Income Tax Appellate Tribunal - Delhi
M/S Bea Systems India Technology Centre ... vs Dcit, Bangalore on 30 April, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'I-2', NEW DELHI
Before Ms. Sushma Chowla, Vice President
Dr. B. R. R. Kumar, Accountant Member
ITA No. 1077/Bang./2012 : Asstt. Year : 2007-08
M/s BEA Systems India Vs Dy. Commissioner of Income
Technology Centre Pvt. Ltd., C/o Tax, Circle-11(2), 5th Floor,
Oracle India P. Ltd., Commerce @ R.P. Bhavan, Nrupathunga
Mantri, 12/1 & 12/2, N.S. Palya, Road, Bangalore
Level 2, 4-8, Bannerghatta Road,
Bangalore-560076
(APPELLANT) (RESPONDENT)
PAN No. AACCB2736K
ITA No. 1272/Bang./2012 : Asstt. Year : 2007-08
Dy. Commissioner of Income Vs M/s BEA Systems India Technology
Tax, Circle-11(2), 5th Floor, Centre Pvt. Ltd., C/o Oracle India
R.P. Bhavan, Nrupathunga P. Ltd., Commerce @ Mantri, 12/1
Road, Bangalore & 12/2, N.S. Palya, Level 2, 4-8,
Bannerghatta Road,
Bangalore-560076
(APPELLANT) (RESPONDENT)
PAN No. AACCB2736K
Assessee by : Sh. Ravi Sharma, Adv.
Revenue by : Ms. Nidhi Sharma, Sr. DR
Date of Hearing: 12.03.2020 Date of Pronouncement: 30.04.2020
ORDER
Per Dr. B.R.R. Kumar, Accountant Member:
The prese nt appeals have bee n filed by the assessee and revenue against the order of the ld. CIT (A)-IV, Bangalore dated 05.07.2012.
2 ITA Nos. 1077 & 1272/Bang./2012BEA Systems India Technology Centre Pvt. Ltd.
2. Following grounds have been raised by the revenue:
"1. The order of the Commissioner of Income Tax (Appeals)-I, Bangalore is opposed to law and facts of the case.
2. The Commissioner of Inco me Tax (Appeals) e rred in stating that what is excluded from export turnover needs to be exclude d from total turno ver.
3. The Commissioner of Income Tax (Appeals) e rred in relying on the decision in the case of Tata Elxsi Limite d in the circumstance when the High Court decision is not accepted by Department and SLP is filed.
4. In the facts and circumstances of the case, the ld. CIT (A) erred in holding that M/s Celestial Labs and Flextronics Software Systems Ltd. being functionally different, cannot be taken as comparables on the transfer pricing issue."
3. Gro und No.1 is gene ral and does not require any adjudication.
4. The issue raise d vide Ground No. 2 is against the direction of CIT (A) vide para 4.1.3 that the telecommunication expenses and other expenses incurred in foreign curre ncy need to be excluded fro m "export turnover" as per clause (iv) of Explanation 2 to section 10A of the Act, ho wever, they are also required to be excluded from the "total turnover". The CIT(A) held that the same are to be excluded in turn relying on the decision of Hon'ble Karnataka High Court in the case of CIT vs Tata Elxsi Ltd. and others (ITA No.70/2009 & Others).
5. Gro und No. 3 of the revenue appeal relates reliance of the ld. CIT (A) on the order of the Hon'ble High Court in the case of Tata Elxi Ltd. which was not accepted by the department 3 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
and wherein SLP has been filed. At this juncture, we hold that reference to filing of SLP cannot be a reason not to accept the order of the Hon'ble jurisdictional High Court. No inte rference is called for in the orde r of the ld. CIT (A).
6. Gro und No. 4 of the revenue appeal relates to accepting Celestial Labs and Flextronics Software Systems Ltd. We find from the record that the ld. CIT (A) has excluded Flextronics Software Systems Ltd. based on the RPT filter which has been applied to all 18 comparables. Similarly, in the case of Celestial Labs Ltd. the same has been exclude d along with other companies as they do not have any onsite revenue. Hence, the decision of the ld. CIT (A) cannot be interfe red with as these companies do not meet the required filters applied by the ld. CIT (A).
