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• Flextronics Ltd.

• L&T Infotech Ltd.

• Infosys Technologies Ltd.

• Satyam Computer Services Ltd.

• iGate Global Solutions Ltd.

ITA Nos. 540 & 541, 616 & 617/Bang/2013 It may be mentioned here that although the turnover of iGate Global Solutions Ltd. ('iGate' for short) for FY 2004-05 was Rs.406 crores and would thus stand excluded on application of the turnover filter at Rs. 200 crores, as was directed to be applied by the CIT(A), the CIT(A) inadvertently did not specifically set out that iGate would be so excluded. However, as can be seen from the set of final comparables selected by the CIT(A) at page 45 of the order, iGate has been excluded therefrom.

(i) That Sankhya Limited ought to stand rejected as a comparable as it is functionally dissimilar to the Assessee [Ground No.4(a)].
(ii) That Exensys Software Solutions Ltd and Thirdware Solutions Ltd. ought to remain rejected as they are functionally dissimilar to the Assessee even apart from having abnormally high margins [Ground No.4(a)].
(iii) That Infosys Ltd., Flextronics Ltd. and Satyam Computer Services Ltd. are not comparable to the Assessee even apart from the fact that they had high turnovers in FY 2004-05 [Ground No.4(a)].

IT(TP)A No.616/Bang/2013: Revenue's appeal for AY 2005-06

17. The first issue to be decided in Revenue's appeal is the application of turnover filter for exclusion of companies that are otherwise found to be functionally comparable. The Grievance of the revenue in this regard is projected in Gr.No.2 of the Grounds of appeal raised by the revenue in its appeal. The basic facts to be noticed with regard application of turnover filter are that the Assessee's turnover for the relevant previous year was ITA Nos. 540 & 541, 616 & 617/Bang/2013 Rs.10.65 crores. The TPO excluded from the list of comparable companies chosen by the Assessee in its TP study companies whose turnover was less than Rs.1 Crore. The contention of the Assessee before the CIT(A) was that while the TPO excluded companies with low turnover, he failed to apply the same yardstick to exclude companies with high turnover compared to the Assessee. The reason for excluding companies with low turnover was that such companies do not reflect the industry trend as their low cost to sales ratio made their results less reliable. The contention of the Assessee was that there would be effect on profitability wherever there is high or low turnover and therefore companies with high turnover should also be excluded from the list of comparable companies. The CIT(A) agreed with the submission of the Assessee and he excluded the following 5 companies whose turnover was above Rs.200 Crores from the list of comparable companies, viz., (i) Flextronics Ltd., (ii) L & T Infotech Ltd., (iii) M/s. Infosys Technologies Ltd., (iv) Satyam Computer Services Ltd., (v) iGate Global Solutions Ltd. The CIT(A) in coming to the above conclusion placed reliance on the decision of the ITAT Bangalore in the case of Genisys Integrating Systems (India) (P) Ltd. Vs. DCIT (2012) 53 SOT 159 (Bang.) wherein it was held when there is a limit for the lower end for identifying the comparable companies, there is no reason why there should not be an upper limit also, as size matters in business.

27. In Gr.No.4(a) the Assessee has sought exclusion of Infosys Ltd., Flextronics Ltd. and Satyam Computer Services Ltd. on the ground that these companies were functionally not comparable with the Assessee. These companies were already excluded on the ground that the turnover of these companies were above Rs.200 Crores and therefore ought to be ITA Nos. 540 & 541, 616 & 617/Bang/2013 considered as companies operating at different level and hence not comparable. The contention of the Assessee is that even functionally these companies are not comparable with the Assessee which is a SWD service provider for the reason that, Infosys Ltd. and Flextronics Ltd. ought to be excluded as being functionally dissimilar to the Assessee, while Satyam Computer Services Ltd. ought to be excluded as its financial data is unreliable besides being otherwise functionally incomparable to the Assessee. The Assessee has placed reliance on the decision of the Tribunal Bangalore Bench, in ITO v. Net Devices India Ltd. [TS-354-ITAT- 2016(Bang)-TP at paras 11.1-11.2, 17.1-17.3 and 18.5.1-18.5.3 at pages 22-24, 31-33 and 40-41 respectively] in support of its submission that Infosys Ltd., Flextronics Ltd. and Satyam Computer Services Ltd. ought to remain excluded for the above reasons. We are of the view that even on the grounds as stated above, these three companies ought to be excluded from the list of comparable companies in view of the decision referred to by the learned counsel for the Assessee rendered on identical facts for the very same AY 2005-06. We hold and direct accordingly.