Income Tax Appellate Tribunal - Bangalore
Societe Generale Global Solution ... vs Assessee on 22 April, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, BANGALORE
BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER
and
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
IT(TP)A No.1188/Bang/2011
(Assessment year: 2007-08)
M/s.Societe Generale Global Solution Centre Pvt. Ltd.
'Inventor' Bldg., 6th floor,
International Tech Park
Whitefield Road,
Bangalore-560006. ... Appellant
PAN:AAECS 6764L
Vs.
Deputy Commissioner of Income-tax,
Circle 12(3),
Bangalore. ... Respondent
Appellant by : Shri S.Raghunathan, Advocate.
Respondent by : Shri G.R.Reddy, CIR(DR).
Date of hearing : 15/03/2016
Date of pronouncement : 22/04/2016
O R D E R
Per INTURI RAMA RAO, AM :
This is an appeal filed by the assessee-company against the assessment order dated 29/09/2011 passed u/s 143(3) r.w.s.144C(3) of the Income-tax Act,1961 [ for short 'the Act'] by the Deputy Commissioner of Income-tax Circle 12(3),Bangalore [for short 'AO'] for the assessment year 2007-08.
IT(TP)A No.1188/Bang/2011 Page 2 of 37
2. The assessee-company raised the following grounds of appeal:
The grounds stated here under are independent of, and without prejudice to one another:
1. Assessment and reference to Transfer Pricing Officer are bad in law
a) The final order issued by the Deputy Commissioner of Income-tax - Circle 12(3) ['DCIT' or'AO'], is bad on facts and in law, and is in violation of the principles of natural justice.
Without prejudice to the above, the order issued by the AO is bad in law insofar as the fact that the AO did not issue to Societe Generale Global Solution Centre Private Limited ('the Appellant or 'the Company'), a show cause notice, as per proviso to section 92C(3) of the Income-tax Act, 1961 ['the Act'].
b) The AO has erred in law in making a reference to the Transfer Pricing Officer ['TPO'],inter alia, since he has not recorded an opinion that any of the conditions in section 92C(3) of the Act, were satisfied in the instant case.
2. Determination of arm's length price
a) The AO/TPO erred in determining a transfer pricing adjustment to software development ('IT') amounting to Rs. 39,863,492 and IT enabled Services (ITeS') amounting to Rs. 18,646,103 by substituting the arm's length price as determined by the Appellant.
b) The AO/TPO erred in rejecting the value of international transaction as recorded in the books of accounts, as the arm's length price.
3. The fresh comparable search undertaken by the TPO is bad in law
a) The TPO erred on facts and in law in conducting a fresh benchmarking analysis using non contemporaneous data and substituting the Appellant's analysis with fresh benchmarking analysis on his own conjectures and surmises. Thus, the Appellant prays that the fresh benchmarking analysis conducted by the learned TPO is liable to be quashed.
IT(TP)A No.1188/Bang/2011 Page 3 of 37
b) The TPO erred in introducing additional comparable companies in the final set, in addition to the companies proposed in the show cause notice, without giving an opportunity to the Appellant to make its submissions on the additional comparables.
c) On the facts and in the circumstances of the case and in law, the learned TPO erred in and the Hon'ble Dispute Resolutions Panel ('DRP') further erred in upholding / confirming the action of the TPO in not demonstrating that the motive of the Appellant was to shift profits outside of India by manipulating the prices charged in its international transactions which is a pre -- requisite condition to make any adjustment under the provision of Chapter X of the Act.
4. Comparability analysis adopted by the TPO for determination of arm's length price
a) The AO/TPO grossly erred on facts in benchmarking the transactions of IT services and ITeS services of the Appellant with companies operating as full fledged entrepreneurs without considering the differences in the functions performed, assets employed and risk undertaken by the Appellant vis-a-vis comparable companies.
b) The TPO erred on facts by not analysing the functional and risk profile of Appellant vis- à-vis comparables selected in the Transfer Pricing Order.
c) The AO/TPO erred on facts in rejecting most of the comparable companies arrived at in the Transfer Pricing Study.
d) The AO/TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional comparability.
e) The AO/TPO also erred on facts in arbitrarily accepting companies without considering the turnover and size of the Appellant and comparables.
f) The AO/TPO grossly erred in law in deviating from the uncontrolled party transaction definition as per the Income-tax Rules and arbitrarily applying a 25% related party criteria in accepting / rejecting comparables.
IT(TP)A No.1188/Bang/2011 Page 4 of 37
g) The AO/TPO also erred on facts and in law in arbitrarily rejecting companies with 4 different year ending (i.e. other than 31 March 2007) and inconsistently applying such filter.
h) The AO/TPO grossly erred on facts in arbitrarily rejecting companies having IT and ITeS service revenue less than 75% of total operating revenue and inconsistently applying such filter, without considering the specific segmental results.
i) The AO/TPO erred on facts in arbitrarily rejecting companies earning less than 25% of revenue from exports.
j) The AO/TPO also erred on facts in arbitrarily rejecting companies based on their financial results without considering the comparability.
k) The AO/TPO erred on facts and in law in considering a set of 'secret data', i.e. data 1which was not available in public domain, in arriving at a fresh set of companies using his power under section 133(6), which is grossly unjustified.
l) The AO/TPO also erred on facts and in law in excluding the foreign exchange gain or loss while calculating the net margins of the comparable companies.
m) The AO/TPO erred on facts in arbitrarily rejecting companies whose employee cost is less than 25% of their total sales for IT services.
n) The AO/TPO erred on facts in arbitrarily rejecting companies whose onsite revenue is greater than 75% of their total export revenue for IT services.
5. Erroneous data used by the AO/TPO
a) The AO/TPO has erred in law in using data, which was not contemporaneous and which was not available in the public domain at the time of conducting the transfer pricing study by the Appellant.
b) The AO1TPO erred in law in not applying the multiple-year data while computing the margin of alleged comparable companies.
IT(TP)A No.1188/Bang/2011 Page 5 of 37
6. Non-allowance of appropriate adjustments to the comparable companies, by the AO/TPO The AO/TPO erred in law and on facts in not allowing appropriate adjustments under Rule lOB to account for, inter a/ia, differences in (a) accounting practices, (b) marketing expenditure, (c) research and development expenditure and (d) risk profile between the Appellant and the comparable companies.
