Income Tax Appellate Tribunal - Delhi
Hewitt Associates (India) Pvt. ... vs Dcit, New Delhi on 8 May, 2026
1
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "H", DELHI
BEFORE SH. RAMIT KOCHAR, ACCOUNTANT MEMBER
AND
SH. SUDHIR KUMAR, JUDICIAL MEMBER
ITA No.5418/DEL/2012
Assessment Year: 2008-09
Aon Consulting Private Vs. Deputy Commissioner of
Limited (Successor Entity Income Tax, Circle 10(1)
of AON Services India New Delhi
Private Limited formerly
known as M/s Hewitt
Associates (India) Private
Limited.
AON Centre, 9th to 11th floor,
Building No. 2, Unitech
Realty Projects Ltd. (SEZ),
Village Tikri, Sector-48,
Gurgaon-122001, Haryana
[PAN No. AAHCA0739J]
(APPELLANT) (RESPONDENT)
Appellant by Sh. Ajit Jain, CA
Sh. Piyush Aggarwal, CA
Respondent by Shri S.K. Jadhav, CIT DR
Date of hearing: 16/03/2026
Date of Pronouncement: 08/05/2026
ORDER
PER SUDHIR KUMAR, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order dated 24-08-2012 framed under section 143(3) r.w.s.144(C) of 2 the Income Tax Act, 1961 (in short "the Act") which was passed as per the direction dated 13-06-2012 of the Dispute Resolution Panel New Delhi [hereinafter referred to as "Ld. DRP"] pertaining to A.Y. 2008-09. The assessee has raised the following revised grounds in appeal:
1. That on the facts and Circumstances of the case and in law, Learned Deputy Commissioner of Income Tax ("AO") has erred in enhancing the total income of the Appellant under section 143(3) read with section 144(C ) read with section 144B of the Act, for the assessment year ("AY") 2009-09 by INR 44,06,38,092/- as against the returned income of INR 9,46,63,523 under the normal provisions of the Act.
2. On facts and in law, the Hon'ble DRP /Ld. TPO erred in rejecting the economic analysis adopted by the Appellant in its Documentation, thereby modifying/ adding/selecting filters and selecting non-comparable companies, thereby contravening the provisions of Rule 10B(2) of the Income Tax Rules, 1962('the Rules').
3. On facts and in law, the Hon'ble DRP/ TPO/AO erred including the following companies having different functional profile than that of the appellant;
a) Celestrial Lab Limited
b) Infoys Technologies Limited.
c) Wipro Limited
d) Kals Information systems Limited
e) Tata Elxi Limited
f) Avani Cincom Technologies Limited
g) E-Zest Solutions Ltd.
h) Presistent Systems Private Limited
4. On facts in law, the Hon'ble DRP/ Ld. TPO/ AO have erred in incorrectly computing the Net Cost Plus (NCP) margin and working capital adjustment margin of Softsol Limited.
5. On facts and in law, the Hon'ble DRP/ Ld. TPO erred in rejecting the economic analysis adopted by the appellant in its 3 TP Documentation thereby modifying/adding/ selecting filters and selecting non-comparable companies thereby contravening the provisions of Rule 10B(2) of the Income Tax Rules, 1962('the Rules').
6. On facts and in law, the Hon'ble DRP/ Ld. TPO/AO have erred in including the following companies having different functional profile than that of the appellant;
a) Mold-Tek Technologies Ltd.
b) Infoys Technologies Limited.
c) Accentia Technologies Ltd.
d) Eclerx Services Ltd.
e) Infosys BPO Ltd.
f) HCL Commet Systems & Services Ltd.
g) Wipro Limited
h) Acropetal Technologies Limited
i) Genesys International Corporation Limited
j) Datamatics Financial Services Ltd.
2. The brief facts of the case are that the assessee is a subsidiary of Hewit Associates LLC. The assessee company is engaged in providing software development services, IT enabled services, payroll processing services, business process, outsourcing in services and Management services to its AEs. It had, during the relevant AY rendered such services to its AEs as well as unrelated parties. The assessee filed its return of income declaring a total of Rs.9,46,63,523/- on 30-09-2008 for AY 2008-09. The case of the assessee was selected for scrutiny. 4 Since the assessee entered into various international transactions the AO made a reference to the Ld. TPO for determining arm's length price under section 92CA of the Act. The Ld. TPO adopted the Transactional Net Margin in Metod ('TNMM') and made the following adjustment as under;
S. No Nature of International Adjustment as per
Transaction TPO order
1 Provision of Software 2,81,18,79,535 19,87,96,730/-
Development Services
2 Provision of IT enabled 1,88,42,70,508 24,18,41,362/-
services
Total 4,69,61,50,043 44,06,38,092/-
Adjustment
Software Support services segment
3. During the AY 2008-09 the assessee entered into
transactions related to software support services of Rs. 2,81,18,79,535/-. The assessee arrived at a set of 16 comparables with an average weighted average margin of 13.06% using multiple year data. The assessee's own margin worked out at 15.69%. This is how the assessee demonstrated that its international transaction with its AEs under this segment is in compliance with the transfer pricing regulations. 5 3.1 During the transfer pricing proceeding, the Ld. TPO after analysing the data bases, annual reports, application of filters and considering objections raised by the assessee, modified the search to arrive at the following final set of 19 comparable companies with arithmetical mean of 26.20% and 23.89% after working capital adjustment and arm's length price (ALP) pertaining to provision of software development support services segment (page no 79 of the TPO order) Sl. Name of the company Sales (Rs. Cr. ) OP to Total Cost No 1 Avani Cincom Technologies 3 21.65 2 Bodhtree Consulting Ltd. 10.42 19.14
3. Celestial Biolabs 20.21 87.94 4 e-Zest Soulations Ltd. 7.66 28.95 5 Flextronics (Articlent) 958 8.07 6 iGate Global Solution ltd 781.51 13.9 7 Infosys 15648 13.9 8 Kals Information systems ltd(seg) 2.05 41.94 9 LGS Global Ltd. 136.52 26.64 10 Mindtree Ltd(seg) 572.96 17.51 11 Persistent System Ltd. 409.88 27.24 12 Quintegra Solution Ltd 89.88 21.74 13 R systems International (seg) 144.56 15.3 14 RS Software (India) Ltd. 101.11 6.46 15 Sasken Communication 389 13.44 Technoligies ltd (seg) 16 Tata Elxsi(Seg) 342.05 18.97 17 Thirdware Solution Ltd. 522.76 18.01 18 Wipro Ltd. (Seg) 11955.6 28.38 19 Softsol India Ltd. 23.65 42.15 Average 26.20 6 Arm's Length Price Arithmetic mean PLI 26.20% Less Working Capital Adjustment 3.31% Adj. Arithmetic mean PLI 23.89% Arm's Length Price Operating Cost Rs.2,432,870,479/-
Arm's Length Margin 23.89% Arm's Length Price Rs.3,014,083,236/- Price changed in the international Rs.2,815,286,506/- transactions Shortfall being adjustment u/s 92CA Rs. 198, 796,730/- IT Enabled Services
4. The assessee provides ITeS services to its AEs which includes
-(i) accounts reconciliation, pension plans, health benefits etc; and (ii) HR services including pay roll maintenance of employee databases etc. For rendering these services, the assessee is remunerated on a cost plus 11.94% basis.
