INFINEON TECHNOLOGIES INDIA PRIVATE LIMITED,BANGALORE vs. ACIT, BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH ‘ C ’ BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T. (T.P) A. No.1670/Bang/2012 S.P. No.120/Bang/2015 (Assessment Year : 2008-09) M/s. Infineon Technologies India Pvt. Ltd., Kalyani Platina, 3rd Floor, Block 1, No.6 & 24, EPIP Zone Phase 1, Whitefield, Bangalore-560 066 …. Appellant. PAN AABCS 6967N Vs. Asst. Commissioner of Income Tax, Circle 11(4), Bangalore. ….. Respondent. Appellant By : Shri K.R. Vasudevan, Advocate. Respondent By : Shri D. Sudhakara Reddy, CIT-III (D.R.) Date of Hearing : 5.10.2015. Date of Pronouncement : 6.11.2015. O R D E R Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the order of assessment for Assessment Year 2008-09 by the DCIT, Circle 11(4), Bangalore passed under Section 143(3) rws 144C of the Income Tax Act, 1961 (in short 'the Act') vide order dt.29.10.2012, in pursuance of the directions issued by the Dispute Resolution Panel (‘DRP’) under Section 144C(5) rws 144C(8) of the Act vide order dt.17.9.2012. 2. The facts of the case, briefly, are as under :-

2 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 2.1 The assessee, a company engaged in the business of provision of software development services of electronic integrated circuits and firmware development of integrated circuits to its parent company, Infineon Technologies Asia Pacific Pte, Singapore, filed its return of income for Assessment Year 2008-09 on 30.9.2008 declaring total income of Rs.21,29,98,270. The case was taken up for scrutiny. In the period under consideration, the assessee had reported the following international transactions :- Software Research & Development and Information Rs.149,50,24,153. Technology Marketing Support Services. R.2,17,85,857. Foreign Currency Loan Rs.23,04,22,866 Reimbursement of expenses paid. Rs.15,43,04,052.

2.2 In view of the above international transactions entered into by the assessee, the Assessing Officer (‘A.O’) made a reference under Section 92CA of the Act to the Transfer Pricing Officer (‘TPO’) for determining the Arm’s Length Price (‘ALP’) of these international transactions after obtaining the necessary approval from the CIT –I, Bangalore. The TPO vide order under Section 92CA of the Act dt.22.9.2011 proposed a T.P. Adjustment of Rs.26,13,69,735 to the ALP of the assessee's international transactions in respect of the software development services rendered by the assessee. The Assessing Officer then issued a draft order of assessment under Section 143(3) rws 144C of the Act dt.30.11.2011 determining the income of the assessee at Rs.58,69,63,275 which included, inter alia, the proposed T.P. Adjustment of Rs.26,13,69,735. 2.3 Aggrieved by the aforesaid draft order of assessment dt.30.11.2011 for the Assessment Year 2008-09, the assessee filed its objections thereto before the DRP, Bangalore. The DRP

3 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 vide its order under Section 144C(5) rws 144C(8) of the Act dt.17.9.2012 confirmed the additions / disallowances made by the TPO/A.O and rejected the objections raised by the assessee. In consequence thereof, the Assessing Officer passed the final order of assessment under Section 143(3) rws 144C of the Act dt.29.10.2012 assessing the taxable income of the assessee at Rs.58,69,63,275 by making the following additions/disallowances :- (i) T.P. Adjustment : Rs.26,13,69,735. (ii) Project Specific Cost : Rs.11,25,95,270. 3.1 Aggrieved by this final order of assessment for Assessment Year 2008-09 dt.29.10.2012, the assessee is in appeal before this Tribunal. Before proceeding to deal with the grounds of appeal, the brief facts relating to the Transfer Pricing issue is summarized hereunder. 3.2 The assessee is engaged in the business of provision of software development services of electronic integrated circuits and firmware development of integrated circuits to its parent company. It also provides marketing support services to its parent company. The segmental financials reported by the assessee during the year under consideration are as under :- Particulars Software Research & Development & Marketing InformationTechnology Support Services. Operating Income (*) 149,50,24,153 2,17,85,857 Operating Cost (**) 142,18,35,901 1,99,87,025 Operating Profit 7,31,88,252 17,98,832 OP Margin / Cost 5.14% 9.00%

3.3 The assessee conducted a T.P. Study for the international transactions adopting TNMM as the Most Appropriate Method (‘MAM’). Based on the study conducted and the comparability analysis carried out, the assessee selected a set of 18 comparable companies to the assessee

4 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 with a Mean Margin of 8.98%. As the margin earned by the assessee with its Associated Enterprises (AEs) was at 5.14%, which was within the margin of + / - 5%, the assessee concluded that the price of its international transactions are at Arm’s Length. 3.4 While accepting TNMM as the MAM, the TPO rejected the assessee's T.P. Study for various reasons set out in the show cause notice issued and embarked on a fresh search using the data bases ‘Prowess’ and ‘Capitaline’. After considering the objections of the assessee, the TPO selected the final set of 20 comparables which are as under :- Sl.No. Name of the Company OP/TC % 1. Avani Cincom Technologies. 25.62 2. Bodhtree Consulting Ltd. 18.72 3. Celestial Biolabs. 87.94 4. e-zest Solutions Ltd. 29.81 5. Flextronics (Aricent) 7.86 6. iGAte Global Solution Ltd. 13.99 7. Infosys 40.37 8. Kals Information Systems Ltd. (Seg.) 41.94 9. LGS Global Ltd. 27.52 10. Mindtree Ltd. (Seg.) 16.41 11. Persistent Systems Ltd. 20.31 12. Quintegra Solution Ltd. 21.74 13. R Systems International (Seg.) 15.30 14. R S Software (India) Ltd. 7.41 15. SaskenCommunication Technologies 7.58 Ltd. (Seg.)

5 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 16. Tata Elxsi (SEg.) 18.97 17. Thirdware Solution Ltd. 19.35 18. Wipro Ltd. (SEg.) 28.45 19. Softsol India Ltd. 17.89 20. Lucid Software Ltd. 16.05 Average 23.65

3.5 The Average Mean Margin of the 20 comparable companies selected by the TPO was 23.65% whereas the assessee's Mean Margin was 5.14% on total cost. After granting working capital adjustment of 0.12%, the TPO worked out the T.P. Adjustment at Rs.26,13,69,735 as under :- Particulars. Amount (Rs.) Arm’s Length Mean Margin on cost 23.65% Less : Working Capital Adjustment 0.12% Adjusted Mean Margin 23.53% Operating Cost 142,18,35,901 ALP @ 123.53% of OP Cost 1,75,63,93,888 Price recovered 1,49,50,24,153 Shortfall being adjustment u/s.92CA 26,13,69,735

Based on the above computation, the TPO proposed an adjustment of Rs.26,13,69,735 to the ALP of the assessee's international transactions with its AEs, which was incorporated in the final order of assessment for Assessment Year 2008-09 dt.29.10.2012 after having been upheld by the DRP. The assessee's taxable income as per this order of assessment was determined at Rs.58,67,63,275, in view of the following additions / disallowances :-

6 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 (i) Disallowance of Project Specific Cost : Rs.11,25,95,270. (ii) T.P. Adjustment : rs.26,13,69,735. 4.1 In this appeal, the assessee has raised the following grounds :- I. Transfer Pricing The grounds mentioned hereinafter are without prejudice to one another. 1. The learned Assessing Officer (“AO”) and the learned Additional Commissioner of Income Tax (Transfer Pricing - VI), Bangalore (“Transfer Pricing Officer” or “TPO”) grossly erred in law and facts of the case in determining the Arm’s Length Price (‘ALP’) of the international transaction of the Appellant and thereby making an adjustment of Rs. 261,369,735/- with respect to the software development services rendered by the tax payer. 2. The learned AO and TPO ought to have accepted the arm’s length price as determined by the Appellant. 3. The learned TPO and the learned AO ought to have accepted the difference in risk profile of the appellant vis-a-vis the comparable companies. The learned TPO and the learned AO erred in not allowing the benefit of market risk adjustment to the Appellant.