7. Following grounds have been raised by the assessee:
"1. That the order passed by the learned Commissio ner of Income Tax (Appeals) - IV, Bangalore ('CIT (A)'), to the e xtent prejudicial to the Appellant, is bad in law and liable to be quashed, [corresponding to ground 1 of original grounds of appeal].
2. That the learned CIT (A) e rred in upholding the rejection of Transfer Pricing ('T P') documentation by the learned Transfer Pricing Officer ('TPO')/ Assessing Officer ('AO' ) and in upholding adjustment to the transfer price of the Appellant in respe ct of its software development services by Rs. 4,86,03,466 and in the information technology enabled services by Rs.71,09,586. [corresponding to ground 2 of original grounds of appeal]
3. The learned CIT-(Appeals) has erred i n upholding the re jection of comparability analysis o f the Appellant in the TP documentation and accepting the 4 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
comparability analysis performed by the learned TPO in the TP Order; [corresponding to ground 3(a) of original grounds of appeal]
4. That the learned CIT(A) has erred in upholding the learned TPO's action of carrying out his own comparability analysis and modifying some of the filters applied by the Appellant (i.e. related party transaction ['RPT'] filte r >0% applied by the learned CIT(A)), without providing an opportunity o f being heard; [co rresponding to ground 3(b) of original grounds of appeal]
5. That the learned CIT(A) erred in applying RPT>0% filter in excluding companies, where as RPT> 15% filter should have been applied and accordingly should have excluded Accel Transmatic Ltd., Geometric Ltd., R Systems International Ltd and Ishir Infotech Ltd in the software development segment of the Appellant and Apollo Health Street Limite d, Caliber Point Business Solutions Ltd., HCL Comne t Syste ms and Services Ltd. and Informed Technologies Ltd in the ITES segme nt of the Appellant; [corresponding to ground 3(b) of original grounds of appeal] Software Development Services Segment
6. That, without prejudice, the learned CIT (A), while excluding Avani Cimcon Technologies Ltd. on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the software development segment of the Appellant, as it is a software product company that owns products like Exchange, Travel solutions, Insurance solutions, customer appre ciation and relationship management application (CARMA), content manageme nt systems, etc, having no segmental information; [corresponding to ground 3(c) of original grounds of appeal]
7. That the learned AO/TPO have erre d in considering e -Zest Solutions Ltd. as a functio nally comparable company to the software development services of the Appellant, whereas this co mpany is 5 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
functionally dissimilar as it is engaged in software product development and providing technical services coming under the category of KPO services; [corresponding to ground 5 of additio nal grounds)]
8. That, without pre judice the learned CIT(A) while excluding Flextronics Software Systems Ltd only on the ground of RPT>0%, has failed to appreciate that this co mpany is functionally dissimilar to the software de velopment segment of the Appellant, as it is engaged in both software services, products and BPO se rvices, having no bifurcation between software services & products, unde rtakes R&D activities and has intangibles; [corresponding to ground 3(c) of o riginal gro unds of appeal]
9. That, without prejudice, the learned CIT(A) while excluding Ishir Infotech Ltd on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the software development segment of the Appellant, as it outsources its se rvi ces for which it pays professional fees which constitutes significant po rtion of its total cost, fails employee cost filter of 25% applied by TPO and related party transactions are in excess of 15% of its sales ; [corresponding to ground 3(c) of original grounds of appeal]
10. That the learned CIT(A) erred in upholding the approach of the learned TPO in including KALS Information Systems Ltd as functionally comparable to the software development segment of the Appellant, whereas this company is functionally dissimilar, as it has significant revenue from software products and no segmentation is available; [corresponding to ground 3(c) of original grounds of appeal]
11. That the learned AO/TPO erred in not appreciating that Lucid So ftware Ltd is functionally not comparable to the software development segment of the Appellant, as it is a software product company which has incurred substantial product development expenditure; [corresponding to ground 3(c) of o riginal grounds of appeal] 6 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
12. That the learne d CIT (A) erred in excluding Mediasoft Solutions Ltd. on account of functional dissimilarity and low margin, whereas this company is functionally comparable to the software development segment of the Appellant; [corresponding to ground 6 (additional grounds)]
13. That, without pre judice, the learned CIT (A) while excluding Persistent Systems Ltd. on the ground of RPT>0%, has failed to appreciate that this company should have been excluded on the basis of it being functionally dissimilar to the software development services o f the Appellant, as it is engaged in provision of software services and software product de velopment with no se gmental information available [corresponding to ground 5 of additional grounds)]
