taking ; and IT(TP)A.1006/Bang/2011 Page - 57 (5) above all, a separate and distinct identity of the industrial unit set up."

19. Ground No.6 challenges the direction of the ld.CIT(A) excluding the following companies applying the turnover range for Rs.200 to Rs.2000 cr.: i. M/s. Avani Cimcom Technologies, ii. M/s. Bodhtree Consulting Limited, iii. M/s. E-zest Solutions Limited, iv. M/s. Infosys Technologies Ltd., v. M/s. Kals Information Systems Limited (Seg.), vi. M/s. LGS Global Ltd., vii. M/s. Lucid Software Limited, viii. M/s. Quintegra Solution Limited, ix. M/s. R Sytems International Ltd., x. M/s. R.S. Software (I) Ltd., xi. M/s. Softsol India Ltd., xii. M/s. Thirdware Solution Limited and xiii. M/s. Wipro Ltd. (Seg.).

IT(TP)A Nos.981 & 1070/Bang/2013 Page 16 of 51

This ratio was followed by this Tribunal in several cases, for example, NTT Data Global Delivery Services Ltd. vs. Ass. CIT (69 taxmann.com 7)(Bang) and Societe Generale Global Solution Centre (P.) Ltd. vs. DCIT (69 taxmann.com 336)(Bang). Following the ratio of the above decisions, we hold that turnover is not relevant criteria for deciding comparability. Accordingly, this ground of appeal is allowed.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 17 of 51 22. Ground No.8 challenges the finding of the ld.CIT(A) in rejecting diminishing revenue filter. The reasoning adopted by the ld.CIT(A) is as under:

Further this Tribunal has been taking a consistent view that turnover filter is not relevant criteria for comparability of the company. Similarly diminishing revenue cannot be relevant criteria and therefore the ground of appeal filed by the revenue is dismissed.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 18 of 51 24. Ground No.10 challenges the finding of the ld.CIT(A) that the gain arising out of variations in foreign exchange currency is operating in nature.

The only issue in the ground of appeal pressed, relating to TP adjustment is whether Foreign Exchange gain made an account of sale proceeds can be treated as operating in nature. The Hon’ble Delhi High Court in the case of Pr.CIT vs. Ameriprise India Pvt. Ltd. in dated 23/03/2016 has categorically held that foreign exchange gain earned by the assessee in relation to sale/purchase emanating from international transactions should be treated as operating in nature. In the light of the ratio laid down in the case of Ameriprise India Pvt. Ltd. (supra), we do not find any reason to differ with the order of the ld.CIT(A). Hence, the ground of appeal is dismissed.

25. The next ground of appeal challenges the finding of the ld.CIT(A) that TP adjustments should be confined to international transactions alone. From the provisions of chapter X of the Act, it is clear that adjustment which has to be done to arrive at ALP is only in respect of transactions with the AE. The same reasoning was followed by the Hon’ble Bombay High Court in the following cases: i) CIT vs. Tara Jewels Exports Pvt. Ltd. (ITA No.1814 of 2013) ii) CIT vs. Thyssen Krupp Industries India (P) Ltd. (ITA No.2201 of 2013); and iii) CIT vs. Goldstar Jewellery Design Pvt. Ltd. (ITA No.2237 of 2013) In the light of the above settled position of law, we do not find any reason to differ from the finding of the ld.CIT(A). Hence, the ground of appeal raised by the revenue is dismissed.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 19 of 51 27. The assessee raised the following grounds of appeal:

IT(TP)A Nos.981 & 1070/Bang/2013 Page 20 of 51

IT(TP)A Nos.981 & 1070/Bang/2013 Page 21 of 51 29. Ground No.1 is general in nature and does not require adjudication.

30. Ground No.2 challenges restriction of deduction of section 80JJA of the Act to only to non-10A unit invoking the provisions of section 80A(4) of the Act. This issue was covered against the assessee in assessee’s own case in earlier year for assessment year 2007-08. The relevant paragraph is extracted in revenue appeal. The ground of appeal raised by the assessee is dismissed.

31. Ground No.3 is not pressed and is accordingly dismissed.

32. Ground No.4 challenges re-allocation of rent expenses relating to non-10A unit. It was submitted as under:

During the FY 2007-08, the Appellant had paid rent amounting to Rs. 47,294,681/- to Millenia Realtors Private Limited, in respect of the approved private bonded warehouse for Unit-1 (non-10A), situated at RMZ Nxt, Sonnenahalli Village, KR Puram Hobli, Mahadevapura. During the year, Unit-1 (non-10A) was carrying on its activities from owned premises at Campus, #138, EPIP, Whitefield and various other rented premises. During the year, Unit-1 (non-10A) had de-bonded premises at Phase-3, Salarpuria GRTech Park and SECON. Resources of the floors de- bonded were shifted to newly bonded floors (which was bonded on August 3, 2007) at RMZ nxt in Block 2B fourth & fifth floor and Block 2C fourth floor for business operations of Unit-1 (non 10A). Accordingly, the rent paid for the same was claimed as deduction by the Company from Unit-1 (non 10A). Details of the premises held by Unit-1 (non-10A) as on 1st April 2007, premises bonded & de-bonded during FY 2007-08 for Unit-1 (non-10A) is placed at Page 1216 to 1218 of the Paper Book. Also, Unit-2 (10A) was carrying on its activities from various rented premises approved as private bonded warehouse by Customs and STPI. On October 23, 2007, Unit-2 (10A) de-bonded premises at Salarpuria GR Tech Park , RMZ nxt in Block 2A fourth floor and ITPL. The floors de-bonded from Unit-2(10A) are not in control of the Company after de-bonding and none of its units were using these premises after de-bonding. Resources of the de-bonded premises were shifted to newly bonded premises at Phase-3

IT(TP)A Nos.981 & 1070/Bang/2013 Page 22 of 51 and RMZ Block 2B ground, first, second third floor & Block 2C fifth floor. Details of the premises held by Unit-2(10A) as on 1st April 2007, premises bonded & de-bonded during FY 2007-08 for Unit-2(10A) is placed at Page 1219 to 1221 of the Paper Book.