7. Variation of 5% from the arithmetic mean
a) The AO/TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Act available to the Appellant.
b) The Dispute Resolution Panel DCIT has erred in law in not providing relief as set down under section 92C(2) of the Act and has erred in not following the directions provided as per CBDT Circular No. 05/2010 dated 3 June 2010 and by not granting the benefits of proviso to section 92C(2) of the Act available to the Appellant.
8. Reduction in deduction under Section 10A
a) The DRP and the DCIT have erred in computing the deduction under section 10A at Rs. 94,534,939;
b) The DRP and the DCIT erred in reducing an amount of Rs. 89,546,490 from the 'export turnover', while computing the deduction under section 10A;
c) Having made the above-mentioned reduction from the export turnover, the DRP and the DCIT erred in not making a corresponding reduction from the 'total turnover' while computing the deduction under section 10A.
9. Interest under section 234B of the Act The DCIT erred in levying and compounding the interest under section 234B of the Act of Rs. 14,708,020.
10. Initiation of penalty proceedings The DCIT erred in initiating penalty proceedings under section 271(1)(C) of the Act in the case of the Appellant.
IT(TP)A No.1188/Bang/2011 Page 6 of 37 Directions issued by the DRP The DRP has erred in law and facts in not taking cognizance of the objections filed by the Appellant in relation to the draft assessment order issued by the AO/ TP order.
The DRP erred in facts and law in confirming the draft order of the AO/TPO.
Relief:
a) The appellant prays that directions be given to grant all such relief arising from the above grounds and also all relief consequential thereto.
b) The appellant craves leave to add to or alter, by deletion, substitution or otherwise, the above grounds of appeal, at any time before or during the hearing of the appeal.
c) The appellant further prays that the adjustment in relation to Transfer Pricing matters made by the learned AO/TPO and upheld by the Hon'ble DRP be deleted.
2. Briefly, facts of the case are that the assessee is a company incorporated under the provisions of the Companies Act, 1956. It is a wholly owned subsidiary of M/s.Genefinance, Paris, which is in turn a subsidiary of Societe Generale, Paris. The assessee-company is engaged in providing IT and ITES services only to its AEs. Being a captive service centre providing contact services to its AEs, SG India assumes less than normal risks and all the significant business and entrepreneurial risks are borne by the overseas affiliates.
3. Return of income for the assessment year 2007-08 was filed on 30/10/2007 declaring a total income of Rs.87,89,920/-.
IT(TP)A No.1188/Bang/2011 Page 7 of 37 The assessee-company also reported the following international transactions with its Associated Enterprises (AE):
International transactions Paid/ Received/ Payable Receivable Provision of Software Development and support services Rs.57,70,20,075 IT enabled and support services Rs.15,80,86,628 Recovery of expenses Rs. 2,46,42,713 Reimbursement of expenses (paid) Rs.1,70,58,838 Advance against service received Rs. 9,39,996 The assessee-company sought to justify the consideration received for the international transaction entered with its AE to be at arm's length price [ALP]. The assessee-company had also submitted transfer pricing study report adopting TNMM as most appropriate method and cost + margin as a profit level indicator for the transferring pricing study. The assessee-company applied Transactional Net Margin Method [TNMM] which was considered to be the most appropriate method for purposes of bench marking the international transactions. The assessee-company's profit margin was computed at 16.25% in respect of software services segment and 15.73% in respect of ITeS segment. The assessee-
company claimed that the same was comparable with other companies rendering software development services and ITe services. For the purpose of transfer pricing study, the assessee-
company had chosen 55 companies as comparable entities in respect of software development services and 22 comparable entities in respect of ITeS segment and arithmetic average of operating profit margins of said comparables was computed at IT(TP)A No.1188/Bang/2011 Page 8 of 37 14.64% in respect of software development services and 12.51% in respect of ITeS segment. According to the assessee-company, its PLI was much higher than the arithmetic mean of the comparable entities. Hence, it was claimed that the transactions with its AE are at arm's length.
4. The Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO). The TPO, by an order dated 26/10/2010 passed u/s 92CA of the IT Act, 1961 computed the transfer pricing adjustment at Rs.3,98,63,492/- in respect of software development services and Rs.1,86,46,103/- in respect of ITeS segment. The TPO accepted TNMM adopted by the assessee- company as well as cost + margin as a profit level indicator but rejected the transfer pricing study report. The TPO proceeded to identify a different set of comparable entities for the purpose of determining the ALP. While doing so, the ld. TPO had applied the following filters in software segment:
· Use of current year data only;
· Turnover filter i.e. excluding companies having income from software development services less than INR 1 crore. · Software development services income less than 75% of total operating revenues were excluded · Related party transactions greater than 25% of operating revenue.
· Export sales less than 25% of operating revenues were excluded;
· Diminishing revenues/ persistent operating loss for last 3 years were excluded;
· Employee cost less than 25% of sales were excluded;
IT(TP)A No.1188/Bang/2011 Page 9 of 37 · Companies whose onsite income greater than 75% of their operating revenue were excluded
5. The TPO rejected 45 of the comparables in respect of software development services selected by the assessee-company in the TP study and introduced 16 new companies by undertaking fresh TP study and finally selected the following comparables:
The TPO computed average profit margin of the comparables in respect of software development services at 25.14% and after giving working capital adjustment of 1.76%, adjusted arithmetical mean of PLI was determined at 23.38%. On the above basis, the IT(TP)A No.1188/Bang/2011 Page 10 of 37 TPO computed the transfer pricing adjustment in respect of software segment as follows:
Operating cost (Rs.49,63,44,321/- + Rs.51,55,65,637/- reimbursement of expenses received of Rs.1,92,21,316/-
Arm's Length Margin 23.38% of the
Operating Cost
Arm's Length Price (ALP) @ 123.38% Rs.63,61,04,883/- of operating cost Arm's length price @ 123.38% of Rs.63,61,04,883/- operating cost Price shown in the international Rs.59,62,41,391/- transactions (Rs.57,70,20,075/-
+ Reimbursement of expenses received of Rs.1,92,21,316/-
Shortfall being adjustment u/s 92CA Rs. 3,98,63,492/-
ITeS segment:
In respect of ITeS Segment, assessee-company, in its transfer pricing study, had selected 22 companies. Out of these companies, 13 companies were rejected by the TPO on account of use of earlier year's data. The TPO undertook the fresh exercise of transfer pricing analysis and introduced his own comparables by rejecting the transfer pricing study of the assessee-company.