7 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 6.2 in adopting the arm’s length mark up to be 23.65%, in respect of the international transaction pertaining to the rendering of software development services by the Appellant; 6.3 in completely relying on the unaudited data requisitioned and consequently obtained by taking recourse to the provisions of Section 133(6) of the Income- tax Act, 1961 (‘the Act’), which in many instances are inconsistent with the data disclosed in audited reports. In doing so the learned TPO has erred in complying with the principles of natural justice. 6.4 in considering 25 percent as the threshold limit for the Related Party Transactions filter as this number is an arbitrary number that has been adopted without any judicial precedence or reasonable basis. 6.5 in rejecting the upper limit for sales turnover filter proposed by the appellant without providing any empirical analysis. In doing so, the learned TPO erred in not appreciating that the software industry is clearly demarcated based on size. 6.6 in accepting companies like Infosys Limited and Wipro Limited as comparable companies even though the sales of Infosys and Wipro are driven based on brand developed by them. In doing so the learned TPO and the learned AO have ignored the adjudication of the Delhi Income Tax Appellate Tribunal (ITAT) in Agnity India Technologies India Pvt. Ltd. (reference: ITA No. 3856(Del)/2010). 6.7 in accepting companies engaged in the provision of software product development like Avani Cimcon Technologies Limited, KALS Information Systems Limited, Persistent Systems Limited, Quintegra Solution Limited, Sasken Communication Technologies Limited, R Systems International Limited and Thirdware Solution Limited which are functionally not comparable to the Appellant’s business. 6.8 in accepting Tata Elxsi Limited as a comparable company even though the company in its reply to the learned TPO under section 133(6) had mentioned that the company provides product design services, which is functionally not comparable to the Appellant’s business. 6.9 in accepting companies such as Celestial Labs Limited, Flextronics Software Systems Limited and Softsol India Limited which are functionally not comparable to the Appellant’s business; 6.10 in accepting companies like Celestial Labs Limited and Infosys Limited which have abnormal/fluctuating profit margins. In doing so the learned AO have disregarded the various jurisdictional ITAT rulings in case of SAP LABS India

8 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 Pvt. Ltd. Vs. ACIT (reference ITA. No. 398/Bang/2008), E-Gain Communication Private Limited (reference: ITA No. 1685/PN/07 - Pune); 6.11 in accepting companies like Flextronics Software Systems Limited, Quintegra Solutions Limited, Sasken Communications Technologies Limited, Wipro Limited and R Systems International Limited without taking into consideration the peculiar economic circumstances surrounding their operations during the year under review; 6.12 in accepting companies having Related Party Transactions exceeding 10% such as Softsol India Limited and Infosys limited. In doing so the learned AO has disregarded the Delhi ITAT ruling in case of Sony India Pvt. Ltd. (reference ITA No.1189/Del/2005); 6.13 in upholding the actions of the learned TPO in applying the export filter for selection of software comparables. In doing so, the learned TPO erred in rejecting Aarman Software Private Limited and VMF Soft Tech Limited. 6.14 in applying the onsite filter for selection of software comparables with the use of the data obtained under section 133(6) of the Act, is not economically valid. In doing so, the learned TPO erred in rejecting companies such as Akshay Software Technologies Limited, Prithvi Information Solutions Limited, Silverline Technologies Limited, Zylog Systems Limited and VJIL Consulting Limited. 6.15 in not maintaining consistency in applying the filters of rejecting companies with abnormal fluctuating margin, diminishing revenue/ persistent losses for the period under consideration, companies with peculiar economic circumstances, companies with different financial year ending, companies for which data are not available in database/ public domain and companies with related party transactions exceeding 25%. 6.16 in accepting companies like Wipro Limited, Thirdware Solution Limited, Persistent Systems Limited, Quintegra Solutions Limited Tata Elxsi Limited which owns intangible assets. 6.17 in accepting companies like Igate global solutions Limited, Thirdware solution Limited, E-Zest Solutions Limited and Wipro limited where segmental data pertaining to software development services is not available.

9 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 II. Corporate Tax

4.2 The assessee has also raised the following additional grounds :- 4.2.1 I. Vide letter dt.12.1.2015, the assessee has raised the additional grounds on the following issues :- i) Ground No.12 : Lucid Software Ltd. should be rejected as a comparable. II. Vide letter dt.16.1.2015, the assessee has raised further additional grounds on the following issues :- (i) Bodhtree Consulting Ltd. should be rejected as a comparable company.

10 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 (ii) Grant of depreciation adjustment. (iii) Correct margin of the assessee should be considered. (iv) Error in computing the work capital adjusted margin. TRANSFER PRICING ISSUES. 5.1 In the course of proceedings before us, the learned Authorised Representative for the assessee submitted a chart, explaining the assessee's position regarding the acceptability or otherwise of each of the companies selected by the TPO in the list of comparable companies to the assessee. The learned Authorised Representative also submitted that he would put forth submissions only on the comparability of the individual companies selected by the TPO in the final set of comparables and also on the inclusion of two of the companies selected by the assessee but rejected by the TPO. 5.2 In this context, it was submitted that only the following grounds of appeal in respect of TP Issues are being pressed and would require consideration and adjudication by the Bench :- i. Grounds at S.Nos.3 & 4 pertaining to the grant of risk adjustment. ii. Grounds No. 6.5 to 6.11, 6.16 and 6.17 related to the exclusion of individual companies selected by the TPO. iii. Ground No.6.13 related to the exclusion of two comparables. iv. Additional Ground raised for exclusion of Bodhtree Consulting Ltd. v. Addl. Ground raised in respect of exclusion of Lucid Software Ltd. vi. Addl. Ground for grant of depreciation adjustment. vii. Addl. Grounds on computation of correct margin and working capital adjustment margin.