However, the AO reallocated the rent expenditure to unit II enjoying 10A benefit by holding as under: • The floors bonded by Unit-1(non-10A) at RMZ were same as floors de-bonded by Unit-2(10A) at RMZ.

• The Company had shifted bonded floors from Unit-2(10A) to Unit- 1(non-10A) in order to shift the expenditure of STP unit to non STP Unit.

The action of the AO came to be confirmed by the ld.CIT(A). Being aggrieved, the assessee is before us in the present ground of appeal.

35. The additional grounds No.7 to 11 seeks to exclude the following comparables: i. Avani Cimcon Technologies Ltd (‘Avani’) ii. Bodhtree Consulting Limited (‘Bodhtree’) iii. E-Zest Solutions Ltd. iv. Infosys Technologies Ltd. v. Kals Information Systems Ltd.(seg.)

IT(TP)A Nos.981 & 1070/Bang/2013 Page 23 of 51 vi. Persistent Systems Ltd. vii. Quintegra Solutions Ltd. viii. Tata Elxsi Ltd. (seg) ix. Thirdware Solutions Ltd. x. Wipro Ltd. (Seg.) xi. Softsol India Ltd. xii. Lucid Software Ltd.

Avani Cimcon Technologies Ltd (‘Avani’): 36. This company was selected by the TPO, which was contested by the assessee-company. On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores.

36.1 Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter. Hence, the assessee-company is challenging the inclusion of this company on the ground that this company is into both software development services as well as development of products like Dxchange, Travel Solutions, Insurance Solutions, Customer Appreciation & Relationship Management Application (CARMA), Content Management systems etc. The website of the company indicates that it has developed a software product by name ‘DXchange’ and no segmental information is available. Reliance in this regard was placed on the decision of the co- ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

36.2 We heard rival submissions and perused the material on record. The comparability of Avani Cimcon Technologies Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“19. Vis-a-vis Avani Cimcon Technologies Ltd, findings of the Tribunal in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 5 of the order which is reproduced hereunder : 5. Avani Cincom Technologies Ltd. 5.1 This company was selected by the TPO as a comparable in spite of the objections of the assessee to the exclusion of this company as a comparable on IT(TP)A Nos.981 & 1070/Bang/2013 Page 24 of 51 the ground that this company is not functionally comparable to the assessee as it is into software products whereas the assessee only provides software development services to its AEs. The TPO rejected the assessee's objections on the ground that this company had categorised itself as a pure software developer, like the assessee and hence selected this company as a comparable. In coming to this conclusion, the TPO relied on information directly submitted by the company in response to enquiries under Section 133(6) of the Act. 5.2 Before us, the learned Authorised Representative reiterated the assessee's objections to inclusion of this company on the ground that it is not functionally comparable to the assessee as it is into software products. In support of this contention, the learned Authorised Representative placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y. 2008-09. 5.3 Per contra, the learned Departmental Representative supported the order of the TPO in including this company as a comparable. 5.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. We find that a co-ordinate bench of this Tribunal on the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y. 2008-09 had held that this company be omitted from the set of comparables as it was functionally dis-similar from a company which only provides software development services to its AEs, like the assessee in the case on hand. At paras 7.6.1 and 7.6.2 of its order, the co-ordinate bench held as under :- “ 7.6.1 We have heard both parties and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the final set of comparables only on the basis of information obtained under section 133(6) of the Act. In these circumstances, it was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables. Non-furnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable. 7.6.2 We also find substantial merit in the contention of the learned Authorised Representative that this company has been selected by the TPO as an additional comparable only on the ground that this company was selected in the earlier year. Even in the earlier year, it is seen that this company was not selected on the basis on any search process carried out by the TPO but only on the basis of information collected under section 133(6) of the Act. Apart from placing reliance on the judicial decision cited above, including the assessee's own case for Assessment Year 2007-08, the assessee has brought on record evidence that this company is functionally dis-similar and different from the assessee and hence is not comparable. Therefore the finding excluding it from the list

IT(TP)A Nos.981 & 1070/Bang/2013 Page 25 of 51 of comparables rendered in the immediately preceding year is applicable in this year also. Since the functional profile and other parameters by this company have not undergone any change during the year under consideration which fact has been demonstrated by the assessee, following the decisions of the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 in dt.22.2.2013, and in the case of Triology E-Business Software India Pvt. Ltd. (ITA No.1054/Bang/2011), we direct the A.O./TPO to omit this company from the list of comparables.” 5.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y. 2008-09, we direct the Assessing Officer / TPO to exclude this company, i.e. Avani Cincom Technologies Ltd. from the list of comparables in the case on hand.”