4.1 During the AY 2008-09 the assessee entered into international transactions related to ITeS of RS. 1,88,42,70,508/- and employed TNMM and OP/OC as the PLI. The assessee arrived at a set of 7 comparable companies on its transfer pricing documents with an average weighted average 7 margin 14.62%. The assessee own margin worked out at 11.94% under this segment.
4.2 During transfer pricing proceedings, the Ld. TPO after the detail search process, accept/reject matrix of companies considered for analysis and application of filters, modified the search to arrive at the following final set of 20 comparable companies mean of 29.16 % at ALP:
Sl. No. Company Total Income PBIT/COST (%)
(Rs.Cr)
1 Acccentia 51.04 44.5
2 Aditya Birla Minacs 183.17 -0.55
3 Asit C Mehta 4.82 9.42
4 Caliber Point business Soultion 58 10.97
(Seg)
5 Coral Hub(VishalInf) 13.07 51.84
6 Cosmic Global 5.86 24.3
7 Crossdomain Soulation p. ltd. 27.4 26.96
8 Datameic financial (BPO Div) 16.72 34.87
9 E4e(earlier Known Nitanny) 25.99 16.87
10 Eclerx 123.45 66.5
11 Genesys International 47.52 48.15
12 Hcl Commet system & services 388.05 32.97
Ltd (Seg)
13 ICRA(Seg) 82.29 11.22
14 InfosysBPO 825.08 20-03
15. I-Service Ind P Ltd 13.39 9.73
16 Mold Tek 17.84 96.66
17 Spanco Ltd. (Seg) 42.27 8.94
18 Acropetal Techonologies Ldt. (Seg) 20.8 35.3
19 Wipro BPO 1158.8 30.23
20 R System International Ltd. (seg) 21.33 4.3
AVG 29.16
8
Arm's Length Price (ALP)
Arithmetic mean PLI 26.16%
Less Working Capital Adjustment 2.81%
Adj. Arithmetic mean PLI 26.35%
Arm's Length Price
Operating Cost Rs.1,685,532,374/-
Arm's Length Margin 26.35% of the operating cost
Arm's Length Price Rs.2,129,670,154/-
Price changed in the international Rs.1,887,828,792/-
transactions
Shortfall being adjustment u/s 92CA Rs.241,841,362/-
5. The Ld. AO in his final assessment order dated 24-08-2012 enhanced the income of the assessee by making addition of Rs.440,638,092/- proposed by the Ld. TPO.
6. The Hon'ble Dispute Resolution Panel ("DRP") vide its order dated 13-06-2012 confirmed the transfer pricing adjustment of RS. 440,638,092/- supporting the order of the Ld. TPO.
7. Aggrieved, the assessee filed an appeal before the tribunal.
8. The appeal of the assessee was allowed for statistical purpose, by the Tribunal vide order dated 20-12-2023, against which the assessee preferred the appeal before the Hon'ble Delhi High Court, and the Hon'ble High Court vide order dated 9 02-02-2025, restored the appeal before the ITAT for disposal. The Hon'ble High Court observed in his order as under;
"35. At the cost of repetition, it is necessary to reiterate that the resolution under MAP is by consent and negotiations; such resolution cannot be imposed in a contested case where there is no such consensus.
36. An agreement arrived at by the competent authorities of two contacting states under MAP cannot substitute the determination of ALP under the Act and the Rules in cases which are not covered under the MAP. The ALP in such cases must necessarily be determined in accordance with Section 92C of the Act and Rule 10B of the Rules. AS noted above, MAP is a specific procedure for addressing issues and the subject transactions. The Agreement under MAP cannot be extrapolated as a determination of ALP of international transactions, which are not subject to MAP, under Section 92C of the Act or Rule 10B of the Rules.
37. The decision of the learned ITAT to direct the determination of the ALP for Non-US Transaction on the basis of framework as agreed to by the competent authorities under MAP for US Transactions, is not in accordance with law and thus, the said decision cannot be sustained.
38. The question of law as framed is, thus answered in favour of the Assessee and against the Revenue. The Assessee's appeal is restored to the learned ITAT for decision in accordance with the Act."
9. At the outset, the Ld. AR brought to our notice that the MAP resolution was arrived between US Competent Authority (CA) and India Competent Authority (CA) vide order dated 21-12- 2017. The assessee accepted the MAP resolution and withdrew 10 its appeal filed with the Tribunal only in relation to the US transactions. The MAP resolutions are summarized below;
Particulars US transaction (around93%)
ALP-MAP resolution
Software development services segment 16.22 % ITeS Segment 15.20% The following TP adjustment on Non-US related transactions are before the tribunal.
Particulars Non-US transactions(around7%) Software development services 1,02,18,152 segment ITeS Segment 1,24,30,646 Total 2,26,48,798
10. We have heard the parties and perused the material available on record.
Inclusion/ Exclusion of comparables
11.The assessee has objected to the inclusion / exclusion of certain comparable companies by the Ld. DRP/TPO/AO in software support service segment as well as ITeS segment. A. Software Support Services Segment Comparables selected by the Ld. TPO 11 Infosys Technologies Limited
12. The Ld. TPO included this company in the final list of companies on the ground that company earns most of its revenue from software development services. More than 90% of its revenue come from maintenance or enhancement of the software. The Ld. TPO observed in his order that ITAT observed in the case of ST Micro, the taxpayer is not being compared with the Infosys alone, Infosys is one of the 19 comparables selected by TPO and selected as a comparable.
12.1 The Hon'ble DRP in its order dated 13-06-2012 recorded that the revenue from software products is only 3.82% of operating revenues and thus is not disqualified from being a comparable.