14. That, without prejudice, the learned CIT(A) while excluding Tata Elxsi Ltd on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the software development segment of the Appellant, as i t is engaged in providing embedded product design services, industrial design & enginee ring and has visual computing labs wherein it provides animation & visual effects services and has e ngaged in R&D activities; [corresponding to gro und 3(c) of original grounds of appeal]
15. That, without pre judice, the learned CIT (A) while excluding Thirdware Solutions Ltd. on the ground of RPT>0%, has failed to appreciate that this company should have been excluded on the basis of it being functionally dissimilar to the software development services o f the Appellant, as it is engaged in sale of software licence, provision of product development & software services and sale of investments, having no segmental information; [corresponding to ground 5 (additional grounds)] IT Enabled Services Segment
16. That the learned AO /TPO have erred in considering Accentia Technologies Ltd. as a functionally co mparable company to the Appellant, 7 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
whereas this company is functionally dissimilar to the IT enabled services segment of the Appellant as it provides Medical transcription, billing, coding and software de velopment & implementation services, having no segmental information and having extraordinary event like amalgamation contributing to extraordinary growth in revenues; [co rresponding to ground 7 (additional grounds)]
17. That the learned CIT (A) erred in upholding the action of the learned TPO in including Bodhtree Consulting Ltd. as a functionally comparable company to the IT enabled services segment, whereas this co mpany has fluctuating margins due to its revenue recognition model and has RPT > 15% of reve nue; [corresponding to ground 7 (additional grounds)]
18. That, without prejudice, the learned CIT(A) while excluding Caliber Point Business Solutions Ltd on the ground of RPT>0%, has failed to appreciate that this company cannot be compared to the IT enabled segment of the Appellant as it is engaged in Research & developme nt activities and has related party transactions exceeding 15% of its revenue; [corresponding to ground 3(c) of original grounds of appeal]
19. That, without prejudice, the learned CIT(A) while excluding Eclerx Services Ltd on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the IT enabled segment of the Appellant, as it is engaged in providing specialized services like Data Analytics, Operatio ns Management and Audits & Reconciliation services which are in the nature of nature of Knowledge Process Outso urcing ('KPO') service and cannot be compared to a support services company like Appellant; [corresponding to ground 3(c) of original grounds of appeal]
20. That, without prejudice, the learned CIT(A) while excluding HCL Comnet Systems and Services Ltd. (seg) on the ground of RPT>0%, has failed to appreciate that this company is functio nally dissimilar to the IT enabled segment o f the 8 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
Appellant, as it provides connectivity services, security services and IT infrastructure management services, has intangibles, has RPT >15% of sales and has a different accounting year; [co rresponding to ground 3(c) of original grounds of appeal]
21. That, without prejudice, the learned CIT(A) while excluding Informed Technologies Ltd on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the IT enabled segment o f the Appellant, as it is knowledge based Back-office processing company which is e ngaged in collecting and analyzing the data on financial fundamentals, corporate governance, director executive compensation and capital market and also has RPT >15%; [correspo nding to ground 3(c) of original grounds of appeal]
22. That, without pre judice, the learned CIT (A) erred in excluding Infosys BPO Ltd. on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the IT enabled services segment of the Appellant, as it is engage d in providing high-end se rvices, has brand value, intangibles and has incurred selling & marketing expenses; [corresponding to ground 7 (additional grounds)]
23. That the learned AO/TPO have erred in considering I services India Ltd. as a functio nally comparable company to the IT enabled services segment o f the Appellant, whe reas this co mpany is functionally dissimilar as it provides Geographic Information System services, Insurance claim processing, mortgage loan processing, cheque processing services, that cannot be compared to support se rvices of the Appellant; [corresponding to ground 7 (additional grounds)]
24. That the learned AO/ TPO have erred in considering Maple e-Solutions Ltd. as a functionally comparable company to the IT enabled services segment, whereas this company cannot be taken as a comparable due to a serious indictment on the Management/Board of the co mpany, making its 9 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
financial information unreliable; [corresponding to ground 7 (additional grounds)]