The TPO applied the following filters:
· Companies whose data is not available for the FY 2006-07 were excluded and the data for the FY 2006- 07 has been considered for the period from 01-04-2006 to 31-03-2007.
IT(TP)A No.1188/Bang/2011 Page 11 of 37 · Companies whose IT enabled service income <Rs.1 crore were excluded.
· Companies whose IT enabled service revenue is less than 75% of the total operating revenues were excluded.
· Companies who have more than 25% related party transactions (sales as well as expenditure combined) of the sales were excluded.
· Companies who have less than 25% of the revenues as export sales were excluded.
· Companies who have diminishing revenues/persistent losses for the period under consideration were excluded.
· Companies having different financial year ending (i.e. not March 31,2007) or data of the company does not fall within 12 month period i.e. 01-04-2006 to 31-3- 2007 were rejected.
· Companies that are functionally different from that of taxpayer or working in peculiar economic circumstances, after giving valid reasons, were excluded.
and finally selected the following comparables:
IT(TP)A No.1188/Bang/2011 Page 12 of 37 Thus arrived at average arithmetic mean of 30.21% and after giving working capital adjustment of 1.66% in respect of ITES segment, the adjusted arithmetical mean PLI was determined at 28.55% in respect of ITeS segment. On the above said basis, the TPO computed the transfer pricing adjustment in respect of ITes Segment as follows:
IT(TP)A No.1188/Bang/2011 Page 13 of 37 The total summary of transfer pricing adjustment made u/s 92CA of the Act is as under:
Segment Arms' length price Price shown in the Adjustment books Software Development Rs.63,61,04,883/- Rs.59,62,41,391/- Rs.3,98,63,492 Services IT Enabled Services Rs.18.21,54,128/- Rs.16,35,08,025/- Rs.1,86,46,103/-
Rs.5,85,09,595/-
6. The AO passed draft assessment order u/s 144C(3) 07/12/2010 incorporating the above adjustment and also addition of Rs.1,29,69,191/- u/s 10A of the Act. The AO also held that the communication expenses be reduced from the export turnover for the purpose of computing the deduction u/s 10A of the IT Act, 1961.
7. Being aggrieved, objections were filed before the Hon'ble Disputes Resolution Panel (DRP), Bangalore. It was contended before the DRP inter alia, that the very reference made by the AO to TPO is invalid in law. The ld. DRP, after upholding the validity of reference to the TPO, held that the TPO was justified in rejecting the transfer pricing study analysis conducted by the assessee-company. On the issue of selection of comparables, the DRP confirmed the action of the TPO/AO and had not granted any relief. The AO completed the assessment u/s 143(3) r.w.c.144C(3) of the Act vide order dated 29/09/2011.
IT(TP)A No.1188/Bang/2011 Page 14 of 37
8. Being aggrieved, the assessee-company is in the present appeal before this Tribunal.
9. We shall take up the appeal segment-wise. At first instance, we shall now deal with Software Development Services. Before us, learned counsel for assessee-company argued that the following companies finally chosen by the TPO should be excluded for the reason of functional dissimilarity.
i. Accel Transmatic Ltd.
ii. Avani Cimcon Technologies Ltd
iii. Celestial Biolabs Ltd.
iv. E-Zest Solutions Ltd.
v. Helios & Matheson Information Technology Ltd.
vi. Infosys Technologies Ltd.,
vii. Ishir Infotech Ltd.
viii. KALS Information Systems Ltd.
ix. Lucid Software Ltd.
x. Persistent Systems Ltd.
xi. Quintegra Solutions Ltd.
xii. Thirdware Solution Ltd., and
xiii. Wipro Ltd.
In this regard, he relied on the decision of the co-ordinate bench (Bangalore) in the case of LSI Research (India) P.Ltd. vs. ITO in IT(TP)A No.1048/Bang/2011 dated 26/05/2015. He has also drawn our attention to relevant paragraphs of the said order. Now, we shall deal with each of the comparables.
i) Accel Transmatic Ltd. We find from the order in the case of LSI Research (India) P.Ltd.(supra) that this Tribunal has deleted this company from the list of comparables on the ground of functional dissimilarities. While coming to this conclusion, this IT(TP)A No.1188/Bang/2011 Page 15 of 37 Tribunal has placed reliance on the decision of the Mumbai bench of the Tribunal in the case of Capgemini India (P) Ltd. vs. Addl.CIT (12 taxman.com 51).
However from the perusal of the financial results of the company, it is clear that it is engaged in the business of software development services as well as media solutions and services. It has two divisions - Technologies Division and Animation Division. The co-ordinate bench (Bangalore)of the Tribunal subsequently in two decisions viz (i) Autodesk India Pvt. Ltd. vs. DCIT (TS 62 ITAT 2013) and Yodlee Infotech Pvt. Ltd. vs. ITO (TS 63 ITAT 2013) had not followed the decision of the Mumbai Tribunal in the case of Capgemini India (P) Ltd.(supra) and remitted the issue back to the file of the AO for fresh adjudication with respect to functional dissimilarity. It is not clear from material on record whether the segmental information is available in respect of each divisions of the company.