12.2 The contention of the assessee is that this company is huge giant company as compared to the assessee; that it has a huge brand and the company engaged in full fledged entrepreneur engaged in consulting, application services system intergration, product engineering, re-engineering and IT 12 infrastructure services. There are a significant size and scale of operation of the company and the revenue earned by the assessee in software development segment is INR 281 Crore whereas Infosys's revenue is INR 15,648 crores, which is 56% higher from the assessee. The company has incurred significant R&D expenditure amounting to 201 crore (Page no. 17 of AR compendium).
12.3 In support, the Ld. AR relied on the ITAT decision in the Assessee's own case ( ITA No.5736/Del/2022) for 2007-08 wherein the Hon'ble ITAT held that this company is a giant company in the area of development of software and it assumed all risks leading to higher profits, whereas the respondents - assessee was a captive unit of the parent company and assumed only a limited risk. This company should be excluded from the list of comparable companies. The relevant extract is reproduced below;
"Infosys Technologies Ltd. Should be excluded from the list of the comparables for the reason latter was a 13 giant company in the area of development of software and it assumed all risks leading to higher profits, whereas the respondents -assessee was a captive unit of the parent company and assumed only a limited risk."[Emphasis supplied] 20.5 Upon careful consideration of the above submissions of the assessee and respectfully following the Hon'ble Delhi High Court's judgment in the case of Agnity India Technologies Pvt. Ltd. (Supra), we direct the Ld. AO /TPO to exclude this company from the final list of comparable companies.
12.4 The Ld. DR relied upon the order of the Ld. AO/TPO. 12.5 Respectfully following the decision of the Assessee's own case in the ITA No.5736/Del/2011, we direct the Ld. AO/TPO to exclude this company from the final list of comparable companies.14
Wipro Limited
13. The Ld. TPO has included this company for the reasons that it qualifies all the filter applied by him. The relevant extract of the Ld. TPO'S order as under;
para 15.1.7 The company was rejected in the TP document saying that it is "functionally different". However, no reasons were given in the Annexure. The company qualifies all the filters applied by TPO. Hence the company was proposed as a comparable to the taxpayer vide tis office show cause notice.
xxxx All the above services, such as R&D services, application development and maintenance package implementation, consulting services etc, from part of software development services. Thus, even if we do not consider infrastructure outsourcing as software development services, 79% of consolidated revenues from IT services are in the nature of software development services and the taxpayer did not go into horizontals within software development services as discussed above. Even the TPO did not into horizontals. Further as can be seen from above the IT services segment revenues do not constitute any sales by way of software products.
Thus, on standalone basis, the IT services segment is into software development services and it qualifies all the filters applied by the TPO. Thus, the company's IT services segment is considered as a comparable on standalone basis as this segment is into software development services and qualifies all the filters applied by the TPO. The assessee submits that Wipro is earning abnormally high profits and hence should be rejected. Firstly, margin of 28.38% by no stretch of imagination can be termed as abnormal. Secondly, this issue in any case is dealt with separately in the order. Similarly, the taxpayer's objection on the ground of turn over and brand are not acceptable in view of the discussion made in the case of Infosys. In view of the above discussion this company shall be retained as a comparable.15
13.1 The Hon'ble DRP has not made any specific observation in respect of this comparable company.
13.2 The contention of the assessee is that this company is functionally dissimilar as its, owns significant intangibles which is evident from the fact that it has filed 17 patents during the AY2007-08 and 40 patents has been registered and 62 are in pipeline. The company contributed R&D efforts to revenues of 368 million. The company earned INR 176,581 million vis-à-vis 2,815 million earned by the assessee i.e 62 times of the revenue earned by the assessee.
13.3 The Ld. AR further submitted that in the assessee's own case for A Y 2007-08, in ITA no. 5736/Del/2011 the Hon'ble Tribunal directed the AO to delete the company from the set of comparable companies holding as under;
21.5 upon careful consideration of the contentions of the ld. Representatives pf the parties and perusal of records, we find merits in the submissions of the assessee. Even though the segmental information for software segment as per TPO's comments was made available to him, the fact remains that this company has vast differences on functional comparability with the assessee. We also note the findings of the Bangalore Tribunal in respect of this company in the case of Hewlett-Packard (India) Globalsoft P.Ltd. (Supra) and respectfully following the same, we direct the Ld. AO/TPO to exclude this company from the final list of comparables companies. 16 13.4 The Ld. DR relied upon the order of the Ld. TPO/AO. 13.5. Upon careful consideration of the contentions of the parties, we find the merit in the submissions of the Ld. AR of the assessee. This company has own's intellectual property in form of registered patents and several applications pending for grant of patents. The company has differences on functional comparability with the assessee. Respectfully following the decision of the assessee's own case, we, direct the AO/TPO to exclude this company from the final list of comparable companies.
Tata Elaxi Limited
14. This company was selected by the assessee himself for the TP report. The Ld. AR has submitted that if it is found that this company cannot be held as comparable to the assessee than the assessee has a right to challenge the comparable because rule of estoppel is not applicable in this case. Reliance is placed the decision of the tribunal in the case of Cadence Design 17 System (India) (P.) Ltd. v/s DCIT [IT A nos. 2074/Del/ /2014 in this case the Tribunal held that;
"15.... If the assessee points out some mistake or any irregularity in the arm's length result then it is incumbent upon the TPO to examine and consider the same and if the assessee's contentions are found to be correct or tenable, then he has to accept the same. There cannot be estoppel against correct procedure of law and principles solely on account of acquiescence or mistake of the assessee. The TPO is required under law to analyze every comparables and then only determine the correct ALP based on proper comparability analysis. Thus, we do not find any merit in the contention of the Revenue that simply because the assessee has included these two companies then the assessee is debarred from objecting to the same, if there are strong and cogent reasons." 14.1 The Ld. TPO included this company but no specific discussion has been made in the order. The Hon'ble DRP has not given specific observation / findings in respect of this comparable.
14.1 The Contention of the assessee is that this company is functionally dissimilar to that of the assessee, since within the software development and service segment, it is engaged in industrial designing / engineering. (page 34 of the Annual Report Compendium). Further this company holds inventory based which it 18 can be conducted that it is also engaged in software products. It is incurred expenditure towards cost of goods sold which is 14 % of the total cost of the company based on which it can be concluded that the company is engaged in trading activities apart from providing services. The company has 12% owns intangibles of the total fixed assets.
14.2 In support thereof, the Ld. AR relied upon the decision of assessee's own case ITA No. 5736/Del/2011 in which the co- ordinate bench relying the judgement of Kaplan India Private Limited (ITANo. 2907 /Del/ 2014 direct the AO to exclude this company from the final set of comparable. The co-ordinate bench has observed as under:
"Coordinate benches have come to the conclusion that the activities carried out under software development segment by Tata Elxsi are not simply software development services but are complex in nature. The IPR in the form of software researched and developed were used as a tool for further development of software yielding higher margins. It was rightly concluded in such decisions that the segment of software development services in Tata Elxsi includes Design services including hardware design and hence is not comparables to simple software developments services... we. Direct exclusion of this company from the final set of comparable companies."