11 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 5.3 Consequently, since all the other grounds, at S.Nos.1, 2, 5, 6.1 to 6.4 6.14 to 6.17 and 7 relating to T.P. Issues are not being pressed, the same are rendered infructuous and accordingly dismissed. 5.4 In the course of proceedings before us, the learned Authorised Representative submitted that the facts of the case on hand are similar, inter alia, to the case of M/s. Sonus Networking India Pvt. Ltd. ( IT(TP) A No.1567/Bang/2012 for Assessment Year 2008-09 in which the co-ordinate bench of this Tribunal vide its order dt.14.5.2015 has rendered its ruling. It was submitted that the set of comparables chosen by the TPO in the cited case (supra) is exactly the same as those selected in the case on hand and therefore the assessee places reliance on the decisions in the cited case (supra). The learned Authorised Representative further submitted that in respect of the exclusion of the company, Bodhtree Consulting Ltd., the assessee places reliance on the decision of the co-ordinate bench of this Tribunal in the case of CISCO Systems India Pvt. Ltd., in IT(TP)A No.27/Bang/2014 dt.14.8.2014. 5.5 At the outset, it needs to be examined whether the judicial pronouncements relied on by the assessee are comparable, on facts, to the assessee in the case on hand. As pointed out by the learned Authorised Representative, the decisions on which reliance have been placed also pertain to the same assessment year namely, 2008-09. The TPO has himself charcterised these companies as engaged in software development services. Also, the various other parameters of comparability are also similar, in that the TPO has adopted TNMM as the MAM in these cases, the PLI has been adopted at Operating Profit (OP) to Total Cost (TC) and the set of comparable companies selected by the TPO are exactly the same in these cases. In view of the fact that

12 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 the TPO has adopted similar comparability analysis and considered the same set of comparable companies in these companies, we find merit in the contentions of the learned Authorised Representative that the decision rendered in the cases (cited supra) can be relied upon in deciding the comparability of the companies in the assessee's case also. Grounds 6.5 to 6.6, 6.16 to 6.17 Exclusion of companies from list of comparables sought for by the assessee. The learned Authorised Representative for the assessee brought to our notice that out of the 20 comparables chosen by the TPO, 13 companies as listed below would have to be excluded as not comparable to the assessee in the case on hand, as laid down by the co-ordinate bench of this Tribunal in the case of M/s. Sonus Networks India Pvt. Ltd. (supra). 1) Avani Cincom Technologies Ltd. 2) Bodhtree Consulting Ltd., 3) Celestial Bio labs Ltd. 4) E-Zest Solutions Ltd. 5) Infosys Technologies Ltd. 6) KALS Information System (Seg.) 7) Persistent Systems Ltd. 8) Quintegra Solutions Ltd. 9) Tata Elxsi Ltd. (Seg.) 10) Thirdware Solutions Ltd. 11) Wipro Ltd. 12) Softsol India Ltd. 13) Lucid Software Ltd.

13 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 6.2 We have heard both parties and perused the material on record. We find that the following were the relevant observations and findings of the co-ordinate bench of this Tribunal in the case of Sonus Networks India Pvt. Ltd., in IT(TP)A No.1567/Bang/2012 dt.14.5.2015 for Assessment Year 2008-09 at paras 10 to 19.3 thereof, while excluding the 12 of the aforesaid companies listed at S.Nos.1, 3 to 13 (supra), which is extracted hereunder :-

“10. The following were the relevant observations of the tribunal on the 12 comparable companies in the aforesaid decision:- “Companies incorrectly adopted as comparables by the TPO as per the contention of the assessee. 7.0 Avani Cincom Technologies Ltd. 7.1 This company was selected by the TPO as a comparable. The assessee objects to the inclusion of this company as a comparable on the ground that this company is not functionally comparable to the assessee as it is into software products whereas the assessee offers software development services to its AEs. The TPO had rejected the objections of the assessee on the ground that this comparable company has categorized itself as a pure software developer, just like the assessee, and hence selected this company as a comparable. For this purpose, the TPO had relied on information submitted by this company in response to enquiries carried out under section 133(6) of the Act for collecting information about the company directly. 7.2 Before us, the learned Authorised Representative reiterated the assessee's objections for the inclusion of this company from the list of comparable companies on the ground that this company is not functionally comparable to the assessee as it is into software products. It is also submitted that the segmental details of this company are not available and the Annual Report available in the public domain is not complete. It was further contended that the information obtained by the TPO under section 133(6) of the Act, on the basis of which the TPO included this company in the final list of comparable companies, has not been shared with the assessee. In

14 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 support of this contention, the learned Authorised Representative placed reliance on the following judicial decisions : i) Trilogy E-Business Software India Pvt. Ltd. V DCIT (ITA No.1054/Bang/2011) ii) Telecordia Technologies India Pvt Ltd V ACIT (ITA No.7821/Mum/2011) It was also submitted that this company has been held to be functionally not comparable to the assessee by a co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 dt.22.2.2013. 7.3 The learned Authorised Representative further submitted that the facts pertaining to this company has not changed from the earlier year (i.e. Assessment Year 2007-08) to the period under consideration (i.e. Assessment Year 2008-09). In support of this contention, it was submitted that :- (i) The extract from the Website of the company clearly indicates that it is primarily engaged in development of software products. The extract mentions that this company offers customised solutions and services in different areas; (ii) The Website of this company evidences that this company develops and sells customizable software solutions like “DX Change, CARMA, etc. 7.4 The learned Authorised Representative submitted that a co-ordinate bench of the Tribunal in its order in Curram Software International Pvt. Ltd., in its order in ITA No.1280/Bang/2012 dt.31.7.2013 has remanded the matter back to the file of the Assessing Officer / TPO to examine the comparability of this company afresh, by making the following observations at paras 9.5.2 and 9.5.3 thereof :- “ 9.5.2 As regards the submission of the learned Authorised Representative, we are unable to agree that this company has to be deleted from the list of comparables only because it has been deleted from the set of comparables in the case of Trilogy E-Business Software India Pvt. Ltd. (supra). No doubt this company has been deleted as a comparable in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) and this can be a good guidance to decide on the comparability in the case on hand also. This alone, however, will not suffice for the following reasons :- (i) The assessee needs to demonstrate that the FAR analysis and other relevant facts of the Trilogy case are equally applicable to the facts of the

15 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 assessee's case also. Unless the facts and the FAR analysis of Trilogy case is comparable to that of the assessee in the case on hand, comparison between the two is not tenable. (ii) After demonstrating the similarity and the comparability between the assessee and the Trilogy case, the assessee also needs to demonstrate that the facts applicable to the Assessment Year 2007-08, the year for which the decision in case of Trilogy E-Business Software India Pvt. Ltd. (supra) was rendered are also applicable to the year under consideration i.e. Assessment Year 2008-09. 9.5.3 It is a well settled principle that the assessee is required to perform FAR analysis for each year and it is quite possible that the FAR analysis can be different for each of the years. That being so, the principle applicable to one particular year cannot be extrapolated automatically and made applicable to subsequent years. To do that, it is necessary to first establish that the facts and attendant factors have remained the same so that the factors of comparability are the same. Viewed in that context, the assessee has not discharged the onus upon it to establish that the decision rendered in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) can be applied to the facts of the case and that too of an earlier year i.e. Assessment Year 2007-08. The assessee, in our view, has not demonstrated that the facts of Trilogy E-Business Software India Pvt. Ltd. (supra) are identical to the facts of the case on hand and that the profile of the assessee for the year under consideration is similar to that of the earlier Assessment Year 2007-08. In view of facts as discussed above, we deem it fit to remand the matter back to the file of the Assessing Officer / TPO to examine the comparability of this company afresh by considering the above observations. The TPO is directed to make available to the assessee information obtained under section 133(6) of the Act and to afford the assessee adequate opportunity of being heard and to make its submissions in the matter, which shall be duly considered before passing orders thereon. It is ordered accordingly.” The learned Authorised Representative submits that this company was selected as a comparable by the TPO not by any FAR analysis or as per the search process conducted by the TPO, but only as an additional comparable for the reason that it was selected as a comparable in the earlier year i.e. Assessment Year 2007-08 on the basis of information