36.3 Respectfully following the ratio of the decision of the co- ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Avani Cimcon Technologies Ltd., from the list of comparables.

Bodhtree Consulting Limited (‘Bodhtree’): 37. This company was selected by the TPO, but not contested by the assessee-company before the TPO. However, inclusion of this company was challenged before the ld.CIT(A) on the grounds of functional differences.

37.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

37.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that Bodhtree is in business of software products and has a hybrid service business model. It is engaged in providing open and end web solutions, software consultancy and design & development of software using latest technology and Bodhtree is a specialist entity offering niche IT services in software engineering,

IT(TP)A Nos.981 & 1070/Bang/2013 Page 26 of 51 data management and document digitization. It was further submitted that the website of the Company mentions that the company offers product solutions in the areas of Data Quality, Business Intelligence, and Life sciences to a reputed customer base worldwide and its products include Spend Data Management Solution (SDMS), Multi Industry Data Anomaly Solution (MIDAS), data cleansing and integration software, Patent Asset Management (PAM), and Patent Search and Patent Analysis Tool (PSPAT). Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

37.3 We heard rival submissions and perused the material on record. The comparability of M/s.Bothdree Consulting Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“20. Vis-a-vis M/s. Bodhtree Consulting Ltd, findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 6 which is reproduced hereunder : 6. Bodhtree Consulting Ltd. 6.1.1 This company has been selected as a comparable by the TPO. The assessee objected to the inclusion of this company in the list of comparables both before the DRP and also before us on the grounds that it is functionally different as it is a product oriented company into software consulting, web services integration, data management, data clearing services, etc. 6.1.2 Before us, the learned Authorised Representative placed reliance on the decision of a co-ordinate bench of this Tribunal in the case of NXP Semi-Conductors India P. Ltd. (supra) for A.Y.2008-09 and the decision of the Mumbai Bench of the ITAT in the case of Nethawk Networks India Pvt. Ltd. (supra) for A.Y. 2008-09 wherein Bodhtree Consulting Ltd., was excluded from the list of comparable companies on account of being functionally different from a provider software development services to its AE as it has software products and a hybrid service business model. 6.2 Per contra, the learned Departmental Representative supported the orders of the TPO in including this company in the list of comparable companies.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 27 of 51 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements relied upon by the assessee. We find that this company; i.e. Bodhtree Consulting Ltd. has been excluded from the list of comparables for providers software development services in the judicial decisions cited by the assessee (supra at para 6.1.2 of this order). The relevant portion at para 15 of the order in the case of NXP Semi-conductors India (P) Ltd. (supra) is extracted hereunder :- “ 15. Bodhtree Consulting Ltd. 15.1 This company has been selected as a comparable by the TPO. The assessee has objected to the inclusion of this company as a comparable, both before the DRP and this Bench, on the grounds that this company is functionally different as it has software products and a hybrid service business model. In the proceedings before us, the learned Authorised Representative placed reliance on the decision of the co- ordinate benches of this Tribunal in the cases of Mindtech (India) Ltd. (supra) and CISCO Systems (India) Pvt. Ltd., in IT(TP)A No.271/Bang/2014 dt.14.8.2014, both for Assessment Year 2009-10, wherein this company was excluded from the list of comparables. It was submitted by the learned Authorised Representative that though these cited decisions were rendered for Assessment Year 2009-10, the facts and circumstances of the case are similar for Assessment Year 2008-09 as well and applies to the year under consideration. The learned Authorised Representative prays that in view of the above, this company be excluded from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the orders of the authorities below in including this company in the list of comparable companies. 15.3.1 We have heard both parties and perused and carefully considered the material on record, including the judicial decisions cited by the ld. A.R. We find that this company has been excluded from the set of comparables for software development service companies in both the aforesaid decisions cited by the assessee. In Mindtech (India) Ltd., the relevant portion of the order at para 16 thereof it has been held as under :- “ 16. We have considered the rival submissions. The Special Bench of the ITAT in the case of Maersk Global Centres (supra) had an occasion to deal with the question as to whether high profit margin making companies should be excluded as a comparable. The Special Bench after considering several aspects held in para 88 of its order that the potential comparable companies cannot be excluded merely on the ground that their profit is abnormally high. The Special bench held that in such cases it would require further investigation to ascertain the reasons for unusually high profit and in order to establish

IT(TP)A Nos.981 & 1070/Bang/2013 Page 28 of 51 whether the entities with such high profits can be taken as comparable or not. In the light of the aforesaid decision of the Special Bench and in view of the admitted position that the assessee follows Fixed Price Project model where revenues from software development is recognized based on software developed and billed to clients, there is a possibility of the expenditure in relation to the revenue being booked in the earlier year. The results of Bodhtree from FY 2003 to 2008 excluding FY 2007 as given by the learned counsel for the assessee were also perused. Perusal of the same shows, that there has been a consistent change in the operating margins. The chart filed by the assessee in this regard is given as an annexure to this order. It appears to us that the revenue recognition method followed by the assessee is the reason for the drastic variation in the profit margins of this company. In the given circumstances, we are of the view that it would be safe to exclude Bodhtree Consulting from the final list of comparables chosen by the assessee. We hold and direct accordingly.”

Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude M/s.Bodhtree Consulting Ltd. Ltd., from the list of comparables.