25. That, without pre judice, the learned CIT (A) while excluding Mold-Tek Technologies Ltd on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the IT enabled services segment of the Appellant, as it is engaged in providing high e nd engineering design and detailing that cannot be compared with the services of the Appellant, and having extraordinary event of amalgamation contributing to supernormal profits ; [corresponding to ground 7 (additional grounds)]
26. That the learned AO/TPO have erred in considering Triton Co rp Limited as a functio nally comparable company to the IT enabled services segment of the Appellant, whereas this company cannot be taken as a comparable due to a serio us indictment on the Management/Board of the company, making its financial information unreliable; [corresponding to ground 7 (additional grounds)]
27. That the learned CIT (A) erred in upholding the action of the learned TPO in including Vishal Information Technologies Ltd. as a functio nally comparable company to the IT enabled services segment o f the Appellant, whe reas this co mpany is functionally dissimilar as it has a different business model wherein it provides agency services by outsourcing services to third party vendors and acting as an inte rmediary between the final customer and the vendor and the reby having low employee cost of 2.3% of its revenue;
[corresponding to ground 7 (additional grounds)]
28. That, without pre judice, the learned CIT (A) while excluding Wipro Ltd. only on the ground of RPT>0%, has failed to appreciate that this company is functionally dissimilar to the IT enabled services segment of the Appellant, as it is engage d in providing activities of various fields like technology innovation, process innovation & delivery 10 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
innovation, has brand value and is engage d in significant Research and developme nt activities, unlike the Appellant; [corresponding to ground 3(c) of original grounds of appeal]
29. That, without pre judice, the learned CIT (A) erred i n excluding Accurate Data Convertors Ltd. on the ground of RPT>0%, has failed to appreciate that this co mpany is functionally dissi milar to IT enabled services segment of the Appellant as the company provides software development services ; [corresponding to ground 7 (additional grounds)]
30. That the learned CIT(A) has erred in upholding the approach o f the learned TPO in disregarding application of multiple year/prior year data as used by the Appellant in the TP docume ntation and holding that current year (i.e. Financial year 2006-
07) data for companies should be used for comparability; [corre sponding to ground 3(d) of original grounds of appeal]
31. That the learned CIT(A) has erred in upholding the learned TPO' s appro ach of using data as at the time of assessment proceedings, instead of that available as on the date of preparing the TP documentation for co mparable companies while determining the arm's length price; [co rresponding to ground 3(e) of original grounds of appeal]
32. That the learned CIT(A) has erred in upholding the approach adopted by the learned TPO of collecting selective information of the companies by exercising powe r granted to him under section 133(6) of the Income Tax Act, 1961 ('Act') that was not available to the Appellant in the public domain, [corresponding to ground 3(f) of original grounds of appeal]
33. That the learned CIT(A) has erred in not providing appropriate adjustment towards the risk differential/ be tween the Appellant and the entrepreneurial companies selected as comparables while de termining the arm's length price, 11 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
[corresponding to ground 3(g) of original grounds of appeal.
34. That the learned CIT(A) has erred in upholding the consequential charging of interest under section 234B and 234D of the Act. [corresponding to ground 4 of original grounds o f appeal]
35. That the learned AO/learne d TPO erred in not including the amount of advances re ceived from holding companies for the purpose of computing the working capital adjustment, [correspo nding to ground 8 (additional grounds)]"
8. The grounds of the assessee appeal are being dealt issue wise as under.
9. The assessee excluded companies that have substantial transaction to the tune of more than 25% with related parties were excluded. The TPO held that it is an appropriate filte r to eliminate the influence of the control transactions. The ld. CIT (A) held that even a one comparable without related party transaction is arrived on the comparability analysis, there is no rationale to re tain the comparables which have related party transactions. The ld. CIT (A) is of the opinion that only if it is not possible to find out any comparable without the related party transaction, the TPO has to apply a suitable filter to identify such comparables, margins on which are not influenced by the related party transaction to make a purposive interpretation unco ntrolled transaction. In the instant case , the ld. CIT (A) held that there is no nee d to include any comparable which has a related party transactio n as there are a number o f comparables available for the study which do not have any related party transactions. Holding this, he excluded Accel Transmatic Ltd., Geome tric Ltd., R Systems 12 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
Internatio nal Ltd and Ishir Infote ch Ltd in the software development segment and Apollo Health Street Limited, Caliber Point Business Solutions Ltd., HCL Comnet Syste ms and Services Ltd. and Informed Technologies Ltd in the ITES segment.