16 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 obtained under section 133(6) of the Act. In this regard, the learned Authorised Representative took us through the relevant portions of the TP order under section 92CA of the Act and the show cause notices for both the earlier year i.e. Assessment Year 2007-08 and for this year and contended that the selection of this company as a comparable violates the principle enunciated in Curram Software International Pvt. Ltd. (supra) that a company can be selected as a comparable only on the basis of FAR analysis conducted for that year and therefore pleaded for its exclusion. The learned Authorised Representative also submitted that he has brought on record sufficient evidence to show that the functional profile of this company remains unchanged from the earlier year and hence the findings rendered by the co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) and in other cases like Trilogy E-Business Software India Pvt. Ltd. (supra) are applicable to the year under consideration as well. 7.5 Per contra, the learned Departmental Representative supported the order of the TPO / DRP for inclusion of this company Avani Cincom Technologies Ltd. in the final set of comparables. 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 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,

17 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 following the decisions of the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 dt.22.2.2013, and in the case of Trilogy 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. 9. Celestial Biolabs Ltd. 9.1 This comparable was selected by the TPO for inclusion in the final list of comparables. Before the TPO, the assessee had objected to the inclusion of this company in the list of comparables for the reasons that it is functionally different form the assessee and that it fails the employee cost filter. The TPO, however, brushed aside the objections raised by the assessee by stating that the objections of functional dissimilarity has been dealt with in detail in the T.P. order for Assessment Year 2007-08. As regards the objection raised in respect of the employee cost filter issue, the TPO rejected the objections by observing that the employee cost filter is only a trigger to know the functionality of the company. 9.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable, as the company is into bio-informatics software product / services and the segmental break up is not provided. It was submitted that :- (i) This company is engaged in the development of products in the field of bio- technology, pharmaceuticals, etc. and therefore is not functionally comparable to the assessee; (ii) This company has been held to be functionally incomparable to software service providers by the decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra);

(iii) The co-ordinate bench of this Tribunal in its order in the case of Trilogy E- Business Software India Pvt. Ltd. (supra) at para 43 thereof had observed about this company that – “ ….. As explained earlier, it is a diversified company and therefore cannot be considered as comparable functionally with the assessee. There has been no attempt to identify, eliminate and make adjustment of the profit margins so that the difference in functional comparability can be eliminated. By not resorting to such a process of making adjustments, the TPO has rendered this

18 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 company as not qualifying for comparability. We therefore accept the plea of the assessee in this regard.” (iv) The rejection / exclusion of this company as a comparable for Assessment Year 2007-08 for software service providers has been upheld by the co-ordinate benches of this Tribunal in the cases of LG Soft India Pvt. Ltd. in ITA No.112/Bang/2011, CSR India Pvt. Ltd. in IT(TP)A No.1119/Bang/2011 and by the ITAT, Delhi Bench in the case of Transwitch India Pvt. Ltd. in ITA No.6083/Del/2010. (v) The facts pertaining to this company has not changed from Assessment Year 2007-08 to Assessment Year 2008-09 and therefore this company cannot be considered for the purpose of comparability in the instant case and hence ought to be rejected. In support of this contention, the assessee has also referred to and quoted from various parts of the Annual Report of the company. 9.3 Per contra, the learned Departmental Representative supported the inclusion of this company in the list of comparable companies. The learned Departmental Representative submitted that the decisions cited and relied on by the assessee are for Assessment Year 2007-08 and therefore there cannot be an assumption that it would continue to be applicable for the period under consideration i.e. Assessment Year 2008-09. 9.4.1 We have heard both the parties and perused and carefully considered the material on record. While it is true that the decisions cited and relied on by the assessee were with respect to the immediately previous assessment year, and there cannot be an assumption that it would continue to be applicable for this year as well, the same parity of reasoning is applicable to the TPO as well who seems to have selected this company as a comparable based on the reasoning given in the TPO’s order for the earlier year. It is evidently clear from this, that the TPO has not carried out any independent FAR analysis for this company for this year viz. Assessment Year 2008-09. To that extent, in our considered view, the selection process adopted by the TPO for inclusion of this company in the list of comparables is defective and suffers from serious infirmity. 9.4.2 Apart from relying on the afore cited judicial decisions in the matter (supra), the assessee has brought on record substantial factual evidence to establish that this company is functionally dis-similar and different from the assessee in the case on hand and is therefore not comparable and also that the findings rendered in the cited decisions for the earlier years i.e. Assessment Year 2007-08 is applicable for this year also. We agree with the submissions of the assessee that this company is functionally different from the

19 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 assessee. It has also been so held by co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) as well as in the case of Trilogy E-Business Software India Pvt. Ltd. (supra). In view of the fact that the functional profile of and other parameters of this company have not changed in this year under consideration, which fact has also been demonstrated by the assessee, following the decision of the co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 in ITA No.845/Bang/2011 and Trilogy E-Business Software India Pvt. Ltd. in ITA No.1054/Bang/2011, we hold that this company ought to be omitted form the list of comparables. The A.O./TPO are accordingly directed. 10. KALS Information Systems Ltd. 10.1 This is a comparable selected by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the set of comparables on grounds of functional differences and that the segmental details have not been provided in the Annual Report of the company with respect to software services revenue and software products revenue. The TPO, however, rejected the objections of the assessee observing that the software products and training constitutes only 4.24% of total revenues and the revenue from software development services constitutes more than 75% of the total operating revenues for the F.Y. 2007-08 and qualifies as a comparable by the service income filter. 10.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee and ought to be rejected / excluded from the list of comparables for the following reasons :- (i) This company is functionally different from the software activity of the assessee as it is into software products. (ii) This company has been held to be functionally not comparable to software service providers for Assessment Year 2007-08 by the co-ordinate bench of this Tribunal in the assessee's own case. This company has been held to be different from a software development company in the decision of the Tribunal in the case of Bindview India Pvt. Ltd. V DCIT in ITA No.1386/PN/2010. (iii) The rejection of this company as a comparable has been upheld by co-ordinate benches of the Tribunal in the case of – (a) Trilogy E-Business Software India Pvt. Ltd. (ITA No.1054/Bang/2011). (b) LG Soft India Pvt. Ltd. (IT (TP) A No.112/Bang/2011) (c) CSR India Pvt. Ltd. (IT (TP) A No.1119/Bang/2011) and

20 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 (d) Transwitch India Pvt. Ltd. (IA No.6083/Del/2010)

(iv) The facts pertaining to this company has not changed from Assessment Year 2007-08 to Assessment Year 2008-09 and therefore this company cannot be considered for the purpose of comparability in the case on hand and hence ought to be excluded from the list of comparables. In support of this contention, the learned Authorised Representative drew our attention to various parts of the Annual Report of this company. (v) This company is engaged not only in the development of software products but also in the provision of training services as can be seen from the website and the Annual Report of the company for the year ended 31.3.2008. (vi) This company has two segments; namely, a) Application Software Segment which includes software product revenues from two products i.e. ‘Virtual Insure’ and ‘La-Vision’ and b) The Training segment which does not have any product revenues.