14.3 The Ld. TPO has not given any specific discussion on this comparable, however, he included this comparable because the assessee itself chosen it. Even otherwise, the Ld. DRP has also not 19 given any specific discussion on the same, as this comparable was itself chosen by the assessee. In view of above, it is necessary to remit back this comparable to the file of the Ld. TPO for its fresh consideration, after giving adequate opportunity of being heard to the assessee. We hold and direct accordingly. Kals Information Systems Limited
15. The Ld. TPO included this company for the reason that this company is into two segments i.e. software development services and training and it qualifies all the filters applied by the him. The relevant extract of the Ld. TPO's order is as under:
The company is into software development and training. As per the information submitted by the company in response to 133(6) notice, it is into two segment i) software development services and ii) training. This, segmental details are also submitted. It qualifies all the filters applied by the TPO. However, the taxpayer has objected this company stating that it is functionally different. 15.1 The Hon'ble DRP has not given specific observation/findings in respect of this comparable. 15.2 The assessee's contention is that the Ld. TPO considered the applications software segment for TNMM analysis. The application software segment comprises of sale of software 20 products and services. Hence the same cannot be considered information only for software services (page 19-20 of Annual Report compendium). The Ld. AR further submitted that this company is engaged in sale of software products. The company comprises of STOL unit engaged in development of software and software products and in a training center of software professionals on online projects. The company hold inventory in books of accounts that pertains to software products which constitutes 36 % of the total revenue.
15.3 In support thereof, the Ld. AR relied upon the decision of assessee's own case ITA No. 5736/Del/2011 in which the co-
ordinate bench relying the judgement of Hawlett-Packard (India) Globalsoft P. Ltd. (IT(TP) No. 1031/Bang/2011 direct the AO to exclude this company from the final set of comparable. The co- ordinate bench has observed as under:
"47. We have given a careful consideration to the submission made on behalf of the assessee. We find that the TPO has drawn conclusions on the basis of information obtained by the issue of notice u/s 136(6) of the Act. This information which was not available in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company as highlighted by the Assessee in its letter dated 21-06-2010 to the TPO. We also find that in the decision referred to by the learned counsel for the assessee, the Mumbai Bench of ITAT has held that this company was developing software products 21 and not purely or mainly software development service provider. We therefore accept the plea of the assessee that this company is not comparable"
15.4 The Ld. DR relied upon the order of the AO/TPO. 15.5 Thus considering the fact that this company is functionally different than the assessee company and also hold huge percentage of inventory. We relying the decision of the assessee's own case ITA No. 5736/Del/2011 direct the Ld. TPO/AO to exclude this company from the final list of the comparable companies. Celestial Labs Limited
16. The Ld. TPO included this company on the ground of functional similarity to that of the assessee. The relevant extract of the Ld. TPO's order is reproduced below:-
"The notice issued u/s 136(6) and copy of the reply was enclosed as a soft copy along with the notice issued to the taxpayer vides this office show cause notice. In its response the taxpayer objected that this fails the employee cost filter without adducing any evidence. In any case, the employee cost is only a trigger and not a conclusive filter. It is used to know the functionality i.e. whether the company is a trader of software or is in software development or in development of software product. As the functionality has been already established by way of 133(6) reply, it is retained as a comparable."
16.1 The Hon'ble DRP has not provided any comments on this comparable.
16.2 The Ld. AR of the assessee submitted that this company is functionally dissimilar as it is engaged in clinical research and 22 manufacture of bio products. The company provides customized enterprise solutions, bioinformatics services to health and life science sector like gene sequence comparision and analysis, prediction, modeling, design, and development of drug molecules and development of industrial enzymes. The Hon'ble DRP has not given any decision of the objection of the assessee so this company cannot be included in the comparable. The Ld. AR also submitted that the company filed the copy right/ patent for its drug design tool 'CELSUITE', which is used to provide research services. This company research and development (R&D) expenditure of 8.28 %, product development expenditure of 46.16% of sale and the business promotion expenses of 6.69% of sale. Its intangibles account of 57% of the total assets. The Ld. AR relied the assessee's own case ITA no. 5736/Del/ 2011 in which the Co-ordinate bench held as under;
"23 iii) Celestial Labs Ltd. We are of the view that in the light of the submissions made by the assessee and the fact that this company was basically/ admittedly in clinical research and manufacture of products and other products, there is no clear basis on which the TPO concluded that this company mainly in the business of providing software development services. We therefore accept the plea of the assessee that this company ought not to have been considered as comparable. [Emphasis supplied].23
16.3 The Ld. DR supported the order of the Ld. AO/TPO. He relied the para 15.1.2 of the Ld. TPO order.
16.4. Based on the above, we find that this company is functionally dissimilar to that of the assessee. Relying the decision of the Assessee's own case, we direct the Ld. TPO/ AO to exclude this company from the list of final comparables.
Avani Cimcon Technologies Limited
17. The Ld. TPO included this company as a comparable on the ground that it qualifies all the filters applied by him. The relevant extract of the TPO's order is reproduced below ;-
The information received from the company shows that it does not have any revenues from sale of products and it is purely software development services provide. Thus, the company is considered as a comparable.
17.1 The Hon'ble DRP has accepted the reasons given by the Ld. TPO and made the observation that as per information obtained u/s 133(6), there are no revenues from products. 17.2 The Ld. AR contested the functional similarity of this company and submitted that the company has developed a software product by name "DX change" in addition to provision of software services. However, the segmental information is not available in public 24 domain( page 35-36 of Annual Report Compendium). Since the complete annual report of the company is still not available in the public domain, the accuracy of the margin computations cannot be verified. The assessee on the other hand does not sell or license any proprietary software products but only engaged in providing software development support services.
17.3 The Ld. AR relied on the decision of the assessee's own case IAT No. 5736/Del/2011 wherein it has been held as under.
"Based on the information available in the company website, which reveals that this company has developed a software product by name "DXchange" it was submitted that this company would have revenue from software product sales apart from rendering of software services and therefore is functionally different from the assessee. It was further submitted that the Mumbai Bench of the Tribunal to the decision in the case of Telecordia Technologies Pvt. Ltd. Vs. ACIT_ITA 7821/Mum/2011 wherein the Tribunal accepted the assessee's contention that this company has revenue from software product and observed that in the absence of segmental details Avani Cincom cannot be considered as comparable to the assessee who was rendering software development services only."[ Emphasis supplied] 17.4 The Ld. DR relied upon the order of the Ld. AO/TPO. 17.5 It is evident from the material on record that the company is functionally different from the assessee and the company was engaged in development and sale of software products. The annual 25 report also not available in public domain. Thus, respectfully following the decision of the Hon'ble Co-ordinate bench, we direct the AO/TPO to exclude this company from the final list of the comparable companies.