10. We have gone through the arguments and facts on re cord. In the case of Ariba Technologies India (P.) Ltd. v. ITO 67 taxmann.com 265, the ITAT held that finding comparables having zero per cent RPT transaction is impossible and therefore a reasonable tolerance range has to be considered for selecting uncontrolled comparables. The tolerance range is dependent on the availability of comparables. Thus if comparables are easily available tolerance range of RPT should be re stricted to minimum. The Hon'ble High Court of Delhi in the case of PCIT Vs Oracle (OFSS) BPO Services (P.) Ltd. 253 Taxman 498 held that the RPT filter is relevant and fits in with the overall scheme of a transfer pricing study which is premised primarily on comparing light entities having similar if not identical functions. The refore, if a particular entity predominantly has transactions with its associate enterprise - in excess of a certain threshold pe rcentage, its profit making capacity may resulted in a disto rted picture, either way. The Hon'ble Court was of the opinion that the broad threshol d figure of 25% RPT in the case of comparables was essential. We take into account, the RPT and find it correct to exclude certain comparables by applying a broad ballpark threshold of taken into account, the functioning and profits of comparable entities who is unrelated transactions were in excess of 75% of the business. Nil percentage criteria would result in selectio n 13 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
of very few companies which may not give sufficient base for comparable. If the relate d party transactions do not have material effect on the o verall profit margins then still that company can be considered as a comparable. The Act does not provide directly as to what percentage of related party transactions can have material effect o n the overall margins. But however guidance can be taken from definition of the Associate d Enterprise from Se ction 92A(2)(e) whe re in it is prescri bed that one enterprise holding 26% shares in the other enterprise can be considered as an associate enterprise. Similarly in the provisio ns of Section 40A(2)(b) the persons having substantial interest is described as a person carryin g not less than 20% of voting po wer in that company. Thus it is found that 20% or 26% interest is considere d as substantial interest. As the provisions of Section 92A(2)(a) are from the transfer pricing chapter itself, a limit of 25% is applied as the threshold limit for the related party transactions. If the limit is reduced furthe r it would only result in eliminating more and more companies, on the other hand if the limit is relaxed then companies with predominantly related party transactions would get included which would not repre sent unco ntrolled transactions. The companies having more than 25% relate d party transactions should therefore be rejected as comparables. Hence, keeping in view the entire ty of the facts, we order that the decision of the ld. CIT (A) on the issue of RPT cannot be upheld. Accordingly, we direct the exclusion of concerns Accel Transmatic Ltd., Geometric Ltd., R.Systems International Ltd. and Ishir Infotech Ltd. in the software development segment of the appellant and Apollo Health Street Limited, Caliber 14 ITA Nos. 1077 & 1272/Bang./2012 BEA Systems India Technology Centre Pvt. Ltd.
Point Business Solutions Ltd., HCL Comnet Systems and Services Ltd. and Informed Technologies Ltd. in the ITES segment.
11. The comparable Avani Cimcon Technologies Ltd., e-Zest Solutions Ltd., Flextronics Software Systems Ltd., Ishir Infotech Ltd., Mediasoft Solutions Ltd., Thirdware Solutions Ltd. cannot be functio nally similar, hence cannot be take n as comparable. The details are as under:
S.No. Name of the Reason s Remarks
co mparable
1. Avani Cimcon • Segmental details Since, fu nctionally
Techno logies are not available the company
Ltd. • The co mpany is dissimilar and no
invo lved in segmental d etails
provision of IT and are ava ilable,
related services canno t be
and owns software considered as a
products co mparable.