10.3 Per contra, the learned Departmental Representative contended that the decision of the co-ordinate bench of the Tribunal in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) was rendered with respect to F.Y.2006-07 and therefore there cannot be an assumption that it would continue to be applicable to the year under consideration i.e. A.Y. 2008-09. To this, the counter argument of the learned Authorised Representative is that the functional profile of this company continues to remain the same for the year under consideration also and the same is evident from the details culled out from the Annual Report and quoted above (supra). 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 Trilogy 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

21 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 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. 11.0 Infosys Technologies Ltd. 11.1 This was a comparable selected by the TPO. Before the TPO, the assessee objected to the inclusion of the company in the set of comparables, on the grounds of turnover and brand attributable profit margin. The TPO, however, rejected these objections raised by the assessee on the grounds that turnover and brand aspects were not materially relevant in the software development segment. 11.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee in the case on hand. The learned Authorised Representative drew our attention to various parts of the Annual Report of this company to submit that this company commands substantial brand value, owns intellectual property rights and is a market leader in software development activities, whereas the assessee is merely a software service provider operating its business in India and does not possess either any brand value or own any intangible or intellectual property rights (IPRs). It was also submitted by the learned Authorised Representative that :- (i) the co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. in 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 intangible and hence does not have an additional advantage in the market. It is submitted that this decision is applicable to the assessee's case, as the assessee does not own any intangibles and hence Infosys Technologies Ltd. cannot be comparable to the assessee ;

(ii) the observation of the ITAT, Delhi Bench in the case of Agnity India Technologies Pvt. Ltd. in ITA No.3856 (Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and market leader assuming all risks leading

22 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 to higher profits cannot be considered as comparable to captive service providers assuming limited risk ; (iii) the company has generated several inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the break up of such revenues is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition of IPRs in ‘AUTOLAY’, a commercial application product used in designing high performance structural systems. In view of the above reasons, the learned Authorised Representative pleaded that, this company i.e. Infosys Technologies Ltd., be excluded form the list of comparable companies. 11.3 Per contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the brand attributable profit margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies.

11.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assessee has brought on record sufficient evidence to establish that this company is functionally dis-similar and different from the assessee and hence is not comparable and the finding rendered in the case of Trilogy E-Business Software India Pvt. Ltd. (supra) for Assessment Year 2007-08 is applicable to this year also. We are inclined to concur with the argument put forth by the assessee that Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. It is ordered accordingly. 12. Wipro Ltd.

23 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 12.1 This company was selected as a comparable by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the list of comparables on several grounds like functional dis-similarity, brand value, size, etc. The TPO, however, brushed aside the objections of the assessee and included this company in the set of comparables. 12.2 Before us, the learned Authorised Representative of the assessee contended that this company i.e. Wipro Ltd., is not functionally comparable to the assessee for the following reasons :- (i) This company owns significant intangibles in the nature of customer related intangibles and technology related intangibles, owns IPRs and has been granted 40 registered patents and has 62 pending applications and its Annual Report confirms that it owns patents and intangibles. (ii) the ITAT, Delhi observation in the case of Agnity India Technologies Pvt. Ltd. in ITA No.3856(Del)/2010 at para 5.2 thereof, that Infosys Technologies Ltd. being a giant company and a market leader assuming all risks leading to higher profits, cannot be considered as comparable to captive service providers assuming limited risk; (iii) the co-ordinate bench of the ITAT, Mumbai in the case of Telecordia Technologies India Pvt. Ltd. (ITA No.7821/Mum/2011) has held that Wipro Ltd. is not functionally comparable to a software service provider. (iv) this company has acquired new companies pursuant to a scheme of amalgamation in the last two years. (v) Wipro Ltd. is engaged in both software development and product development services. No information is available on the segmental bifurcation of revenue from sale of products and software services. (vi) the TPO has adopted consolidated financial statements for comparability purposes and for computing the margins, which is in contradiction to the TPO’s own filter of rejecting companies with consolidated financial statements.

12.3 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 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

24 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 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. 13. Tata Elxsi Ltd. 13.1 This company was a comparable selected by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the set of comparables on several counts like, functional dis-similarity, significant R&D activity, brand value, size, etc. The TPO, however, rejected the contention put forth by the assessee and included this company in the set of comparables. 13.2 Before us it was reiterated by the learned Authorised Representative that this company is not functionally comparable to the assessee as it performs a variety of functions under software development and services segment namely – a) product design, (b) innovation design engineering and (c) visual computing labs as is reflected in the annual report of the company. The learned Authorised Representative submitted that, (i) The co-ordinate bench of the Mumbai Tribunal in the case of Telecordia Technologies Pvt. Ltd. (supra) has held that Tata Elxsi Ltd. is not a functionally comparable for a software development service provider.

25 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 (ii) The facts pertaining to Tata Elxsi Ltd. have not changed from the earlier year i.e. Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09 and therefore this company cannot be considered as a comparable to the assessee in the case on hand. (iii) Tata Elxsi Ltd. is predominantly engaged in product designing services and is not purely a software development service provider. In the Annual Report of this company the description of the segment ‘software development services’ relates to design services and are not to software services provided by the assessee. (iv) Tata Elxsi Ltd. invests substantial funds in research and development activities which has resulted in the ‘Embedded Product Design Services Segment’ of the company to create a portfolio of reusable software components, ready to deploy frameworks, licensable IPs and products. The learned Authorised Representative pleads that in view of the above reasons, Tata Elxsi Ltd. is clearly functionally different / dis-similar from the assessee and therefore ought to be omitted form the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the stand of the TPO in including this company in the list of comparables. 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 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

26 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 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. 14. E-Zest Solutions Ltd. 14.1 This company was selected by the TPO as a comparable. Before the TPO, the assessee had objected to the inclusion of this company as a comparable on the ground that it was functionally different from the assessee. The TPO had rejected the objections raised by the assessee on the ground that as per the information received in response to notice under section 133(6) of the Act, this company is engaged in software development services and satisfies all the filters. 14.2 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 is submitted by the learned Authorised Representative that this company is engaged in ‘e-Business Consulting Services’, consisting of Web Strategy Services, I T design services and in Technology Consulting Services including product development consulting services. These services, the learned Authorised Representative contends, are high end ITES normally categorised as knowledge process Outsourcing (‘KPO’) services. It is further submitted that this company has not provided segmental data in its Annual Report. The learned Authorised Representative submits that since the Annual Report of the company does not contain detailed descriptive information on the business of the company, the assessee places reliance on the details available on the company’s website which should be considered while evaluating the company’s functional profile. It is also submitted by the learned Authorised Representative that KPO services are not comparable to software development services and therefore companies rendering KPO services ought not to be considered as comparable to software development companies and relied on the decision of the co-ordinate bench in the case of Capital IQ Information Systems (India) (P)

27 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 Ltd. in ITA No.1961(Hyd)/2011 dt.23.11.2012 and prayed that in view of the above reasons, this company i.e. e-Zest Solutions Ltd., ought to be omitted from the list of comparables. 14.3 Per contra, the learned Departmental Representative supported the inclusion of this company in the list of comparables by the TPO. 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 included this company in the list of comparbales 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. 15. Thirdware Solutions Ltd. (Segment) 15.1 This company was proposed for inclusion in the list of comparables by the TPO. Before the TPO, the assessee objected to the inclusion of this company in the list of comparables on the ground that its turnover was in excess of Rs.500 Crores. Before us, the assessee has 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 and trading in software and giving licenses for use of software. In this regard, the learned Authorised Representative submitted that :- (i) This company is engaged in product development and earns revenue from sale of licences and subscription. It has been pointed out from the Annual Report that the company has not provided any separate segmental profit and loss account for software development services and product development services.