E-Zest Solutions Ltd
18. The Ld. TPO included this company for the reasons recorded in his order which is reproduced below;
The company was not finding place in the accept/reject matrix of the taxpayer. But the company's data was available in the Prowess database (segment search). The Annual Report is available for the FY2007-08. But the functionally is not clear from the AR and also RPT information was not available in the AR. 133(6) notice was issued to the company. As per the reply received from the company, it is engaged in software development services and qualifies all the filters applied by the TPO including RPT filter. Thus, the company is proposed as a comparable to the taxpayer vides this office show cause notice. In its response the taxpayer argued on the basis of website information that the company is functionally different and is into diversified service. However, based on the categorical information available in the 133(6) reply the company is considered as a comparable. The relevant portion of reply is represented here.
XXXXX It is evident from the above that the company is into software development. Hence it is retained.
18.2 The Hon'ble DRP has observed that as per information obtained u/s 133(6), there are no revenues from products. The company rightly retained the comparable.
2618.3 The Ld. DR submitted that this company functionally dissimilar. The company earned the revenue from services and sale of software. The company is engaged in services such as product engineering, mange cloud, technology operations. The services provided by this company are KPO services as these are high-end technical services such as digital engineering, digital commerce digital data engineering digital operations (page no 43 of the Annual Report compendium). The segmental details for sale of products and services are not available. 18.4 The Ld. AR submitted that in the assessee's own case in ITA No 5736/Del/2011 for AY 2007-08 this company has been excluded from the list of final comparable. The relevant extract is reproduced below;
14.3 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.... 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 AO/TPO is accordingly directed. [ Emphasis supplied] 27 18.4 The Ld. DR relied on the order of the Ld. TPO and submitted that the function of this company is same and this company was rightly included in the final list of the comparable. 18.5 On the careful consideration of the submissions of the assessee, material on record as well as the decision of the assessee's own case, we direct the Ld.AO/TPO to exclude this company from the final list of the comparable. Persistent Systems Private Limited
19. This company was selected by the assessee himself for the TP report. As in the above para 14 already held that assessee has a right to challenge the comparable which was selected by himself, if found out that cannot be held as comparable to the assessee. The Ld. TPO selected this company on the ground that it qualifies all filters applied by him but no specific discussion has made.
19.2 The Ld. AR submitted that this company is functionally dissimilar and the company incurred significant research & development expenditure amounting INR 48 million during FY 28 2007-08. The segmental information is not available and the company derives from both sale of software products and services. There is no clear allocation of segmental between software products and software developments services. The company is engaged in licensing of products and the same is recognized on delivery of products (pages no. 29-30 of Annual Report Compendium).
19.3 Ld. DR relied the order of the TPO.
19.4 The Ld. TPO has not given any specific discussion on this comparable, however, he included this comparable because the assessee itself chosen it. Even otherwise, the Ld. DRP has also not given any specific discussion on the same, as this comparable was itself chosen by the assessee. In view of above, it is necessary to remit back this comparable to the file of the Ld. TPO for its fresh consideration, after giving adequate opportunity of being heard to the assessee. We hold and direct accordingly. B. Information Technology Enabled Services Comparables selected by the Ld. TPO 29
20. In the ITeS segment the assessee has disputed the inclusion of 10 comparable companies selected by the Ld. TPO. In respect of all 10 comparable companies, the Ld. DR relied upon the findings of the Ld. TPO and Hon'ble DRP in the order for inclusion of these companies in the final set of comparables. He further submitted that assessee is not simply a BPO company engaged in providing BPO services but is also providing after sales and upgradation services and hence the functions of the assessee extended to that of a KPO. Also, the assessee belongs to a big group of companies which has subsidiaries located across the country and hence comparable to huge companies. We have dealt with each of these 10 disputed comparable companies in the subsequent paragraphs.
Coral Hub Ltd. (Earlier Vishal Information)
20. This company included by the Ld. TPO as a comparable on the reasons that the company is into IT enabled services and qualifies all the filters. The Ld. AR of the assessee challenged the inclusion of this company but during the course of hearing 30 not pressed this comparable. Because this comparable not pressed hence, we hold that this Company rightly included in the final list of the comparable.
Mold-Tek Technologies Ltd.
21. The Ld. TPO selected this company on the ground that as per information of the company, the IT division of the company is mainly engaged in ITES. It qualifies all the filters applied by him. The relevant portion of the order as under;
13.10 As per the information and Annual Repot of the company, the IT division of the company is mainly engaged in ITES. It qualifies all the filters applied by the TPO. Thus, the IT division of the company is proposed as a comparable.
21.1 The Ld. AR submitted that this company is functionally dissimilar to the assessee as the company renders structural engineering KPO services, it is a leading provider of engineering and design services with specialization in civil, structural and mechanical engineering services. He further submitted that during the FY2007-08 the extraordinary event happened and the arrangement involving amalgamation between Tekmen Tool Pvt. Ltd, and Mold- Tek and demerger between Mold -Tek and 31 Mold-Tek Plastic Limited was simultaneously sanctioned by the Hon'ble AP High Court vide order dated 25th July 2008. The appointed date for amalgamation and demerger was 1st October 2006 and 1st April, 2007 respectively (pages no 66-67 of Annual Report Compendium).