Accordingly, following the decision of the co-ordinate bench in the abovementioned cases, we remit the issue to the file of the AO for fresh evaluation of the company with respect to functional aspects.
ii. Avani Cimcon Technologies Ltd: It is the contention of the assessee-company that this company cannot be compared with that the assessee-company, as it is engaged in the business of software products. This was excluded from the list of IT(TP)A No.1188/Bang/2011 Page 16 of 37 comparables by the co-ordinate bench in the case of LSI Research (India) P.Ltd.LSI (supra) following the decision of the Mumbai Tribunal in the case of Telecordia Technologies Pvt. Ltd. vs. ACIT. The Tribunal in the case of LSI Research (India) P.Ltd. (supra) accepted the findings of the Mumbai Tribunal in the case of Telecordia Technologies Pvt. Ltd., that it was engaged in the business of software products and no segmental information was available. The co-ordinate bench (Bangalore) of the Tribunal in the case of Trilogy E-Business software vs. DCIT (TS 748 ITAT 2012) dated 23/11/2012 rendered the similar findings in respect of this company and excluded it from the list of comparables. The revenue had not brought any information on record controverting the above findings. Therefore, we have no hesitation to follow the decision of the co-ordinate bench of the Tribunal in the case of Trilogy E-Business software and LSI Research (India) P. Ltd and accordingly we direct the AO to exclude this company from the list of comparables.
iii. Celestial Biolabs Ltd.: This company was excluded from the list of comparable companies in the case of LSI Research (India) P. Ltd on the ground that it was engaged in the clinical research and manufacture of bio products. The Tribunal further held that there was no clear basis on which the TPO concluded that this company was mainly in the business of software IT(TP)A No.1188/Bang/2011 Page 17 of 37 development services. The same findings were rendered in the following cases:
· Trilogy E-business Software vs. DCIT (TS 748 ITAT 2012(Bang) TP);
· Bearing Point Business Consulting P. Ltd. vs. DCIT (TS 758 ITAT 2012(Bang) TP);
· CSR Pvt. Ltd. vs. ITO (TS 68 ITAT 2013(Bang) TP); · LG Soft India Pvt. Ltd. vs. DCIT (TS 68 ITAT 2013(Bang) TP);
· Transwitch India Pvt. Ltd. vs. DCIT (TS 64 ITAT 2013(Bang) TP);
· Mercedes Benz R&D India Pvt.Ltd. vs. DCIT (TS 108 ITAT 2013(Bang) TP);
· IBM India Pvt. Ltd. vs. JCIT (TS 367 ITAT 2013(Bang) TP); · HCL EAI Services Ltd. vs. DCIT (TS 133 ITAT 2013(Bang) TP);
· NDS Services Pay-TV Technology Pvt. Ltd. vs. ACIT ((TS 127 ITAT 2013(Bang) TP) · Logica Pvt. Ltd. vs. ACIT (TS 131 ITAT 2013(Bang) TP) · 3DPLM Software Solutions Ltd. vs. DCIT (TS 359 ITAT 2013(Bang) TP) iv. E-Zest Solutions Ltd.: This Company was held to be not comparable with the software development company as it is engaged in product development services, and high-end technical services which come under category of KPO services in the case of LSI Research (India) P. Ltd (supra). The co-ordinate bench of Tribunal had come to this conclusion following the decision of co- ordinate bench (Hyderabad) of the Tribunal in the case of Capital I-Q Information Systems (India) (P) Ltd.
The ld.DR had not brought any evidence on record controverting the above submissions. Te Hon'ble High Court of IT(TP)A No.1188/Bang/2011 Page 18 of 37 Delhi in the case of Rampgreen Solutions Ltd. vs. CIT in ITA No.102/2015 dated10/8/2015 "31. In the present case, the Tribunal noted that Vishal and eClerx were both engaged in rendering ITeS. The Tribunal held that, "once a service falls under the category of ITeS, then there is no sub-classification of segment". Thus, according to the Tribunal, no differentiation could be made between the entities rendering ITeS. We find it difficult to accept this view as it is contrary to the fundamental rationale of determining ALP by comparing controlled transactions/entities with similar uncontrolled transactions/entities. ITeS encompasses a wide spectrum of services that use Information Technology based delivery. Such services could includerendering highly technical services by qualified technical personnel, involving advanced skills and knowledge, such as engineering, design and support. While, on the other end of the spectrum ITeS would also include voice-based call centers that render routine customer support for their clients. Clearly, characteristics of the service rendered would be dissimilar. Further, both service providers cannot be considered to be functionally similar. Their business environment would be entirely different, the demand and supply for the services would be different, the assets and capital employed would differ, the competence required to operate the two services would be different. Each of the aforesaid factors would have a material bearing on the profitability of the two entities. Treating the said entities to be comparables only for the reason that they use Information Technology for the delivery of their services, would, in our opinion, be erroneous.
32. It has been pointed out that whilst the Tribunal in Willis Processing Services (India) Pvt. Ltd. v. DCIT (supra) held that no distinction could be made between KPO and BPO service providers, however, a contrary view had been taken by several benches of the Tribunal in other cases. In Capital IQ Information System India (P.) Ltd. v. Dy. CIT, (IT) [2013] 32 taxmann.com 21 and Lloyds TSB Global Services Pvt. Ltd. v. DCIT, (ITA No. 5928/Mum/2012 dated 21th November 2012), the Hyderabad and Mumbai Bench of the Tribunal respectively accepted the view that a BPO service provider could not be compared with a KPO service provider.
33. The Special Bench of the Tribunal in Maersk Global Centers (India) Pvt. Ltd. (supra) struck a different cord. The Special Bench of the Tribunal held that even though there IT(TP)A No.1188/Bang/2011 Page 19 of 37 appears to be a difference between BPO and KPO Services, the line of difference is very thin. The Tribunal was of the view that there could be a significant overlap in their activities and it may be difficult to classify services strictly as falling under the category of either a BPO or a KPO. The Tribunal also observed that one of the key success factors of the BPO Industry is its ability to move up the value chain through KPO service offering. For the aforesaid reasons, the Special Bench of the Tribunal held that ITeS Services could not be bifurcated as BPO and KPO Services for the purpose of comparability analysis in the first instance. The Tribunal proceeded to hold that a relatively equal degree of comparability can be achieved by selecting potential comparables on a broad functional analysis at ITeS level and that the comparables so selected could be put to further test by comparing specific functions performed in the international transactions with uncontrolled transactions to attain relatively equal degree of comparability.