28 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 (ii) In the case of E-Gain communications Pvt. Ltd. (2008-TII-04-ITAT-PUNE-TP), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company. The learned A.R. prayed that in the light of the above facts and in view of the aforecited decision of the Tribunal (supra), this company ought to be omitted from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 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. Lucid Software Ltd. 16.1 This company was selected as a comparable by the TPO. Before us, the assessee has objected to the inclusion of this company as a comparable on the grounds that it is into software product development and therefore functionally different from the assessee. In this regard, the learned Authorised Representative submitted that – (i) This company is engaged in the development of software products. (ii) This company has been held to be functionally different and therefore not comparable to software service providers by the order of a co-ordinate bench of the Tribunal in the assessee's own case for Assessment Year 2007-08 (IT(TP)A

29 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 No.845/Bang/2011), following the decision of Mumbai Tribunal in the case of Telecordia Technologies India Pvt. Ltd. (ITA No.7821/Mum/2011). (iii) The rejection of this company as a comparable to software service providers has been upheld by the co-ordinate benches of this Tribunal in the cases of LG Soft India Pvt. Ltd. (ITA No.1121/Bang/2011) and CSR India Pvt. Ltd. [ IT(TP)A No.1119/Bang/2011 ] and by the Delhi Bench of the Tribunal in the case of Transwitch India Pvt. Ltd. (ITA No.6083/Del/2010). (iv) The factual position and circumstances pertaining to this company has not changed from the earlier Assessment Year 2007-08 to the period under consideration i.e. Assessment Year 2008-09 and therefore on this basis, this company cannot be considered as a comparable in the case on hand. (v) The relevant portion of the Annual Report of this company evidences that it is in the business of product development. The learned Authorised Representative prays that in view of the factual position as laid out above and the decisions of the co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 and other cases cited above, it is clear that this company being into product development cannot be considered as a comparable to the assessee in the case on hand who is a software service provider and therefore this company i.e. Lucid Software Ltd., ought to be omitted from the list of comparables. 16.2 per contra, the learned Departmental Representative supported the action and finding of the TPO in including this company in the list of comparables. 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

30 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 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. 17. Persistent Systems Ltd. 17.1.1 This company was selected by the TPO as a comparable. The assessee objected to the inclusion of this company as a comparable for the reasons that this company being engaged in software product designing and analytic services, it is functionally different and further that segmental results are not available. The TPO rejected the assessee's objections on the ground that as per the Annual Report for the company for Financial Year 2007-08, it is mainly a software development company and as per the details furnished in reply to the notice under section 133(6) of the Act, software development constitutes 96% of its revenues. In this view of the matter, the Assessing Officer included this company i.e. Persistent Systems Ltd., in the list of comparables as it qualified the functionality criterion. 17.1.2 Before us, the assessee objected to the inclusion of this company as a comparable submitting that this company is functionally different and also that there are several other factors on which this company cannot be taken as a comparable. In this regard, the learned Authorised Representative submitted that : (i) This company is engaged in software designing services and analytic services and therefore it is not purely a software development service provider as is the assessee in the case on hand. (ii) Page 60 of the Annual Report of the company for F.Y. 2007-08 indicates that this company, is predominantly engaged in ‘Outsourced Software Product Development Services’ for independent software vendors and enterprises. (iii) Website extracts indicate that this company is in the business of product design services. (iv) The ITAT, Mumbai Bench in the case of Telecordia

31 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 Technologies India Pvt. Ltd. (supra) while discussing the comparability of another company, namely Lucid Software Ltd. had rendered a finding that in the absence of segmental information, a company be taken into account for comparability analysis. This principle is squarely applicable to the company presently under consideration, which is into product development and product design services and for which the segmental data is not available. The learned Authorised Representative prays that in view of the above, this company i.e. Persistent Systems Ltd. be omitted from the list of comparables. 17.2 Per contra, the learned Departmental Representative support the action of the TPO in including this company in the list of comparables. 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. 18. Quintegra Solutions Ltd. 18.1 This case was selected by the TPO as a comparable. Before the TPO, the assessee objected to the inclusion of this company in the set of comparables on the ground that this company is functionally different and also 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 by the TPO. On the issue of acquisitions, the TPO rejected the assessee's objections observing that the assessee has not adduced any evidence as to how this event had an any influence on the pricing or the margin earned. 18.1.2 Before us, the assessee objected to the inclusion of this company for the reason that it is functionally different and also that there are other factors for which this company cannot be considered as a comparable. It was submitted that,

32 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 (i) Quintegra solutions Ltd., the company under consideration, is engaged in product engineering services and not in purely software development services. The Annual Report of this company also states that it is engaged in preparatory software products and is therefore not similar to the assessee in the case on hand. (ii) In its Annual Report, the services rendered by the company are described as under : “ Leveraging its proven global model, Quintegra provides a full range of custom 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.” (iii) This company is also engaged in research and development activities which resulted in the creation of Intellectual Proprietary Rights (IPRs) as can be evidenced from the statements made in the Annual Report of the company for the period under consideration, which is as under : “ Quintegra has taken various measures to preserve its intellectual property. Accordingly, some of the products developed by the company …………… have been covered by the patent rights. The company has also applied for trade mark registration for one of its products, viz. Investor Protection Index Fund (IPIF). These measures will help the company enhance its products value and also mitigate risks.” (iv) The TPO has applied the filter of excluding companies having peculiar economic circumstances. Quintegra fails the TPO’s own filter since there have been acquisitions in this case, as is evidenced from the company’s Annual Report for F.Y. 2007-08, the period under consideration. The learned Authorised Representative prays that in view of the submissions made above, it is clear that inter alia, this company i.e. Quintegra Solutions Ltd. being functionally different and possessing its own intangibles / IPRs, it cannot be considered as a comparable to the assessee in the case on hand and therefore ought to be excluded from the list of comparables for the period under consideration. 18.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the set of comparables to the assessee for the period under consideration.

33 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 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 the case 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. 19. Softsol India Ltd. 19.1 This company was selected by the TPO as a comparable. The assessee objected to the inclusion of this company as a comparable on the grounds that this company is functionally different and dis-similar from it. The TPO rejected the assessee's objections on the ground that as per the company’s reply to the notice under section 133(6) of the Act, the company has categorized itself as a pure software developer and therefore included this company as a comparable as the assessee was also a provider of software development services. Before us, in addition to the plea that the company was functionally different, the assessee submitted that this company was excluded from the list of comparables by the order of the co- ordinate bench of this Tribunal in the assessee's own case for Assessment Year

34 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 2007-08 (ITA No.845/Bang/2011) on the ground that the ‘Related Party Transactions (‘RPT’) is in excess of 15%. The learned Authorised Representative submitted that for the current period under consideration, the RPT is 18.3% and therefore this company requires to be omitted from the list of comparables. 19.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables as this company was a pure software development service provider like the assessee. 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 ITA No.845/Bang/2011 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.” Following the decision of the co-ordinate bench of this Tribunal in the case of Sonus Networks India Pvt. Ltd. (supra) for Assessment Year 2008-09, we direct the Assessing Officer/TPO to exclude the aforesaid 12 companies from the list of comparables to the assessee in the case on hand. Additional Ground of Appeal. 7. Bodhtree Consulting Ltd. 7.1 As regards Bodhtree Consulting Ltd., the learned Authorised Representative for the assessee has submitted that, for exclusion of this company from the list of comparables to the assessee in the case on hand, reliance is placed on the decision of the co-ordinate bench of this Tribunal in the case of CISCO Systems (India) Pvt. Ltd., in IT(TP)A No.271/Bang/2014 dt.14.8.2014, wherein it was held that this company is a software product company and not a software development services company. It is submitted that this decision was followed in