E-Zest Solutions Ltd.: 38. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it functionally different.

38.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

38.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company is into diversified activities such as outsourced product engineering, product development, technology consulting, business consulting which are normally regarded as high-end ITES services. The services fall under the category of KPO services. Therefore, should be IT(TP)A Nos.981 & 1070/Bang/2013 Page 29 of 51 excluded. Further, no segmental data is provided in the annual report of the company for the year under consideration. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

38.3 We heard rival submissions and perused the material on record. The comparability of M/s.E-Zest Solutions Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“22. Vis-a-vis M/s. e-Zest Solutions Ltd, findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 8 which is reproduced hereunder : 8. e-Zest Solutions Ltd. 8.1 This company was selected by the TPO as a comparable inspite of the assessee's objections to its inclusion as a comparable on the ground that it was functionally different from the assessee. The TPO rejected the assessee's objections on the ground that as per the information received under Section 133(6) of the Act this company is engaged in software development services and qualifies all the filters applied. 8.2 Before us, the learned Authorised Representative contended that this company ought to be excluded from the list of comparables on the ground that it is functionally different to the assessee. It was submitted that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for A.Y. 2008- 09, has held that this company is to be excluded from the list of comparables to a provider of software development services as it is rendering product development services and high and technical services which come under the category of KPO services. 8.3 Per contra, the learned Departmental Representative supported the order of the TPO including this company in the list of comparables. 8.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited. We find that a co- ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables to a provider of software development services as it is into product development services and high end technical services which come under the category of KPO Services; holding as under at para 14.4 thereof :- “ 14.4 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the record that the TPO has IT(TP)A Nos.981 & 1070/Bang/2013 Page 30 of 51 included this company in the list of comparables only on the basis of the statement made by the company in its reply to the notice under section 133(6) of the Act. It appears that the TPO has not examined the services rendered by the company to give a finding whether the services performed by this company are similar to the software development services performed by the assessee. From the details on record, we find that while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services. It has been held by the co- ordinate bench of this Tribunal in the case of Capital I-Q Information Systems (India) (P) Ltd. Supra) that KPO services are not comparable to software development services and are therefore not comparable. Following the aforesaid decision of the co-ordinate bench of the Hyderabad Tribunal in the aforesaid case, we hold that this company, i.e. e-Zest Solutions Ltd. be omitted from the set of comparables for the period under consideration in the case on hand. The A.O. / TPO is accordingly directed.” 8.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer / TPO to omit this company from the list of comparables in the case on hand.” Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude E-Zest Solutions Ltd., from the list of comparables.

Infosys Technologies Ltd. 39. This company was selected by the TPO, which was contested by the assessee-company.

39.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

39.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company provides end-to-end business solutions that leverage technology thereby enabling its client to enhance business performance including technical consulting, design, development, re-engineering, maintenance, systems integration, package evaluation and IT(TP)A Nos.981 & 1070/Bang/2013 Page 31 of 51 implementation, and testing and infrastructure management services. The Director Report states that Income is from software service and products. However, no segmental information is available as regards profits earned on account of software services and software products. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

39.3 We heard rival submissions and perused the material on record. The comparability of Infosys Technologies Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“23. Vis-a-vis M/s. Infosys Technologies Ltd, findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 9 which is reproduced hereunder :

Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Infosys Technologies Ltd. from the list of comparables.

Kals Information Systems Ltd. (Seg.) 40. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it is functionally different.

40.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this, revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 33 of 51 40.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company derives its revenues primarily from software development services and software products. Besides, the company is also engaged in providing training, translation and interpretation services. The financials has two segments i.e. Application Software and Training. But there is no further bifurcation between software services and products. Inventory holding on account of software development products is around 43% of total current assets. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

40.3 We heard rival submissions and perused the material on record. The comparability of Kals Information Systems Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“24. Vis-a-vis M/s. Kals Information Systems Ltd, findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 10 which is reproduced hereunder : 10. KALS Information Systems Ltd 10.1 This is a comparable selected by the TPO inspite of the assessee's objections to its inclusion in the list of comparables on the grounds that it is functionally different and that the segment details were inconsistent with respect to software services revenue and software products revenue. The TPO, however, rejected the assessee's objections and included this company in the list of comparables by relying on the information received in reply to notice under Section 133(6) of the Act. 10.2 Before us, the learned Authorised Representative contended that this company ought to be excluded from the list of comparables as it is functionally different, being into software products, whereas the assessee in the case on hand is merely into provision of software development services. It was submitted that the rejection of this company as a comparable to providers of software development services has been upheld by a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra).

IT(TP)A Nos.981 & 1070/Bang/2013 Page 34 of 51 10.3 Per contra, the learned Departmental Representative supported the TPO’s action in including this company in the final list of comparables. 10.4.1 We have heard both parties and perused and carefully considered the material on record, including the judicial decision relied on by the assessee. We find that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables as it was into development of software products and hence not comparable to a provider of software services; observing as under at para 10.4 of the order :- “ 10.4 We have heard both parties and perused and carefully considered the material on record. We find from the record that the TPO has drawn conclusions as to the comparability of this company to the assessee based on information obtained u/s.133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as pointed out by the learned Authorised Representative. We also find that the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) and in the case of Triology E-Business Software India Pvt. Ltd. (supra) have held that this company was developing software products and was not purely or mainly a software service provider. Apart from relying of the above cited decisions of co-ordinate benches of the Tribunal (supra), the assessee has also brought on record evidence from various portions of the company’s Annual Report to establish that this company is functionally dis-similar and different form the assessee and that since the findings rendered in the decisions of the co-ordinate benches of the Tribunal for Assessment Year 2007-08 (cited supra) are applicable for this year i.e. Assessment Year 2008-09 also, this company ought to be excluded from the list of comparables. In this view of the matter, we hold that this company i.e. KALS Information Systems Ltd., is to be omitted form the list of comparable companies. It is ordered accordingly.” 10.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer to omit this company from the list of comparables in the case on hand.”

Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd

IT(TP)A Nos.981 & 1070/Bang/2013 Page 35 of 51 (supra) we direct the AO/TPO to exclude Kals Information Systems Ltd., from the list of comparables.

Persistent Systems Ltd. 41. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it functionally different.

41.2 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

42.3 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company is engaged in providing ‘Outsourced Product Development Services’ to independent software vendors and enterprises. The company offers complete product life cycle services from end to end. No bifurcation is available between the two activities of the company, being sale of software services and products. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

42.4 We heard rival submissions and perused the material on record. The comparability of Persistent Systems Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“25. Vis-a-vis M/s. Persistent Systems Ltd, findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 12 which is reproduced hereunder : 12. Persistent Systems Ltd. 12.1 This company was selected as a comparable by the TPO over- ruling the objections of the assessee that this company, being into

IT(TP)A Nos.981 & 1070/Bang/2013 Page 36 of 51 development of software products engaged in product design and analytic services is functionally different from the assessee who is only a provider of software development services. The TPO rejected the assessee's objections on the ground that this company is mainly, a software development service company, and as per the details filed/obtained under Section 133(6) of the Act 96% of its revenues are from software development services. 12.2 Before us, the assessee objected to the inclusion of this company in the list of comparables on the ground that it is functionally different, being engaged in software designing and analytic services and is therefore not comparable to a provider of software development service provider, as is the assessee in the case on hand. The learned Authorised Representative submitted that a co- ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company, being engaged in product development and product design services, is to be omitted from the list of comparables to providers of software development services. 12.3 Per contra, the learned Departmental Representative supported the orders of the authorities below in including this company in the list of comparables. 12.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncement relied on by the assessee. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables as it is functionally different from a provider of software development services, being engaged in product development and product design services. At para 17.3 of this order the co-ordinate bench has held as under :- “ 17.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that this company i.e. Persistent Systems Ltd., is engaged in product development and product design services while the assessee is a software development services provider. We find that, as submitted by the assessee, the segmental details are not given separately. Therefore, following the principle enunciated in the decision of the Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. (supra) that in the absence of segmental details / information a company cannot be taken into account for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted from the set of comparables for the year under consideration. It is ordered accordingly.”

IT(TP)A Nos.981 & 1070/Bang/2013 Page 37 of 51 12.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand.” Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Persistent Systems Ltd. from the list of comparables.

Quintegra Solutions Ltd. 43. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that the company is having peculiar economic circumstances and as an extraordinary event of acquisition of another company.

43.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

43.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company provides a full range of custom high end IT solutions such as development, testing, maintenance, SAP, product engineering and infrastructure management services), proprietary software products and consultancy services in IT on various platforms and technologies. During the year under consideration, the company has developed certain proprietary products portfolio and acquired copy rights for the same in Flexible Home Building (HBfx), Hospital Management and Information System (HMIS) in healthcare and EduCampus in Education verticals as products. During the year, the company made a key strategic acquisition of PA Corporation Inc. (‘PAC’), a US-based information technology corporation providing a broad range of services. PAC has core competencies in hign-end IT consulting and leadership in middle space IT

IT(TP)A Nos.981 & 1070/Bang/2013 Page 38 of 51 services, enabling Quintegra to leverage across multiple points in the value chain.Reliance in this regard was placed on the decision of the co- ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

43.4 We heard rival submissions and perused the material on record. The comparability of Quintegra Solutions Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“26. Vis-a-vis M/s. Quintegra Solutions Ltd, findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 13 which is reproduced hereunder : 13. Quintegra Solutions Ltd. 13.1 This company was selected as a comparable by the TPO inspite of the objection of the assessee to its inclusion in the list of comparables on the ground that there were peculiar economic circumstances in the form of acquisitions made during the year. The TPO rejected the assessee's objections holding that this company qualifies all the filters applied. 13.2 Before us, the assessee objected to the inclusion of this company as a comparable on the ground that it is functionally different as it is engaged in product engineering services and not in software development services. It was also submitted that this company was engaged in developing proprietary software products and has IPR’s and is functionally different from a provider of software development services, as is the assessee in the case on hand. In support of its contentions, the assessee relied on the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 where it was held that this company was to be omitted from the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the orders of the authorities in including this company in the list of comparables. 13.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision relied on by the assessee. We find that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company, being engaged in product engineering services, having substantial R&D activity resulting in the creation of proprietary software products and IPR’s, is functionally different from a IT(TP)A Nos.981 & 1070/Bang/2013 Page 39 of 51 mere provider of software development services is to be omitted from the set of comparables; observing as under at paras 18.3.1 to 18.3.3 of the order :- “ 18.3.1 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details brought on record that this company i.e. Quintegra Solutions Ltd. is engaged in product engineering services and is not purely a software development service provider as is the assessee in the case on hand. It is also seen that this company is also engaged in proprietary software products and has substantial R&D activity which has resulted in creation of its IPRs. Having applied for trade mark registration of its products, it evidences the fact that this company owns intangible assets. The co- ordinate bench of this Tribunal in thecase of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010 dt.9.11.2012) has held that if a company possesses or owns intangibles or IPRs, then it cannot be considered as a comparable company to one that does not own intangibles and requires to be omitted form the list of comparables, as in the case on hand. 18.3.2 We also find from the Annual Report of Quintegra Solutions Ltd. that there have been acquisitions made by it in the period under consideration. It is settled principle that where extraordinary events have taken place, which has an effect on the performance of the company, then that company shall be removed from the list of comparables. 18.3.3 Respectfully following the decision of the co-ordinate bench of the Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (supra), we direct that this company i.e. Quintegra Solutions Ltd. be excluded from the list of comparables in the case on hand since it is engaged in proprietary software products and owns its own intangibles unlike the assessee in the case on hand who is a software service provider.” 13.4.2 Following the decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand. Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Quintegra Solutions Ltd. from the list of comparables.