34. We have reservations as to the Tribunal's aforesaid view in Maersk Global Centers (India) Pvt. Ltd. (supra). As indicated above, the expression 'BPO' and 'KPO' are, plainly, understood in the sense that whereas, BPO does not necessarily involve advanced skills and knowledge; KPO, on the other hand, would involve employment of advanced skills and knowledgefor providing services. Thus, the expression 'KPO' in common parlance is used to indicate an ITeS provider providing a completely different nature of service than any other BPO service provider. A KPO service provider would also be functionally different from other BPO service providers, inasmuch as the responsibilities undertaken, the activities performed, the quality of resources employed would be materially different. In the circumstances, we are unable to agree that broadly ITeS sector can be used for selecting comparables without making a conscious selection as to the quality and nature of the content of services. Rule 10B(2)(a) of the Income Tax Rules, 1962 mandates that the comparability of controlled and uncontrolled transactions be judged with reference to service/product characteristics. This factor cannot be undermined by using a broad classification of ITeS which takes within its fold various types of services with completely different content and value. Thus, where the tested party is not a KPO service provider, an entity rendering KPO services cannot be considered as a comparable for the purposes of Transfer Pricing analysis. The perception that a BPO service provider may have the ability to move up the value chain by offering KPO services IT(TP)A No.1188/Bang/2011 Page 20 of 37 cannot be a ground for assessing the transactions relating to services rendered by the BPO service provider by benchmarking it with the transactions of KPO services providers. The object is to ascertain the ALP of the service rendered and not of a service (higher in value chain) that may possibly be rendered subsequently.
35. As pointed out by the Special Bench of the Tribunal in Maersk Global Centers (India) Pvt. Ltd. (supra), there may be cases where an entity may be rendering a mix of services some of which may be functionally comparable to a KPO while other services may not. In such cases a classification of BPO and KPO may not be feasible. Clearly, no straitjacket formula can be applied. In cases where the categorization of services rendered cannot be defined with certainty, it would be apposite to employ the broad functionality test and then exclude uncontrolled entities, which are found to be materially dissimilar in aspects and features that have a bearing on the profitability of those entities. However, where the controlled transactions are clearly in the nature of lower- end ITeS such as Call Centers etc. for rendering data processing not involving domain knowledge, inclusion of any KPO service provider as a comparable would not be warranted and the transfer pricing study must take that into account at the threshold.
36. As pointed out earlier, the transfer pricing analysis must serve the broad object of benchmarking an international transaction for determining an ALP. The methodology necessitates that the comparables must be similar in material aspects. The comparability must be judged on factors such as product/service characteristics, functions undertaken, assets used, risks assumed. This is essential to ensure the efficacy of the exercise. There is sufficient flexibility available within the statutory framework to ensure a fair ALP.
37. Applying the aforesaid principles to the facts of the present case, it is once again clear that both Vishal and eClerx could not be taken as comparables for determining the ALP. Vishal and eClerx, both are into KPO Services. In Maersk Global Centers (India) Pvt. Ltd. (supra), the Special Bench of the Tribunal had noted that eClerx is engaged in data analytics, data processing services, pricing analytics, bundling optimization, content operation, sales and marketing support, product data management, revenue management. In addition, eClerx also offered financial services such as real-time capital markets, middle and back- office support, portfolio risk management services and IT(TP)A No.1188/Bang/2011 Page 21 of 37 various critical data management services. Clearly, the aforesaid services are not comparable with the services rendered by the Assessee. Further, the functions undertaken (i.e. the activities performed) are also not comparable with the Assessee. In our view, the Tribunal erred in holding that the functions performed by the Assessee were broadly similar to that of eClerx or Vishal. The operating margin of eClerx, thus, could not be included to arrive at an ALP of controlled transactions, which were materially different in its content and value. In Maersk Global Centers (India) Pvt. Ltd. (supra), the Special Bench of the Tribunal had noted the same and had, thus, excluded eClerx as a comparable. It is further observed that the comparability of eClerx had also been examined by the Hyderabad Bench of the Tribunal in M/s Capital Iq Information Systems (India) (P.) Ltd. v. Additional Commissioner of Income-tax (supra), wherein, the Tribunal directed the exclusion of eClerx as a comparable for the reason that it was engaged in providing KPO Services and further that it had also returned supernormal profits. Respectfully following the ratio laid down by the Hon'ble Delhi High Court, we hold that E-Zest Solutions Ltd., cannot be compared with the assessee-company as it is engaged in KPO services.
v) Helios & Matheson Information Technology Ltd. This company was excluded by the co-ordinate bench of this Tribunal in the case of This company was excluded by the co- ordinate bench of this Tribunal in the case of LSI Research (India) P. Ltd on the ground that it was engaged in the business of development and sale of software products. This finding has not been rebutted by the learned DR. Further, we find that Pune bench of the Tribunal in the case of PTC Software (India) Pvt. Ltd. vs. ACIT (TS 149 ITAT 2013(Pun) TP) also given similar findings IT(TP)A No.1188/Bang/2011 Page 22 of 37 in respect of this comparable. It is now trite law that a company engaged in software development cannot be compared with the company engaged in development of software products. Therefore, we direct the AO/TPO to exclude this company from the list of comparables.
vi) KALS Information Systems Ltd.: This company was rejected as comparable to a software development service company in the case of LSI Research (India) P. Ltd. (supra). It is found by the Hon'ble Tribunal that it was also engaged in developing software products and not purely software development provider. It is also found that no segmental details were available and similar observations have been made in the following cases:
o Bearing Point Business Consulting P.Ltd. vs. DCIT [TS 758 ITAT 2012(Bang) TP(AY 2007-08] o CSR Pvt. Ltd. vs. ITO [TS 68 ITAT 2013(Bang) TP(AY 2007-08] o Logica Pvt. Ltd. vs. ACIT [TS 131 ITAT 2013 (Bang) TP)(AY 2007-08)] o LG Soft India Pvt. Ltd. vs. DCIT [TS 64 ITAT 2013(Bang) TP(AY 2007-08] o Tranwitch India Pvt Ltd. Vs. DCIT (TS 105 ITAT 2013 (Bang) TP)(AY 2007-08)] o Mercedes Benz R&D India Pvt.Ltd. vs. DCIT[TS 108 ITAT 2013(Bang) TP])AY 2007-08);
IT(TP)A No.1188/Bang/2011 Page 23 of 37 Following the decisions cited supra, we hold that this company cannot be considered as comparable company which is engaged in providing software development services. Therefore, we direct the TPO/AO to exclude this company from the list of comparable.