21.2 In support thereof, the assessee relied on the decision of the assessee own case in ITA NO. 5736 /del/2011 (Hewitt Associates (India) Private Limited. Vs. ACIT) wherein it has held as under:
25.2 In support thereof, the assessee relied on the decision of the special Bench of the Hon'ble Tribunal in the case of Maersk Global Centre(India) Private Limited (ITA No. 7466/MUM/2012 ) wherein it has been held :-
"8.1 In so far as the case of Mold -Tek Technologies is concerned, it is observed from the annual report of the said company for the financial year 2007-08 placed at page 139 to 151 of the paper book that the said company was pioneer in structural engineering KPO services and its entire business comprised of providing only structural engineering services to various clients. Further information of Mold- Tek Technologies Ltd. available on their Website is furnished in the form of printout at page 158 to 165 of the paper book and a perusal of the same shows that it is a leading provider of engineering and design services with specialization in civil, structural and mechanical engineering services. It is stated to have a strong team of skilled resources with world class resources and skill sets. It is also stated to have consistently helped the clients to cut down design and development costs of civil structural mechanical and plant design by 30-40 % and delivered technologically superior outputs to match and exceed expectations. It is claimed to have inhouse software development team, quality control training and troubleshooting facilities. M/s Mold-Tek is also rendering web design and development services with experience in tunning them into an 32 effective graphic design representation and creating dynamic and graphic rich web applications from IT specs, design prints ect. Keeping in view this information available in the annual report of Mold-Tek as well on its website, we are of the view that the said company is mainly involved in providing high-end services to its clients involving higher special knowledge and domain expertise in the field and the same cannot be taken as comparable to the assessee company which is mainly involved in providing low-end services.[Emphasis supplied] 21.3 We find that during the FY 2007-08 the extraordinary event happened and the scheme of arrangement involving amalgamation between Tekmen Tool Pvt. Ltd. and Mold-Tek and demerger between Mod-Tek and Mold -Tek Plastic Limited was sanctioned by the Hon'ble AP High Court vide order dated 25th July 2008. Thus, this company cannot be considered as a comparable. Upon consideration of the submissions made by the assessee material available on record and the decision of the assessee's own case we hold that this company is not a suitable comparable to the assessee. Hence, we direct the Ld. TPO/AO to exclude this company rom the final list of comparable companies.
Accentia Technologies Ltd.33
22 The Ld. TPO selected this company for the reason that it qualifies all filters applied by him. The Ld. TPO's findings is reproduced below;
13.1 The company was not part of the companies considered by the taxpayer in the accept/reject matrix given by the taxpayer in the TP report. However, the company's data is available in the Capitaline database. The Annual Report was not available. 133(6) notice was issued. As per the reply received from the company, it has ITES segment which is into medical transcription services and qualifies all the filters applied by the TPO. Thus, the company was proposed as a comparable. In response, the taxpayer has objected that there has been restructuring in this company.
The Taxpayer has objected this comparable stating that this financial year has extraordinary circumstances. However, it is pertinent to mention here that what so ever merger took place last year has been dealt in last year order. The TPO accepts that there has been some merger and acquisition this year also however the taxpayer did not adduce any evidence from the annual report or otherwise how this event had an influence on pricing or the margin earned by the company for the FY 2007-08. In the absence of the same, the above claim of the taxpayer of extraordinary event is rejected. The TPO has analysed that this is not a peculiar activity done by the company as it doesn't affect either the revenue of the company or margin itself.
22.1 The Hon'ble DRP has not provided any comments on this comparable.
22.2 The assessee has prayed for the exclusion of this company on account of extraordinary events in the form of acquisition/ merger that took place during the relevant AY. The Ld. AR submitted that this company is not functionally comparable 34 because the company earns it revenue from medical transcription billing and coding software development and implementation (page 44and 47 of the Annual Report Compendium). Further the segmental details are not available and employee cost to sale ratio as 12% during the AY2008-09. This year extraordinary events happened that Iridium Technologies and Geosoft Technologies got amalgamated with the company. Further during this year, the company acquired Thunga Software Pvt. Ltd. GSR Physician's Billing Services, GSR Systems Denmed Inc. and various other entities. 22.3 In support thereof, the assessee relied on the decision of the assessee own case in ITA NO. 5736 /del/2011 (Hewitt Associates (India) Private Limited. Vs. ACIT) wherein it has held as under:
"1. Extraordinary events during the year- Amalgamation of subsidiary resulting in growth of revenues by 75.33% Amalgamated the company Iridiun Technologies which is a software product company. 2. Functionally not comparable - The activity of medical transcription (considered by TPO), billing and coding and software development and implementation is not comparable to the services provided by the Appellant. 3 Business promotion expenses constitutes, 28.34% of the total operating revenue earned by the company."35
23.4 Keeping in view the fact that an extraordinary event in the form of acquisition took place in this company in the year under consideration, the other facts also establishes that the company functionally dissimilarity between this company and the assessee and respectfully following the decision of the assessee's own case we hold that this company to be not a suitable comparable company. Accordingly, we direct the AO/TPO to exclude this company from the list of the Comparables.
Eclerx Services Ltd.
24. The Ld. TPO selected this company for the reason that it qualifies all filters applied by him. The Ld. TPO's findings is reproduced below;
13.6 The data of the company is available in Prowess database. Annual Report is available for the AY. 133(6) notice was issued to the company. As per the information submitted by the company, it qualifies all the filters applied by the TPO. Thus, the same is considered as a comparable.
24.1 The Hon'ble DRP has observed in the order that KPO is also part of ITeS Industry. Moreover, ITAT Hyderabad case of 36 Deloitte Consultants covers small amounts of outsourced activities. Rightly accepted.
24.2 The Ld. AR for the assessee submitted that this company is functionally dissimilar to that of the assessee for the reason that it outsources services to third party vendors which is 19.32% of the total expense (page no.60 of the Annual Report of compendium) that is engaged in KPO/highly specialized domain services providing data analytics and customized process solutions to a host of global clients. On the other hand, the assessee is a simplicitor, captive BPO service provider, does not outsource any activities and rendered such as accounts reconciliation payroll, maintenance of employee database etc. 28.3 The Ld. AR of the assessee relied upon the decision of the assessee own case in ITA NO. 5736 /del/2011 (Hewitt Associates (India) Private Limited. Vs. ACIT) wherein the co- ordinate bench relying the decision of in the case of Maersk Global Centre (India) Private Limited (ITA No. 7466/Mum/2012 has held as under:
37
"Keeping in view the nature of services rendered by M/s EClerx Services Pvt. Ltd. and its functional profile, we are of the view that this company is also mainly engaged in providing high-end services involving specialized knowledge and domain expertise in the field and the same cannot be compared with the assessee company which is mainly engaged in providing low-end services to the group concerns."
28.4 Based on the above submissions, we are of the view that this company is functionally dissimilar to the assessee. Respectfully following the finding of the Tribunal in the assessee's own case we hold that this company be excluded from the final list of comparable companies. Accordingly, we direct the Ld. AO/TPO to exclude this company from the final list of the comparable.
Infosys BPO Ltd.
29. The Ld. TPO selected this company for the reason that it qualifies all filters applied by him. The Ld. TPO's finding in para 13.9 of his order is reproduced below:
38
13.9 The data of the company is available in Powess data base. As per the annual report, it is into ITES qualifies all the filters applied by the TPO. Thus, the company is proposed as a comparable. 29.1 The Hon'ble DRP has observed in the order that the usage of single year data impossibility of performance and marketing expenses. Turnover criterion has been elaborately discussed elsewhere in the order. Rightly accepted.