Tata Elxsi Ltd.(seg) 44. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it is functionally

IT(TP)A Nos.981 & 1070/Bang/2013 Page 40 of 51 different and possess significant R&D activity and posses intangible assets and also fails the onsite filter.

44.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

44.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company operates into two segments: 1) System Integration services and 2) Software Development services. Software Development services segment is further diversified into sub-services/ activities being, ‘Product Development services’, ‘Design Engineering services’, ‘Visual Computing Labs’ for which no segmental information is available. Business Units of company include Embedded Product Design services, Animation and Visual Effects, System Integration Services.The financials indicate that the R&D activities has resulted in the creation of Intellectual properties. On perusal of the annual report, it can be seen that the company has R & D expenses of 3.39% of sales. On perusal of the annual report, it can be seen from the description of the activities performed in the embedded software service segment that the company has invested in R&D efforts in developing reusable software components, licensable IPs, etc. The company is engaged in IP development in communication and multimedia technologies. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett- Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

44.3 We heard rival submissions and perused the material on record. The comparability of Tata Elxsi Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

IT(TP)A Nos.981 & 1070/Bang/2013 Page 41 of 51 “27. Vis-a-vis M/s. Tata Elxsi Ltd (seg), findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 15 which is reproduced hereunder : 15. Tata Elxsi Ltd. (Seg) 15.1 This company was a comparable selected by the TPO inspite of the assessee's objections to its inclusion in the set of comparables on the ground that it is a product company which has significant R&D activity, IPR’s, etc and is therefore functionally dis-similar from the assessee who is a provider of software development services. The TPO, however, rejected the contentions put forth by the assessee and included this company in the set of comparables on the ground that he has taken only the software development and services segment for comparability purposes. 15.2 Before us, it was submitted that this company is not functionally comparable to the assessee as it performs a variety of activities under the software development and services segment, namely, product design, innovation design engineering and visual computing labs, as is reflected in the Annual Report of the company and therefore it is not purely a provider of software development services like the assessee. The learned Authorised Representative also submitted that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) has held that this company is to be omitted from the list of comparables for providers of software development services, like the assessee in the case on hand. 15.3 Per contra, the learned Departmental Representative supported the orders of the authorities below in including this company in the list of comparable companies. 15.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision relied on by the assessee. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables to a provider of software development holding as under at paras 13.4.1 and 13.4.2 of its order extracted hereunder :- “ 13.4.1 We have heard both parties and carefully perused and considered the material on record. From the details on record, we find that this company is predominantly engaged in product designing services and not purely software development services. The details in the Annual Report show that the segment “software development services” relates to design services and are not similar to software development services performed by the assessee. 13.4.2 The Hon'ble Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. V ACIT (ITA No.7821/Mum/2011) has held that Tata Elxsi Ltd. is not a software development service provider and therefore it is not functionally comparable. In this context the relevant portion of this order is extracted and reproduced below :- “ …. Tata Elxsi is engaged in development of niche product and development services which is entirely different from the assessee company. We agree with the contention of the learned Authorised

IT(TP)A Nos.981 & 1070/Bang/2013 Page 42 of 51 Representative that the nature of product developed and services provided by this company are different from the assessee as have been narrated in para 6.6 above. Even the segmental details for revenue sales have not been provided by the TPO so as to consider it as a comparable party for comparing the profit ratio from product and services. Thus, on these facts, we are unable to treat this company as fit for comparability analysis for determining the arm’s length price for the assessee, hence, should be excluded from the list of comparable portion.” As can be seen from the extracts of the Annual Report of this company produced before us, the facts pertaining to Tata Elxsi have not changed from Assessment Year 2007-08 to Assessment Year 2008-09. We, therefore, hold that this company is not to be considered for inclusion in the set of comparables in the case on hand. It is ordered accordingly.” 15.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand.” Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Tata Elxsi Ltd. from the list of comparables.

Thirdware Solutions Ltd. 45. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it its turnover is more than Rs.,500 crores.