vii) Infosys Technologies Ltd.: This company was excluded from list of comparables by this Hon'ble Tribunal in the case of LSI Research (India) P. Ltd (supra) which is engaged in software development services on the ground of functional dissimilarities. The Hon'ble Tribunal observed that Infosys Technologies Ltd., owns significant intangibles and has huge revenue from software products. It further observed that the break-up of revenue from software services and software products were not available. In the circumstances, the company was held to be not comparable with Software Development Services Company. Similar observations have been made by co- ordinate benches in the following cases:
· Bearing Point Business Consulting P.Ltd. vs. DCIT [TS 758 ITAT 2012(Bang) TP(AY 2007-08] · Adaptec (India) Pvt. Ltd. vs. DCIT [TS 34 ITAT 2013 (Hyd) TP(AY 2007-08] · CSR Pvt. Ltd. vs. ITO [TS 68 ITAT 2013(Bang) TP(AY 2007-08] · LG Soft India Pvt. Ltd. vs. DCIT [TS 64 ITAT 2013(Bang) TP(AY 2007-08] · Logica Pvt. Ltd. vs. ACIT (TS 131 ITAT 2013(Bang) TP) IT(TP)A No.1188/Bang/2011 Page 24 of 37 · Transwitch India Pvt. Ltd. vs. DCIT [TS 105 ITAT 2013(Bang) TP);
· Virtusa (India) Pvt. Ltd. vs. DCIT [TS 253 ITAT 2013 (Hyd) TP(AY 2007-08] Following the decisions cited supra, we hold that this company cannot be considered as comparable company which is engaged in providing software development services. Therefore, we direct the TPO/AO to exclude this company from the list of comparable.
viii) Ishir Infotech Ltd.: This company was excluded from the list of comparables by the Hon'ble Tribunal in the case of LSI Research (India) P. Ltd (supra) following the decision in the case of First Advantage Offshore Services Pvt. Ltd. vs. DCIT in IT(TP)A No.1086/Bang/2011, for assessment year 2007-08.
Tribunal, in the case of First Advantage Offshore Services Pvt. Ltd.(supra) followed the decision of the Tribunal in 24/7 Company Pvt. Ltd., wherein it was held that Ishir Infotech Ltd., was outsourcing its work and therefore, had not satisfied 25% of the employee cost filter. Thus it was excluded from list comparables.
We also find from the decision of this Tribunal in the case of Logica Pvt. Ltd. vs. ACIT in IT(TP)A No.1129/Bang/2011 (TS- 131-ITAT-2013-BANG-TP) that this was not considered as a comparable on the ground that it had related party transactions of more than 15% of sales. However, we also find that this Tribunal in the case of Mercedes Benz Research & Development India Pvt. Ltd. vs DCIT in IT(TP)A No.1222/Bang/2011 [TS-108- IT(TP)A No.1188/Bang/2011 Page 25 of 37 ITAT-2013-Bang-TP] had restored the issue to the file of the TPO to examine the above aspects of this comparable. In the absence of any financial data on record in support of the proposition that it had outsourced its work and had related party transactions of more than 15%, we also restore this issue to the file of the TPO/AO to examine the issue afresh on the above lines.
ix) Lucid Software Ltd.: This company was excluded from the list of comparables by this Tribunal in the case of LSI Research (India) P. Ltd (supra) on the ground of functional dissimilarities. The co-ordinate bench (Mumbai) in the case of Telecordia Technologies India Pvt. Ltd. vs. ACIT [TS 325 ITAT 2012(Mum)] observed that this company was predominantly engaged in the product development rather than service provider. Thus it was considered to be functionally dissimilar to a pure software service provider company. Similar observation has been made in the following decisions:
· CSR Pvt. Ltd. vs. ITO [TS 68 ITAT 2013(Bang) TP(AY 2007-08] · LG Soft India Pvt. Ltd. vs. DCIT [TS 64 ITAT 2013(Bang) TP(AY 2007-08] · Transwitch India Pvt. Ltd. vs. DCIT [TS 105 ITAT 2013(Bang) TP);
· Mercedes Benz R&D India Pvt.Ltd. vs. DCIT[TS 108 ITAT 2013(Bang) TP])AY 2007-08);
· Logica Pvt. Ltd. vs. ACIT (TS 131 ITAT 2013(Bang) TP) · Virtusa (India) Pvt. Ltd. vs. DCIT [TS 253 ITAT 2013 (Hyd) TP(AY 2007-08] IT(TP)A No.1188/Bang/2011 Page 26 of 37 Following the decisions cited supra, we hold that this company cannot be considered as comparable company which is engaged in providing software development services. Therefore, we direct the TPO/AO to exclude this company from the list of comparable.
x) Persistent Systems Ltd. : This company was excluded from the list of comparable by this Tribunal in the case of LSI Research (India) P. Ltd (supra) which is engaged in software service provider on the ground of functional dissimilarities. The Hon'ble Tribunal further observed that it is engaged in the business of product development, software product document and product design services and no segmental details were available. Therefore, it was held that this company was not comparable with that of the assessee-company. Similar observations have been made in the following decisions:
· Bearing Point Business Consulting P.Ltd. vs. DCIT [TS 758 ITAT 2012(Bang) TP(AY 2007-08] · CSR Pvt. Ltd. vs. ITO [TS 68 ITAT 2013(Bang) TP(AY 2007- 08] · LG Soft India Pvt. Ltd. vs. DCIT [TS 64 ITAT 2013(Bang) TP(AY 2007-08] · Mercedes Benz R&D India Pvt.Ltd. vs. DCIT[TS 108 ITAT 2013(Bang) TP])AY 2007-08);
· NDS Services Pay-TV Technology Pvt. Ltd. vs. CIT [TS 127 ITAT 2013(Bang) TP(AY 2007-08] IT(TP)A No.1188/Bang/2011 Page 27 of 37 Following the decisions cited supra, we hold that this company cannot be considered as comparable company which is engaged in providing software development services. Therefore, we direct the TPO/AO to exclude this company from the list of comparable.
xi) Quintegra Solutions Ltd.: This company was excluded from the list of comparable by this Tribunal in the case of LSI Research (India) P. Ltd (supra) following the decision of this Tribunal in 24/7 Customer Service.com Pvt. Ltd. where it was held that it was engaged in in product engineering services, proprietary software products and has a substantial R&D activity which has resulted in creation of IPRs. Thus it was held to be not comparable to a pure software provider.