35 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 several cases, including Sonus Networks India Pvt. Ltd. (supra). It was also submitted that the co-ordinate bench of this Tribunal in the case of NXP Semi-conductors P. Ltd. in IT(TP)A No.1560/Bang/2012 from Assessment Year 2008-09 has also held that Bodhtree Consulting Ltd. is not comparable to companies engaged in software development services. 7.2 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited by the assessee. We find that the co- ordinate bench of this Tribunal, in the case of M/s. CISCO Systems India Pvt. Ltd. (supra) has excluded this company from the list of comparables to those engaged in software development services and at para 26.1 of the order has held as under :- “ 26.1 Bodhtree Consulting Ltd.:- As far as this company is concerned, it is not in dispute that in the list of comparables chosen by the assessee, this company was also included by the assessee. The assessee, however, submits before us that later on it came to the assessee’s notice that this company is not being considered as a comparable company in the case of companies rendering software development services. In this regard, the ld. counsel for the assessee has brought to our notice the decision of the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. v. ITO, ITA No.7633/Mum/2012, order dated 6.11.2013. In this case, the Tribunal followed the decision rendered by the Mumbai Bench of the Tribunal in the case of Wills Processing Services (I) P. Ltd., ITA No.4547/Mum/2012. In the aforesaid decisions, the Tribunal has taken the view that Bodhtree Consulting Ltd. is in the business of software products and was engaged in providing open & end to end web solutions software consultancy and design & development of software using latest technology. The decision rendered by the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. (supra) is in relation to A.Y. 2008-09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Following the aforesaid decision of the Mumbai Bench of the Tribunal, we hold that Bodhtree Consulting Ltd. cannot be regarded as a comparable. In this regards, the fact that the assessee had itself proposed this company as comparable, in our opinion, should not be the basis on which the said company should be retained as a comparable, when factually it is shown that the said company is a software product company and not a software development services company.”

36 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 7.3 Following the above cited decision of the co-ordinate bench in the case of CISCO Systems India Pvt. Ltd. (supra), we direct the TPO to exclude this company, Bodhtree Consulting Ltd., from the list of comparable companies to the assessee in the case on hand. Ground No.6.13 : Inclusion of Companies in the list of comparables sought for by the assessee. 8.1 In the proceedings before us, the learned Authorised Representative for the assessee submitted that the assessee seeks inclusion of the following companies in the set of comparable companies :- 1) Aarman Software Pvt. Ltd. 2) VMF Softech Ltd. 8.2 It was submitted that the TPO had rejected the above two companies only on the ground that the export sales are not more than 25% of the sales during the year under consideration. The assessee, however, submits that the export sales of these two companies are more than the 25% limit specified in the filter adopted by the TPO and therefore these two companies have been wrongly rejected as comparables by the TPO. 8.3 We have heard the rival submissions of both the learned Authorised Representative and learned Departmental Representative in the matter and perused and carefully considered the TPO’s order and the material on record in the matter. 8.3.1 In the case of Aarman Software Ltd., the TPO had observed that this company is having 100% of domestic sales and therefore fails the export sales filter of 25%. However, from the extract of the Annual Report of the company submitted by the assessee, it appears that the

37 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 entire sales of the company was export sales. Therefore, prima facie, it would appear that the TPO has rejected the inclusion of this company as a comparable on a wrong appraisal of facts. 8.3.2 In the case of VMS Softech Ltd. also, the TPO has rejected the inclusion of this company as a comparable on the ground that this company fails the export sales filter of 25% applied by the TPO. However, from the extract of the Annual Report of this company for the period under consideration, submitted by the assessee, it appears that about 97.35% of the sales generated by this company was export sales. Therefore, prima facie it appears that the TPO has rejected the inclusion of this company form the list of comparables on a wrong appreciation of facts. 8.3.3 In the light of the factual matrix, as laid out above, we consider it appropriate to remand the issue, of examination of the comparability of these two companies to the assessee, back to the file of the TPO for fresh consideration in the light of the details brought on record by the assessee. Needless to add, that the assessee shall be provided adequate opportunity of being heard and make submissions / file details required in this regard, which shall be considered while deciding the issue of comparability of these two companies. It is ordered accordingly. Consequently, Ground No.6.13 is treated as allowed for statistical purposes.

38 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 profile needs to be adjusted for proper comparability. The assessee also submits that the details of the computation of the risk adjustment has also been submitted. In support of its contentions for being allowed risk adjustment, the learned Authorised Representative of the assessee placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of Intellinet Technologies India Pvt. Ltd. in ITA No.1217/Bang/2010 and Bearing Point Business Consulting Pvt. Ltd. in ITA No.1124/Bang/2011. 9.2 We find that the co-ordinate bench of this Tribunal in the cases of Intellinet Technologies India Pvt. Ltd. (supra) and Bearing Point Business Consulting Pvt. Ltd. (supra) have held that, in principle, risk adjustment must be granted, if warranted in the facts of the case, for bringing the comparables on par with the assessee company. Following the above decision and of the co-ordinate bench (supra), we also hold that in principle, the assessee may be granted risk adjustment, if so required in the peculiar facts of the case for bringing the comparable companies on par with the assessee. However, the quantum of risk adjustment to be granted, if any, is remanded back to the file of the TPO. The TPO is directed to examine the details of the quantitative computation of risk adjustment and attendant details submitted by the assessee justifying its claim for risk adjustment and to take into account the same along with all the relevant material before deciding on the percentage of risk adjustment to be allowed, if any, in accordance with law. It is ordered accordingly. Consequently, Ground Nos.3 & 4 are treated as allowed for statistical purposes. CORPORATE TAX ISSUES. 10. Ground No.6: Disallowance of Project Specific Cost.

39 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 10.1 This Ground is in respect of the disallowance of project specific costs amounting to Rs.11,25,95,270 u/s.40(a)(i) of the Act. 10.2 In the course of assessment proceedings, the Assessing Officer observed that the assessee had claimed these amounts as project specific costs. It was found that these charges consist of GLM and software charges paid by the company. The Assessing Officer held that this issue of disallowance of software usage charges (shrink wrapped software) for non-deduction of taxes is to be disallowed under Section 40(a)(i) of the Act as has been held by the Hon'ble High Court of Karnataka in the case of Samsung Electronics Co. Ltd. & Others (Kar) in ITA No.2808 of 2005 dt.15.10.2011 and to which case the assessee was also a party (ITA No.1264 & 1265/06). In this view of the matter, the Assessing Officer made the disallowance of Rs.11,25,95,270 under Section 40(a)(i) of the Act. On appeal, the DRP upheld the decision of the Assessing Officer who then made the disallowance in the final order of assessment. 10.3 It is against these findings of the authorities below, that the assessee is before us in this appeal. In the course of hearings before us, the learned Authorised Representative for the assessee fairly conceded that this issue is covered against the assessee and in favour of Revenue by the decision of the Hon'ble High Court of Karnataka in the case of Samsung Electronics Co. Ltd. (supra), relied on by the A.O./DRP, and to which case the assessee was also party before the Hon'ble High Court. Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Samsung Electronics Co. Ltd. (supra) which has also been rendered in the assessee's case, we uphold the decision of the Assessing Officer. Consequently, we dismiss Ground No.8 raised by the assessee.