29.2 The contention of the assessee is that the revenue earned by ACPL in ITES segment is INR 188.78 crores whereas Infosys BPO"s revenue is INR 825.08 crores which exponentially higher than the assessee. Further extraordinary event that the company acquired shared service centre of Philps at Poland, Thailand and Chennai. The company incurred substantial expenditure on selling and marketing expenses i.e. 6.17% of the revenue. Further the company has a heavily brand name which has a significant value in the space (page no. 55 of the Annual Report compendium). The Ld. AR also submitted that relying the decision in the case of NTT Global Delivery Services Ltd. Vs. ITO (ITA No. 5339/Del/2011) the Tribunal in the assessee's own 39 case excluded this company from the final list of the comparable. In the assessee's case the tribunal held as under:
"5.8.2 We have perused the submission advanced by both the sides in the light of the records placed before us. From TP study at page 539- 638 of the paper book, it is observed that this company has huge turnovers, owns IPR and brand value on products and provides services to vast clientele. Under such circumstances this company cannot be accepted to be a fit comparable in case of the Assessee who is captive service provider providing services only to its group concerns.
5.8.3 Accordingly. We direct this company to be excluded from the list of comparables. [Emphasis supplied] 29.3 Considering the functional distinction brought out by the Ld. AR between this company and the assessee and respectfully following the decision of the Delhi tribunal in NTT Global Delivery Services Ltd.
(supra), we direct the Ld. AO/TPO to exclude this company from the list of comparables.
29.3 Respectfully following the decision of the assessee's own case, we direct the Ld.AO/TPO to exclude this company from the list of comparables.
HCL Comnet System& Services Ltd.
40
30. The Ld. TPO selected this company for the reason that it qualifies all filters applied by him. The relevant findings of the Ld. TPO as under:
13.8 The data of the company is available in the Prowess database.
The company's accounting year ends with June 2008. The company was issued 133(6) notices to submit the data for 12 months period from 01-04-2007 to 31-03-2008. As per the data submitted by the company for the period from 01-04-2007 to 31-03-2008. the ITES segment qualifies all the filters applied by the TPO. Thus, the ITES segment is considered as comparable.
30.1 The Hon'ble DRP has observed in the order that information u/s 133(6) has been obtained and segmental data used. Usage of single year data impossibility of performance has been elaborately discussed elsewhere in the order. Rightly accepted.
30.2 The Ld. AR of the assessee submitted that this company is operates in two segments (i) Telecommunication services (ii) enabled services. Further IT enabled services comprises, of data entre management services, end user computing services, managed networking services and tool and process consulting 41 services. Further, the Ld. AR submitted that this company owns Intangible constituting 7.11% of the revenue page No.83 of the Annual Report compendium).
30.3 The Ld. AR relied upon the decision of the assessee's own case ITA No. 5736/Del/2011 in this case the Co-ordinate bench relying the decision of ICC India Ltd. vs. DCIT (ITA No. 25/Del/2012) direct the Ld. AO/TPO to exclude this company from the list of comparable.
The CO-ordinate bench held as under:
"(v) the assessee has objected to the inclusion of this company on the ground that the company is into remote IT infrastructure management services, data centre management and user computing services managed security services net working services, tool and process consulting services and therefore functionally dissimilar. The other objections to the inclusion are that the company runs a highly capital-
intensive industry, it operates 24/7 in 3 shifts, it has a significant brand value and huge assets base. It is also the assessee's plea that the company is a full risk bearing entrepreneur whereas the assessee is a Captive Services Provide to its AE.
Having considered all the aspects, it is our considered opinion that the assessee's contention about being functionally dissimilar is 42 correct.... Accordingly, we direct for the exclusion of the company from the final list of comparables."
30.4 In view of the functional dissimilarity brought out between the assessee and this comparable company and the financial year ending of the company is 30th June 2007 and relying the decision of the assessee's own case we, direct the AO/TPO to exclude this company from the list of comparables. Wipro Limited (Earlier known as Wipro BPO Limited)
31. The Ld. TPO selected this company on the ground that it qualifies all filters applied by him. The Ld. TPO's finding in para 13.11 of his order is reproduced below:
13.11 Annual report is available for 2007-08. It has IT services segment consisting of both software development services and ITES. But the annual report did not contain segmental information on standalone basis. Thus, the company was asked information u/s 133(6) to submit segment details. The company submitted segmental on standalone basis. The BPO segment qualifies all the filters applied by the TP. Thus, it is considered as a comparable.
31.1 The Hon'ble DRP has observed in the order that the usage of single year data impossibility of performance and marketing 43 expenses. Turnover criterion has been elaborately discussed elsewhere in the order. Rightly accepted.
31.2 The Ld. AR submitted that this company is a giant entity having huge asset base, brand value, goodwill and presence in global market. The size of the operations are multifold of that of the assessee. The Ld. AR further submitted that this company's R&D efforts have contributed revenues of USD 368 million which is approximately 11% of our Global IT Services and products revenue for the year. He also submitted that this company incurred expenditure on selling and marketing expenses i.e. 3.04 % of the total revenue. This company has been granted 40 registered patents and has 62 pending applications this includes 33 registered patents and 51 patent applications of OKI Techno Centre Singapore Pte. Limited (page no 86-87 of Annual report Compendium).
31.3 In support thereof, the Ld. AR placed reliance on the decision of the assessee's own case ITA No. 5736/Del/2011 wherein the co-ordinate bench relying the decision in the case 44 of H&S Software Development and Knowledge Management Centre Pvt. Ltd. (ITANo. 6455/del/2012) directed the AO/TPO to exclude this company from the comparable list. The CO-
ordinate bench held as under:
39. This is TPO's comparable in which segmental details has been obtained u/s 133(6) of the Act. However, assessee has sought its exclusion on grounds of significantly higher turnover, abnormal margins, presence of intellectual property, diversified business, brand value and turnover and relied upon Calibrated Health Systems Ltd.(supra) available at page853 to 862 of the paper book.
40. Coordinate Bench of ITAT, Delhi examined comparability of WIPRO with Calibrated Health Systems Ltd. engaged in providing ITES services to its foreign entity as in the case of Assessee and ordered its exclusion on the ground that this is a giant entity with marked differences as regards risk profile nature of services, ownership of IP rights, expenditure on R&D etc. So, following the decision rendered by coordinate benches as well as the fact that the assessee company is captive service provider taking minimum risk having no intangibles cannot be compared with WIPRO which is having diversified business ownership of significant intangibles and huge expenditure on R&D etc. So, hereby order to exclude this company from the final list of comparables." [emphasis supplied] 45 31.4 In view of the vast difference in the operations/ functions of this company and having significant intangibles and relying the assessee's own case we direct the AO/TPO to exclude this company from the final list of the comparables.
