HEWLETT PACKARD GLOBAL SOFT PVT. LTD. vs. DCIT,

First, we take up the cross appeals in the case of erstwhile TH Consulting (India) Private Limited in & 471/B/2013. Although various grounds are raised in both these appeals but both sides agreed that grievances of the assessee are in respect of seeking exclusion of three comparables i.e. 1) Apitco Limited, 2) Choksi Laboratories Limited and 3) WAPCOS Limited (Seg.) and the grievances of the revenue are against the direction of CIT (A) for exclusion of one comparable i.e. Rites Limited (Seg.). Both sides also agreed that these issues may be decided in the light of the chart submitted by the learned AR of the assessee and the Annual Reports of these companies available in the paper book and relevant page nos. were pointed out by the learned AR of the assessee where the business profile of respective company is available.

We have considered the rival submissions and perused the materials on record including the relevant pages of the Annual Reports of these comparable companies. The first company is Apitco Limited. For this company, pages 362 to 364 and 378 of the paper book were referred. As per these pages of the paper book being relevant portion of Annual report of this company, this company is deriving income from Asset Reconstruction & management Services, Project Related Services,

The second comparable company in dispute is Choksi Laboratories Limited. For this company, page no. 407 of the paper book is referred by the learned AR of the assessee. As per this page of the paper book being relevant portion of Annual report of this company, this company is a commercial testing house engaged in the testing of various products and also offers services in the field of pollution control as allied activity. . In our considered opinion, the nature & scope of services being rendered by the assessee is very different and narrow as compared to the scope of services being rendered by this company i.e. Choksi Laboratories Limited and therefore, this company also cannot be considered as a comparable in the present case because of functional dissimilarity. We direct the AO/TPO to exclude this company also from the final list of comparables.

The third comparable company in dispute is Rites Limited. For this company, page no. 474 of the paper book is referred by the learned

The fourth comparable company in dispute is WAPCOS Limited (Seg.). For this company, page no. 580, 587, 590,595 & 635 of the paper book is referred by the learned AR of the assessee. As per these pages of the paper book being relevant portion of Annual report of this company, this company derives majority of its revenues from consultancy and contracts and it is having three business centre being 1) Centre for Power, 2) Centre for infrastructure and 3) Centre for water Resources. In our considered opinion, the nature & scope of services being rendered by the assessee is also very different as compared to the scope of services being rendered by this company i.e. WAPCOS Limited (Seg.)and therefore, this company also cannot be considered as a comparable in the present case because of functional dissimilarity. We direct the AO/TPO to exclude this company also from the final list of comparables.

As per above discussion, it is seen that there is no merit in the objection of the revenue seeking non exclusion of one comparable i.e. Rites Limited and we have held that all three companies, exclusion of which is being requested by the assessee i.e. 1) Apitco Limited, 2) Choksi Laboratories Limited and 3) WAPCOS Limited (Seg.) should be excluded from the final list of comparables.

In the result, the appeal of the assessee being ITA 435/Bang/2013 is partly allowed in the terms indicated above and the appeal of the revenue being ITA 471/Bang/2013 is dismissed.

Now, we take up the cross appeals in the case of erstwhile RELQ Software Private Limited in & 472/B/2013.

It is submitted by the learned AR of the assessee that out of 20 comparables as per the order of the TPO, learned CIT (A) has rejected the claim of exclusion of two comparables i.e. 1) LGS Global Limited and 2) E – Zest Solutions Limited and the assessee is in appeal before the tribunal seeking their exclusion and learned CIT (A) has directed exclusion of the following 8 comparables and the revenue is in appeal against this direction of CIT (A). These 8 companies are 1) Avani Cincom Technologies Limited, 2) Celestial Biolabs Limited, 3) Tata Elxsi Limited (Seg.), 4) Wipro Limited (Seg.), 5) Flextronics Software Systems Limited (Seg.), 6) Igate Global Solutions Limited, 7) Sasken Communication Technologies Limited (Seg.) and 8) Kals Info Systems Limited (Seg.). He submitted a copy of tribunal order in assesses own case for the same year in and submitted that as per this tribunal order, all these 10 comparable companies are to be excluded and if that is done, the average margin of remaining 7 comparables will be 19.62 % because no ground is raised by the revenue in respect of 3 comparables for which, learned CIT (A) directed for exclusion i.e. 1) Infosys Technologies Limited, 2) Mindtree Limited (Seg.) and 3) Persistent Systems Limited. He drawn our attention to page 31 of this tribunal order. It was pointed out by the bench that the issue regarding 3 comparable companies i.e. 1) Flextronics Software Systems Limited (Seg.), 2) Igate Global Solutions Limited and 3) Sasken Communication Technologies Limited (Seg.) is not covered in favour of the assessee by this tribunal order although for remaining 7 comparable companies, it is so covered because learned DR of the IT(TP)A No. 435,436,471 & 472/B/2013 revenue has not pointed out any difference in facts. In reply, he submitted that the issue about these three companies was left open by the tribunal in this order but even if these three companies are not excluded, the average profit of such 10 comparable companies including these three will be only 17.42 % as against 19.62 % of 7 companies after excluding these three companies and the profit percentage of the present assessee is 9.90% as noted by the TPO on page 2 of his order.

We have considered the rival submissions and the tribunal order cited by the learned AR of the assessee. As per this tribunal order, following 7 companies are to be excluded from the list of final compaables i.e. 1) Avani Cincom Technologies Limited, 2) Celestial Biolabs Limited, 3) Tata Elxsi Limited (Seg.), 4) Wipro Limited (Seg.), 5) LGS Global Limited, 6) E – Zest Solutions Limited and 7) Kals Info Systems Limited. Regarding the remaining three companies exclusion of which is allowed by CIT (A) but the issue is not covered by this tribunal order i.e. 1) Flextronics Software Systems Limited (Seg.), 2) Igate Global Solutions Limited and 3) Sasken Communication Technologies Limited (Seg.), we find that turnover of following two companies is more than 10 times of the turnover of the assessee company at Rs. 75.35 Crores. The turnover of 1) Flextronics Software Systems Limited (Seg.) is Rs.953.35 Crores and of 2) Igate Global Solutions Limited is Rs. 781.51 Crores. Hence these two companies are also excluded by applying turnover filter. Then we are left with 8 comparables out of 20 comparables selected by the TPO. The average margin of these remaining 8 comparables is stated to be 18.52%. We direct the TPO/AO to verify this working of average margin of these 8 comparable companies and recalculate the TP adjustment accordingly.

Regarding the issue raised by the revenue in respect of deduction u/s 10A, we find that this issue is covered in favour of the assessee by IT(TP)A No. 435,436,471 & 472/B/2013 the judgment of Hon’ble Karnataka High Court rendered in the case of Tata Elxsi limited, 349 ITR 98 and respectfully following the same, we decline to interfere in the order of CIT (A) on this issue.

In the result, the appeal of the assessee being ITA 436/Bang/2013 is partly allowed in the terms indicated above and the appeal of the revenue being ITA 472/Bang/2013 is also partly allowed in the terms indicated above.

In the combined result, the appeal of the revenue being ITA 471/Bang/2013 is dismissed and remaining one appeal of the revenue and two appeals of the assessee are partly allowed in the terms indicated above.