45.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

45.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company is engaged in implementation and consulting services of software based on ERP and Business Intelligence. M/s.Thirdware also earns revenues from sale of user licenses and subscription. Software development services rendered by the company comprise of IT(TP)A Nos.981 & 1070/Bang/2013 Page 43 of 51 implementation and consulting services of developed and traded software. There are no segmentals for software development services and product development services and the financials indicate that the production and sale of developed and traded software cannot be expressed in any generic unit and therefore, segmental data is not available. Reliance in this regard was placed on the decision of the co- ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

45.3 We heard rival submissions and perused the material on record. The comparability of Thirdware Solutions Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“28. Vis-a-vis M/s. Thirdware Solutions Ltd, findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 16 which is reproduced hereunder : 16. Thirdware Solutions Ltd. 16.1 This company was included in the list of comparables despite the objections of the assessee to its inclusion in the list of comparables on the ground that its turnover was in excess of Rs.500 Crores. 16.2 Before us, the assessee objected to the inclusion of this company as a comparable for the reason that apart from software development services, it is in the business of product development, trading in software, giving licenses for use of software and that segmental details are not available. It was also submitted that a co- ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) in its order for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables for providers of software development services. 16.3 Per contra, the learned Departmental Representative supported the orders of the TPO in including this company in the list of comparables. 16.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision relied upon. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 had held that since this company is IT(TP)A Nos.981 & 1070/Bang/2013 Page 44 of 51 engaged in product development and earns revenue from sale of licenses it is to be omitted from the list of comparables for software development services, holding as under at para 15.3 of the order :- “ 15.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the material on record that the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Further, as pointed out by the learned Authorised Representative, the Pune Bench of the Tribunal in the case of E-Gain Communications Pvt. Ltd. (supra) has directed that since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. In the case on hand, the assessee is rendering software development services. In this factual view of the matter and following the afore cited decision of the Pune Tribunal (supra), we direct that this company be omitted from the list of comparables for the period under consideration in the case on hand.” 16.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to omit this company from the list of comparables in the case on hand.”

Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Thridware Solutions Ltd., from the list of comparables.

Wipro Ltd.(seg) 46. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it is functionally different and the revenue from software development services is less than 75% of total revenue and possess high turnover brand value.

46.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 45 of 51 46.2 Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter. Hence, the assessee-company is challenging the inclusion of this company on the ground that this company on the ground that the company is engaged in Information Technology Services, R&D Services, Business Processing Outsourcing and other business.The company caters to various industries and is leading India based provider of IT services and Products. Wipro is a giant company and a market leader assuming all risks leading to higher profits. During the year under consideration, the company has earned revenue from software development services (as considered by the TPO) of Rs 11955.6 crore which is 16.83 times higher than the revenue of the Appellant. There are no segmentals available for revenue from sale of product and services. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

46.3 We heard rival submissions and perused the material on record. The comparability of Wipro Ltd. (seg.) had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett- Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

“29. Vis-a-vis M/s. Wipro Ltd (seg), findings of this coordinate bench in the case of M/s. Broadcom Communications Technologies P. Ltd (supra), appears at para 17 which is reproduced hereunder : 17. Wipro Ltd. 17.1 This company was selected as a comparable by the TPO inspite of the assessee's several objections to its inclusion in the list of comparables on the grounds of functional dis-similarity, brand value, size, etc. 17.2 Before us, the learned Authorised Representative contended that this company i.e. Wipro Ltd. is not functionally comparable to the assessee as it owns significant intangibles; both in the nature of customer related and technology related intangibles. It was submitted that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra) has held that this company be omitted from the list of comparables for providers of IT(TP)A Nos.981 & 1070/Bang/2013 Page 46 of 51 software development services since it is into product development, owns significant IPR’s, has immense brand value, etc. 17.3 Per contra, the learned Departmental Representative supported the TPO’s action in including this company in the final list of comparables. 17.4.1 We have heard both parties and perused and carefully considered the material on record; including the judicial pronouncements cited and relied upon. We find that the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the list of comparables for providers of software development services for the following reasons as laid out at paras 12.4.1 and 12.4.2 of its order which is extracted hereunder :- “ 12.4.1 We have heard both parties and carefully perused and considered the material on record. We find merit in the contentions of the assessee for exclusion of this company from the set of comparables. It is seen that this company is engaged both in software development and product development services. There is no information on the segmental bifurcation of revenue from sale of product and software services. The TPO appears to have adopted this company as a comparable without demonstrating how the company satisfies the software development sales 75% of the total revenue filter adopted by him. Another major flaw in the comparability analysis carried out by the TPO is that he adopted comparison of the consolidated financial statements of Wipro with the stand alone financials of the assessee; which is not an appropriate comparison. 12.4.2 We also find that this company owns intellectual property in the form of registered patents and several pending applications for grant of patents. In this regard, the co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. (ITA No.227/Bang/2010) has held that a company owning intangibles cannot be compared to a low risk captive service provider who does not own any such intangible and hence does not have an additional advantage in the market. As the assessee in the case on hand does not own any intangibles, following the aforesaid decision of the co-ordinate bench of the Tribunal i.e. 24/7 Customer.Com Pvt. Ltd. (supra), we hold that this company cannot be considered as a comparable to the assessee. We, therefore, direct the Assessing Officer/TPO to omit this company from the set of comparable companies in the case on hand for the year under consideration.” 17.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Ltd. (supra), we direct the Assessing Officer / TPO to omit this company from telecommunication expenses list of comparable companies.”

Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd

IT(TP)A Nos.981 & 1070/Bang/2013 Page 47 of 51 (supra) we direct the AO/TPO to exclude Wipro Ltd., from the list of comparables.

Softsol India Ltd. 47. This company was selected by the TPO, but contested by the assessee-company before the TPO on the ground that it is functionally different.

47.1 On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

47.2 Hence, the assessee-company is challenging the inclusion of this company on the ground that this company it has related party transactions (RPT) of 18.3%; thereby failing the RPT filter of 15%. Reliance in this regard was placed on the decision of the co-ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

47.3 We heard rival submissions and perused the material on record. The comparability of Softsol India Ltd., had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

IT(TP)A Nos.981 & 1070/Bang/2013 Page 48 of 51 14.2 Before us, the learned Authorised Representative submitted that this company ought to be excluded from the list of comparables as a co-ordinate bench of this Tribunal in its order in 3DPLM Software Solutions Ltd. (supra) has held that this company is to be excluded as a comparable as it has related party transactions (RPT) of 18.3%; thereby failing the RPT filter of 15%. 14.3. Per contra, the learned Departmental Representative supported the order of the TPO in including this company in the list of comparables. 14.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision relied on by the assessee. We find that a co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 has held that this company is to be omitted from the set of comparables observing / holding as under at para 19.3 of the order :- “ 19.3 We have heard both parties and perused and carefully considered the material on record. We find that the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in has excluded this company from the set of comparables for the reason that RPT is in excess of 15% following the decision of another bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2011. As the facts for this year are similar and material on record also indicates that RPT is 18.3%, following the afore cited decisions of the co-ordinate benches (supra), we hold that this company is to be omitted from the list of comparables to the assessee in the case on hand.” 14.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to exclude this company from the list of comparables in the case on hand. Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Softsol India Ltd., from the list of comparables.

Lucid Software Ltd. 48. This company was selected by the TPO. On appeal, the ld.CIT(A) deleted this company from the list of comparables by applying turnover filter of range of Rs.200 crores to Rs.2000 crores. Being aggrieved by IT(TP)A Nos.981 & 1070/Bang/2013 Page 49 of 51 this revenue was in appeal before us in IT(TP)A No.1070/Bang/2013 wherein we held that turnover is not an appropriate filter.

48.1 Hence, the assessee-company is challenging the inclusion of this company on the ground that the company is a provider of software products and services to the global NDT (Non Destructive Testing) and material sciences industry. Lucid has developed proprietary software known as ‘Mullam’. Lucid amortizes expenditure in relation to this software on a deferment basis. Approximately 28% of total capital employed is invested in product development expenditure. No bifurcation is available between the two activities of the company, being software development services and sale of software products.

48.2 Reliance in this regard was placed on the decision of the co- ordinate bench of Tribunal in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd. vs. Asst.CIT in IT(TP)A No.1682/Bang/2012 dated 26/08/2015.

48.3 We heard rival submissions and perused the material on record. The comparability of Lucid Software Ltd. had come up for consideration before co-ordinate bench of this Tribunal in the case of M/s.Hewlett- Packard (India) Software Operation P.Ltd (supra). The relevant portion is extracted hereunder:

IT(TP)A Nos.981 & 1070/Bang/2013 Page 50 of 51 products and therefore is functionally different from provider of software development services. 11.3 Per contra, the learned Departmental Representative supported the orders of the authorities below in including this company as a comparable. 11.4.1 We have heard the rival contentions and perused and carefully considered the material on record; including the decision relied on by the assessee. We find that the co-ordinate bench in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09 excluded this company from the list of comparables observing that this company, being into development of software products, is functionally different from a provider of software development services, as is the assessee's in the case on hand and therefore ought to be excluded from the list of comparables. At para 16.3 of this order the co-ordinate bench held as under :- “ 16.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that the company i.e. Lucid Software Ltd., is engaged in the development of software products whereas the assessee, in the case on hand, is in the business of providing software development services. We also find that, co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 (IT(TP)A No.845/Bang/2011), LG Soft India Pvt. Ltd. (supra), CSR India Pvt. Ltd. (supra); the ITAT, Mumbai Bench in the case of Telecordia Technologies India Pvt. Ltd. (supra) and the Delhi ITAT in the case of Transwitch India Pvt. Ltd. (supra) have held, that since this company, is engaged in the software product development and not software development services, it is functionally different and dis-similar and is therefore to be omitted from the list of comparables for software development service providers. The assessee has also brought on record details to demonstrate that the factual and other circumstances pertaining to this company have not changed materially from the earlier year i.e. Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09. In this factual matrix and following the afore cited decisions of the co-ordinate benches of this Tribunal and of the ITAT, Mumbai and Delhi Benches (supra), we direct that this company be omitted from the list of comparables for the period under consideration in the case on hand.” 11.4.2 Following the above decision of the co-ordinate bench of this Tribunal in the case of 3DPLM Software Solutions Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to exclude this company from the list of comparables in the case on hand. Respectfully following the ratio of the decision of the co-ordinate bench in the case of M/s.Hewlett-Packard (India) Software Operation P.Ltd (supra) we direct the AO/TPO to exclude Lucid Software Ltd from the list of comparables.

IT(TP)A Nos.981 & 1070/Bang/2013 Page 51 of 51 In the result, the appeal filed by the assessee as well as the revenue is partly allowed.