However, we find that the decision of the Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. was for the assessment year 2008-09. It is not clear whether similar facts were existing for the assessment year 2007-08 as no information was filed before us in support of the above propositions. In the circumstances, we remit the issue back to the file of TPO/AO for fresh evaluation of the comparable on the above lines.
xii) Thirdware Solution Ltd., This company was excluded from the list of comparables by this Tribunal in the case of LSI Research (India) P. Ltd (supra) following the decision of Pune Bench of Tribunal in the case of Egain Communication P.Ltd. vs. ITO [TS 7 ITAT 2008(Pun)] on the ground of functional IT(TP)A No.1188/Bang/2011 Page 28 of 37 dissimilarities. The Pune Bench of the Tribunal observed that this company had income from other sources like interest and deposits which jacked up the profit margin of the company. It was also observed that it was into the purchase & sale of software licenses. Thus, ITAT held that it cannot be a comparable to a company which is engaged in software development. This decision was in relation to assessment year 2004-05, whereas, in the present case, we are concerned with assessment year 2007-
08. It is not clear from material on record whether similar circumstances were present for the assessment year 2007-08. In the circumstances, we have no option but to remit the issue to the file of the TPO/AO for fresh evaluation of this company on the above lines.
xiii) Wipro Ltd.: This company was excluded from the list of comparables by this Tribunal in the case of LSI Research (India) P. Ltd (supra) which is engaged in software service provider on the ground of functional dissimilarities. The Hon'ble Tribunal further observed that this company owns intellectual property in the form of registered patents etc. On this ground, this company was not considered as comparable.
Now, it is settled proposition of law that a company owing intangibles cannot be compared to low risk captive service provider which does not own any intangibles. Following the same reasoning, the Hon'ble Tribunal, in the following decisions held IT(TP)A No.1188/Bang/2011 Page 29 of 37 that this company cannot be considered as comparable with a company which is captive service provider.:
· Bearing Point Business Consulting P. Ltd. vs. DCIT (TS 758 ITAT 2012(Bang) TP);
· Adaptec (India) Pvt. Ltd. vs. DCIT [TS 34 ITAT 2013 (Hyd) TP(AY 2007-08] · LG Soft India Pvt. Ltd. vs. DCIT [TS 64 ITAT 2013(Bang) TP(AY 2007-08] · CSR Pvt. Ltd. vs. ITO [TS 68 ITAT 2013(Bang) TP(AY 2007-08] · Transwitch India Pvt. Ltd. vs. DCIT [TS 105 ITAT 2013(Bang) TP);
· Mercedes Benz R&D India Pvt.Ltd. vs. DCIT[TS 108 ITAT 2013(Bang) TP])AY 2007-08);
Furthermore, the Hon'ble Delhi High Court in the case of CIT vs. Agnity India Technologies P.Ltd. [TS 189 HC 2013 (Del) TP] held that Wipro Ltd. was full-fledged risk bearing company and owns branded proprietary software. Therefore, this company cannot be compared with a low risk captive service provider, like the assessee-company. Following the decisions cited supra, we hold that this company cannot be considered as comparable company which is engaged in providing software development services. Therefore, we direct the TPO/AO to exclude this company from the list of comparable.
10. Learned AR of the assessee-company sought exclusion of the following companies from the list of comparables applying the turnover filter of Rs.200 crores and above.
IT(TP)A No.1188/Bang/2011
Page 30 of 37
Sl. Comparable company Turnover
No. (INR)
crores
1 Flextronics Software Systems Ltd. (merged) 848.66
2 Igate Global Solutions Ltd. 747.27
3 Infosys Technologies Ltd. 13,149
4 Mindtree Ltd. 590.39
5 Persistent Systems Ltd. 293.74
6 Sasken Communication Technologies Ltd 343.57
7 Tata Elxsi Ltd. 262.58
8 Wipro Ltd. 961.09
The submissions of the learned AR of the assessee-company have been considered at length. Though there are decisions to the effect that the companies with the turnover filter of Rs.1 to Rs.200 crores should alone be considered as comparables, this proposition was diluted by the Mumbai bench of the Tribunal in the case of Willis Processing Services (I) P.Ltd. vs. DCIT [TS-49- ITAT-2013(Mum)-TP] wherein it was held that the turnover band of Rs.1 to Rs.200 crores is bereft of any rationality as the application of this rule does not enable comparison of a company with Rs.200 crores with another company having a turnover of Rs.201 crores. It was further observed by the Hon'ble Tribunal that the turnover was also not a criteria prescribed under rule 10B for selection of comparables. We are also of the considered opinion that the turnover cannot be relevant criteria in a service sector where fixed overheads are nominal and the cost of service is in direct proportion to the services rendered. Following this reasoning we hold that the above companies cannot be excluded from the list of comparables.
IT(TP)A No.1188/Bang/2011 Page 31 of 37 ITeS segment:
11. The TPO rejected 15 companies out of 55 comparables selected by the assessee-company. Further, the TPO undertook the fresh benchmarking analysis and introduced 20 additional comparables. Out of the above, the assessee-company contends that Accurate Data Converts Ltd., was included by the TPO for the first time without affording reasonable opportunity to the assessee-company. Further, assessee-company also seeking exclusion of the following companies on functional dissimilarities:
i. Bodhtree Consulting Ltd.
ii. Eclerx Services Ltd.
iii. Infosys BPO Ltd.
iv. Mold-Tech Technologies Ltd., and
v. Wipro Ltd.
Placing reliance on the decision of the Tribunal in the case of First Advantage Offshore Services Pvt.Ltd. vs. DCIT in ITA No.1086/Bang/2011 and Symphony Marketing Solutions India Pvt. Ltd. vs. ITO in ITA No.1316/Bang/2012.