Acropetal Technologies Limited
32. The Ld. TPO included this company for the following reasons:
13.2 The company was not part of the companies considered by the taxpayer in the accept/reject matrix given by the taxpayer in the TP report. However, the company's data is available in the Capitaline database. The segmental information is not available for FY 2007-08.
133(6) notice was issued. As per the reply received from the company, it has ITeS segment which qualifies all the filters applied by the TPO. XXXX As can be seen from above engineering and design services as rendered by the company are in the nature of IT enabled services. Thus, the taxpayer's argument that engineering services rendered by the company are not IT enabled services is incorrect. Hence all the three services -engineering services, BPO, and data processing - rendered by the company for the FY 2007-08 forms part of the IT 46 enabled services and thus the company's IT Division is comparable to the taxpayer.
32.1 The Hon'ble DRP has not provided any comments on this comparable.
32.2 The Ld. AR submitted that this company is engaged in development of computer software. Further this company holds inventory vis-à-vis assessee is a service provider holding no inventory ( page No. 48 of Annul Report compendium). Further the company incurred onsite development expenditure which constitutes 69.32% of the total expenses (page no. Annual Report compendium). Reliance is placed on the following decision:
(i) ITA NO. 511&512 /Del/2016 (AY2010-11) Steria India (P.) Ltd.
(ii) PCIT vs. Evalueserve, com Pvt. Ltd. ITA No 6310/Del/ 2012
(iii) Dimension Data India vs. ACIT ITA No. 7725/ Mum/2012 47 32.3 This company engaged in development of computer software and hold the inventory. The company incurred 69.32% onsite development expenditure of the total expenses. From the above submissions and perusal of the material on records the factual differences between the assessee and this company are evident. Thus, we direct the AO/TPO to exclude this company from the final list of the comparables.
Genesys International Corporation Limited
33. The Ld. TPO selected this company on the ground that it qualifies all filters by him. The Ld. TPO's finding in para 13.7 of his order is reproduced below:
13.7 As the company satisfied all the filters applied by the TPO, the same is considered as comparable. The company is considered as comparable.
Xxxx As discussed under the head "Verticals/ Horizontals" the taxpayer did nod consider different functional lines within IT enabled services for selection of comparable companies. Thus, the company cannot be rejected on the basis that it is into different functional line within ITES. Hence the company is retained as a comparable. The taxpayer 48 further contends that the company has intangibles research and development activities and it own products which make the company un comparable to the taxpayer in terms of functions. These objections of the taxpayer also deserve rejection on the same ground that the TPO has not gone into the functional and vertical lines of the comparable companies on which issue the taxpayer has not raised objections.
33.1 The Hon'ble DRP has observed in the order that the Board's Circular covers the areas of operation under ITES. The presence of intangible assets has not adversely influenced the comparability. Rghtly accepted.
33.2 The Ld. AR of the assessee submitted that the company is functionally dissimilar to the assessee; this company is engaged in rendering geospatial services for mapping navigation internet portals, as well as infrastructure players including state and local government. It provides geographical information services viz. remote sensing cartography, data conversion related computer based work and other related services. Further company is engaged in research and development in the area of intelligence and recognition, mobile mapping and LIDAR and 49 company holds own significant intangibles in form of computer software and GIS database and same are used to provide geospatial services. During the year extraordinary event and company acquired 100 equity stake, in M/s Ladya Systech Limited as per the expansion plan of the company. In the pursuant of the sanctioned order dated 7th September 2007, of the Hon'ble High Court Judicature at Mumbai the business of Engineering and Information Technology Division has been transferred and demerged into GI Engineering Solutions Ltd. It was further submitted that the company has registered growth of more than 146% in turnover from INR 19 Crores in FY 2006- 07 to INR 47 Crores in FY 2007-08 (page no. 71 to 73 of the Annual report compendium).
33.3 The Ld. DR relied upon the order of the TPO and submitted that the company was rightly accepted as a comparable.
33.4 We have heard the parties and perused the material on record. We find in the force in the contention of the assessee 50 that this company is functionally dissimilar to that of the assessee and also there is an extraordinary, events of acquired of 100 equity stake and transferred and demerged of the business which renders this company as a non-comparable. Hence, we direct the Ld. AO/TPO to exclude this company from the final list of comparable companies.
Datamatics Financial services Ltd.
34. The Ld. TPO selected this company on the ground that it qualifies all filters by him. The Ld. TPO's finding in para 13.5 of his order is reproduced below:
13.5 The data of the company is available in Prowess database. Annual Report is available for the FY2007-08. ITES Segment results are not available. The ITES segment contributes less than 75% of the revenues.
133(6) notice was issued to submit segmental details. In response the company submitted segmental financials for ITES segment. The ITES segment qualifies all the filters applied by the TPO. Thus, the ITES segment of the company is considered as a comparable. 33.1 The Hon'ble DRP has examined the TPO's comments on this comparable and finds no infirmity in the same. Rightly Accepted.
5133.2 The Ld. AR of the assessee submitted that the segmental accounts of the company are not available in the annual report or public domain, so the accuracy of the segmental margin remains unreliable and unverified. Reliance is placed upon the decision of the Hon'ble Mumbai Tribunal in case of WNS Global services (P.) Ltd. v. ITO [IT Nos. 396,631/Mum/2011 & 7378 /Mum/2012 in which the Hon'ble Court held that the segmental details of this company are not available in the annual report and therefore, directed for exclusion of this company. The relevant extract is as under:
110. xxx Further, though the company provides various other services, however segmental data relating to all services are not available in the annual report. For the aforesaid reasons the tribunal Mumbai Bench in Dialogic Network India (P.) Ltd (supra) has excluded this company as a comparable. Facts being similar following the aforesaid decision of the co-
ordinate Bench, we exclude this company as a comparable. 33.3 Keeping this view that the segmental details of this company are not available in the annual report, following the decision of the co-ordinate bench we direct the AO/TPO to exclude this company as a comparable.
52
34.In the light of the above the matter is restore back to the AO/TPO to be deiced as direct here in above.
35. In the result the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 08.05.2026.
Sd/- Sd/-
(RAMIT KOCHAR) (SUDHIR KUMAR)
ACCOUNTANT MEMBER (JUDICIAL MEMBER)
SR BHATNAGGR
Date: 08.05.2026
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals) `
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT DELHI