2. e-Zest Solutions • Segmental details Since, fu nctionally
Ltd. are not available the company
• The company dissimilar and no
divers ified into segmental d etails
customs software are ava ilable,
developmen t, CRM canno t be
ERP, knowledge considered as a
man agement co mparable.
consultancy and
legal so lutions.
3. Flextronics • Segmental details Since, functions
Software are not available are different,
Systems Ltd. • Financials are financials are
ava ilable only for insufficient and in
the period July the absence of
2006 to March segmental d etails
2007 canno t be
• Develop software considered as a
products and right comparable.
provid es software
consultancy
serv ices an d is
also a pro duct
compan y
15 ITA Nos. 1077 & 1272/Bang./2012
BEA Systems India Technology Centre Pvt. Ltd.
4. I shir Infotech Employees cost / Fails TPO's filter Ltd. sales filte r is of employees cost greater th an 4% / sales filter is greater than 25%
5. Mediasoft • Low margin Insufficient Solu tions Ltd. compan y financials and • Not in I T sector do es no t meet FAR an alys is.
6. Thirdware • Segmental details Since, fu nctionally Solu tions Ltd. are not available dissimilar and in • Fun ctionally the absence of derived revenue segmental data from sale of canno t be license software considered as a serv ices and co rrect exp ort from SEZ co mparable
12. Regarding the KALS Information Systems Ltd., we find that the co mpany has got significant reve nue from software products and as no segmental are available this needs to be excluded. Similarly, with the case of Lucid Software Ltd. which is predominantly product Development Co mpany, hence the same canno t be taken as a comparable. Similarly Tata Elxsi Ltd. is a product company and the same cannot be taken as a comparable.
13. Regarding the Persistent Systems Ltd., the same is to be excluded o wing to extra ordinary event with regard to restructuring during the relevant year wherein the subsidiary Control Net (India) Ltd. was merged with the comparable company.
14. The assessee pleaded for inclusion of the concern Media Soft Solutions Ltd. The TPO had excluded the same because of the low margins. The case of the assessee is that the same merits to be included. However, we find no merit in the same.
16 ITA Nos. 1077 & 1272/Bang./2012BEA Systems India Technology Centre Pvt. Ltd.
15. Now coming to the ITES segment wherein the assessee has chosen 15 comparables to benchmark its transaction. The TPO had finally selected 27 concerns as comparables. The CIT(A) excluded 18 concerns and the assessee before us is contesting the inclusion of 14 concerns. Accentia Technologies Ltd. is found to be functionally not comparable and also owing to the amalgamation of two companies namely, Iridium Technologies Ltd. and Geo Soft Technologies Ltd. Similarly, Bodhtree Consulting Ltd. is excluded; the comparable being mainly into software solutions. Similarly, we find Eclerx Services, Informed Technologies India Ltd. are KPO he nce cannot be taken into consideration as a comparable. The concern Infosys BPO Ltd. is engaged in diversified activities and owns intangible and hence cannot be included as comparable. Owing to the reported fraud in the management Maple e-Solutions and Traton Corporation Ltd. cannot be considered as right comparables. The concern High Services Ltd. are providing high-end services and is engaged in web hosting which is not functionally comparable to the assessee. Similarly, Mold Tec Technologies Ltd. is to be excluded as it is providing KPO services. We find Vishal Info rmation Technologies Ltd. has outsourced 43% of the sales and owing to low employee cost to sales ratio of 2.2 this will not be a correct comparable. Accurate Data Conve rtor is a development se rvices company and Wipro Ltd. has invested in R&D activities for development of IP, hence not meeting the criteria of FAR.
16. Regarding the ground no s. 30, 31, 32 & 33, we find that the action of the TPO is in accordance with the established proce dure laid down for TP study. Hence, these grounds may be treated as dismissed.
17 ITA Nos. 1077 & 1272/Bang./2012BEA Systems India Technology Centre Pvt. Ltd.
17. In the result, the appeal of the assessee is allowed and the appe al of the revenue is dismissed.
Order Pronounced in the Open Court on 30 /04/2020.
Sd/- Sd/-
(Sushma Chowla) (Dr. B.R.R. Kumar)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: 30/04/2020
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5.DR: ITAT
ASSISTANT REGISTRAR