12. Now, we shall deal with each of them. Bodhtree Consulting Ltd., Eclerx Services Ltd., and Mold-Tek Technologies Ltd., were excluded from the list of comparables by this Tribunal in the case of First Advantage Offshore Services Pvt.Ltd.(supra) on the ground of functional dissimilarity. The Tribunal further observed that these companies are into the business of IT(TP)A No.1188/Bang/2011 Page 32 of 37 Knowledge Process Outsourcing (KPO). Accordingly, the Tribunal held that these companies cannot be compared with assessee- company which is engaged in IT enabled services. The relevant paras of the order of the Tribunal in the case of First Advantage Offshore Services Pvt.Ltd. (supra) are extracted hereunder:
"39. Having heard both the parties and having considered their rival contentions, we find that the assessee had raised elaborate objections to each of the comparables in group 3 before the TPO. The TPO has also reproduced the said objections in his order para 6.5.1 of page 178 of his order. He has rejected the contention of the assessee by holding that every function within BPO sector can be from low end to high end and the activities of the assessee such as accounting, web management, network management are BP0 services using technology but these services are not categorized as KPO. He held that a call centre may offer support services. like telemarketing to high end services like technical support services, where not only the level of knowledge, skill required would be high, but the technical knowledge as well would be high. According to him, back office transaction process services may he as remarkable and as complicated as insurance/market transaction processing services. He, therefore, rejected the contention of the assessee and treated the 131'O as equivalent to KPO services.
40. We have to now consider whether a BP0 and a KPO are functionally similar and are comparable to each, other. BPO is a subset if, outscoring arid involves the contracting of the operations and responsibilities of specific business functions or process to a third party services provider. Often business processes outsourcing are information technology based and referred to as ITES-BPO. KPO is one of the sub-segment of the BPO industry. It involves outsourcing of core information related business activities which are competitively important or form an integral part of a company's value chain. It thus requires advanced analytical and technical skills as well as a high degree of specialist expertise. The KPO services include all kinds of research and information gathering. Thus it can be seen that even though both BPO and KPO are offering IT(TP)A No.1188/Bang/2011 Page 33 of 37 information technology based services, the skill and expertise and may be even the tools required are different which may result in different economic results of both the segments. Thus, in such circumstances, we are of the opinion that they cannot be compared with each other and have to be excluded from the list of comparables. "
The Hon'ble Delhi High Court in the case of Rampgreen Solutions Ltd. (supra) held that KPO company cannot be compared with BPO company extracted supra. The learned DR has not controverted that these companies are KPO companies. In the result, we hold that these companies cannot be considered as comparables following the ratio laid down in the cases cited supra.
Infosys BPO Ltd. and Wipro Ltd.
13. This Tribunal excluded these companies from the list of comparables in the case of Symphony Marketing Solutions India Pvt. Ltd.(supra) holding that Infosys BPO Ltd., was a subsidiary of Infosys Ltd., and having brand value etc. Similar observations were made by the Tribunal in the case of Capital IQ Information Systems (India) Pvt.Ltd. [TS 720 ITAT 2012(Hyd) TP]. Hon'ble Delhi High Court in the case of Agnity India Technologies P.Ltd.(supra) held that these companies cannot be compared with smaller companies. Following the decision of Hon'ble Delhi High Court as well as the Tribunal in the above cited cases, we direct IT(TP)A No.1188/Bang/2011 Page 34 of 37 the TPO/AO to exclude these companies from the list of comparables.
14. The assessee-company also raised additional grounds of appeal as regards selection of comparables, which were not pressed at the time of hearing. Hence, the same are dismissed as not pressed. Other grounds of appeal relating to selection of comparables were neither pressed nor considered necessary for adjudication.
15. The ground No.8 relates to restriction of deduction u/s 10A of the Act. The AO, while computing deduction u/s 10A, had reduced the amount of expenditure incurred on telecommunication etc., from the export turnover. It is the contention of the assessee-company that the same should be reduced from the export turnover as well as total turnover as laid down by the Hon'ble High Court of Karnataka in the case of CIT vs. Tata Elxsi (349 ITR 98).
16. We heard the rival submissions and perused material on record. We find that this issue is squarely covered by the decision of the jurisdictional High Court in the case of Tata Elxsi (supra) wherein the Hon'ble High Court held as follows:
"From the aforesaid judgments, what emerges is that, there should be uniformity in the ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10-A is a beneficial section. It is intended to provide incentives to promote section. It is intended to IT(TP)A No.1188/Bang/2011 Page 35 of 37 provide incentives to promote exports. The incentive is to exempt profits relatable to exports. In the case of combined business of an assessee, having export business and domestic business, the legislature intended to have a formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. In the case of Section 80HHC, the export profit is to be derived from the total business income of the assessee, whereas in Section 10-A, the export profit is to be derived from the total business of the undertaking. Even in the case of business of an undertaking, it may include export business and domestic business, in other words, export turnover and domestic turnover. The export turnover would be a component or part of a denominator, the other component being the domestic turnover. In other words, to the extent of export turnover, there would be a commonality between the numerator and the denominator of the formula. In view of the commonality, the understanding should also be the same. In other words if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator & the denominator cannot be different. Therefore, though there is no definition of the term 'term turnover' in Section 10-A, there is nothing in the said Section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. Though when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to the same the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chose to expressly define what the total turnover means, then, when the total turnover includes export turnover, the meaning assigned by the legislature to the export turnover is to be respected and IT(TP)A No.1188/Bang/2011 Page 36 of 37 given effect to, while interpreting the total turnover which is inclusive of the export turnover. Therefore the formula for computation of the deduction under Section 10-A, would be as under:
Profits of the business of Export turnveriiiiiiiiiiiiiiiiiiii the undertaking X (Export turnover + domestic turnover) Total turnover In that view of the matter, we do not see any error committed by the Tribunal in following the judgments rendered in the context of Section 80HHC in interpreting Section 10-A when the principle underlying both these provisions is one and the same. Therefore, we do not see any merit in these appeals. The substantial question of law framed is answered in favour of the assessee and against the revenue."
Respectfully following the decision of the jurisdictional High Court, we direct the AO to reduce telecommunication expenses of Rs.8,95,46,490/- from the export turnover as well as total turnover and allow the deduction u/s 10A accordingly.
17. In the result, the appeal filed by the assessee-company is partly allowed.
Order pronounced in the open court on this 22nd day of April, 2016 sd/- sd/-
(VIJAY PAL RAO) (INTURI RAMA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Place : Bangalore
D a t e d : 22/04/2016
srinivasulu, sps
IT(TP)A No.1188/Bang/2011
Page 37 of 37
Copy to :
1 Appellant
2 Respondent
3 CIT(A)-II Bangalore
4 CIT
5 DR, ITAT, Bangalore.
6 Guard file
By order
Assistant Registrar
Income-tax Appellate Tribunal
Bangalore