40 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 11. Ground No.9 : Advance Tax Credit. 11.1 In this Ground, the assessee contends that the Assessing Officer has failed to give credit for advance tax paid amounting to Rs.1,50,00,000, due to which interest under Section 234B and 234C of the Act has been excessively charged. From a perusal of the record, we find this Ground was raised before the DRP and the DRP had directed the Assessing Officer to examine the claim of the assessee and allow as per the existing system of giving credit for pre- paid taxes. In view of the above, the Assessing Officer is directed to comply with the directions of the DRP and give credit for the pre-paid taxes paid by the assessee as per law. Consequently, Ground No.9 is treated as allowed for statistical purposes. 12. Additional Ground on Depreciation Adjustment. 12.1 The assessee has submitted that the depreciation cost as a percentage of the cost of the assessee during the financial year is significantly different from that of the comparable companies. Therefore, in order to achieve reliable comparability, the margins of the comparable companies should be adjusted for differences in depreciation cost of the comparable companies and the tested party. In support of the above contention the learned Authorised Representative placed reliance on the decision of the co-ordinate bench of this Tribunal in the case of 24/7 Customer.com Pvt. Ltd. in ITA No.227/Bang/2010 dt.9.11.2012. 12.2 We have heard both parties and perused and carefully considered the material on record, including the judicial decision cited by the assessee. It is not in dispute that the assessee had not raised this issue before the authorities below and has raised this issue before us for the first time. We find that this issue being a legal issue, can be raised before the Tribunal for the

41 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 first time as has been held by the co-ordinate bench of this Tribunal in the case of 24/7 Customer.com Pvt. Ltd. (supra), the relevant portion of which is extracted hereunder :- “ 19.1 Additional ground of appeal The assessee vide letter dt.10.9.2012 filed an application seeking leave to urge additional grounds under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 which are as under : “ Ground 1 : Transfer Pricing It is most humbly prayed that this Hon'ble Tribunal to permit the appellant to raise the following additional ground in continuation of the existing grounds of appeal and be read as Ground No.1.7 after Ground No.1.6 Ground No.1.7 Depreciation adjustment - The depreciation cost as a percentage of the gross block of the appellant during the financial year 2004 was 25% and the comparables reported an average depreciation cost as a percentage of the gross block of 10%. - The difference in the depreciation cost arises due to differences in the accounting treatment across the comparables and the appellant. - Considering the above fact, to achieve reliable comparability, the margins of the comparable companies post the adjustment of the depreciation should be considered.” 19.2 The assessee in the grounds raised sought adjustment towards depreciation on the ground that the depreciation cost as a percentage of the gross block of the assessee was 25% as against 10% for the comparable and hence this difference needs to be adjusted for comparability. During the proceedings, on being specifically asked, the learned counsel for the assessee stated that this ground was not raised before the TPO and CIT (Appeals) but prayed that the same be admitted for adjudication as it was a legal issue. 19.3 The learned Departmental Representative submitted that he has, prima facie, no objection to admission of this additional ground. He, however, pointed out that the additional ground raised was very general, put in a bland manner, was not clear or specific and appeared to be an afterthought after the CIT (Appeals) has confirmed the adjustments made by the TPO. The learned Departmental Representative submitted that the assessee has not explained as to why this claim of depreciation is being submitted now; why it is necessary to accept the same; why this claim was not raised earlier; computation of quantum, etc. In the absence of these details, such an additional ground would have no meaning and not being maintainable ought to be dismissed summarily.

42 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 19.4 We have heard both parties and considered the rival submissions. We find force in the submissions of the learned Departmental Representative. Whether an adjustment towards depreciation is warranted or not may be, issue of principle. But whether the principle needs to be applied to a particular case or not would depend on the peculiar facts of that case. It cannot be anybody’s case that an adjustment has to be necessarily granted whenever and wherever there is difference in depreciation between the tested party and the comparables. An adjustment for difference in depreciation is a valid principle for comparability, but whether this case entails such an adjustment has to be examined in the light of the particular facts of the case. Hence, the additional ground raised by the assessee is as much as issue of fact as it is of principle. 19.5 Before us, the assessee has not been able to adduce any reason as to why this issue was not raised before the authorities below. It gives credence to the view of the learned Departmental Representative that this claim is only an afterthought, pursuant to the learned CIT (Appeals) confirming the adjustments proposed by the TPO. 19.6 Besides this, the adjustment for depreciation, sought for by the assessee, does not appear to be tenable even on merits. It has been stated in the additional grounds raised that while the depreciation of the assessee is 25% of its gross block, it is 10% of the gross block for the comparables. It is interesting to note that the assessee has compared the depreciation as a percentage of the gross block of the individual cases and not as a percentage to operating cost. 19.7 No case has been made out by the assessee that the difference in depreciation is due to any reason like capacity utilization, etc. The difference in depreciation could be due to many reasons as different companies have their own accounting problems in the matter of fixed assets and depreciation on the basis of technical estimates made of useful life of the assets. Depreciation provided under the Income Tax Rules or the minimum depreciation provided under the Companies Act may not be really exhibiting the actual position. Over a period of time, the difference of depreciation provided under different methods would almost be the same except for marginal difference. In the written down value (WDV) method, the depreciation for the initial year would be more, whereas in straight line method, depreciation in the initial years would be less. However, at the end of the day, the depreciation off sets each by itself. 19.8 In the interest of equity and natural justice, we feel constrained to admit the additional ground raised by the assessee on the issue of depreciation. However, mere claim for an adjustment will serve no purpose unless it is backed by proper details. The additional ground states that the depreciation of the assessee is a ratio of its gross block of 25% as against 10% of the comparable companies. The assessee has not stated the depreciation as a percentage of operational cost nor has any evidence been placed on record to show that the difference in depreciation is due to any operational reasons. As discussed (supra), there could be several reasons for difference in depreciation between companies like, rates of depreciation, age of the assets, etc. and therefore adjustment towards depreciation can be granted only if there are operational differences that affect comparability. We remit the issue of depreciation as raised by the assessee in the additional grounds (supra) to the file of the Assessing Officer / TPO with

43 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 direction to examine and consider the claim for adjustment towards depreciation in the light of our observations from paras 19.3 to 19.8 of this order and to dispose the matter expeditiously after affording adequate opportunity of being heard to the assessee. It is ordered accordingly.” 12.3 Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of 24/7 Customer.com Pvt. Ltd. (supra), we admit the additional ground raised for grant of depreciation adjustment and remit the matter to the file of the TPO to consider and examine the assessee's claim for adjustment towards depreciation in the light of the Tribunal’s observations at paras 19.4 to 19.8 of the order of the co-ordinate bench (supra) after affording the assessee adequate opportunity of being heard and to submit details/explanations required, which shall be duly considered. It is ordered accordingly. Consequently, this additional ground is treated as allowed for statistical purposes. 13. As regards the other additional grounds raised on account of wrong computation of margins and wrong computation of working capital adjustment, the learned Authorised Representative for the assessee submitted that these are computational issues that are to be examined by the TPO and decided on merits. We direct the TPO to examine the issues raised on the computation of margin and computation of working capital adjustment and decide the issues on merits after affording the assessee adequate opportunity of being heard and to make submissions and file details in this regard and to duly consider the same while deciding the issue. It is ordered accordingly. 14. In the result, the assessee's appeal for Assessment Year 2008-09 is partly allowed.

44 ITA No.1670/Bang/2012 S.P. No.120/Bang/2015 15. Since the assessee's appeal for Assessment Year 2008-09 stands disposed off, the S.P. No.120/Bang/2015 for the same assessment year is rendered infructuous and is accordingly dismissed. Order pronounced in the open court on 6th Nov., 2015.

Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (JASON P BOAZ) Judicial Member Accountant Member

*Reddy gp Copy to : 1. Appellant 2. Respondent 3. C.I.T. 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard File. (True copy) By Order

Asst. Registrar, ITAT, Bangalore