Ita/419/2016 Of The Pr. Commissioner Of Income Tax Gurgaon v. M/S Equant Solutions India Pvt Ltd

ITA No.419 of 2016 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA|AT CHANDIGARH Date of decision : 39.10.2019 1,ITA No.419 of 2016 (O&M) The Principal Commissioner of Income Tax,|Gurgaon ...... Appellant VeTSuU M/s Equant Solutions India Pvt. Ltd, ...... Respondent 2.ITA No.405 of 2016 (O&M) The Principal Commissioner of Income Tax,|Gurgaon ...... Appellant VeTSuU M/s Orange Business Services IndiaSolutions (P) Ltd, ...... Respondent 3) ITA No.405 of 2018 (O&M) Orange Business Services India Solutions Pvt. Ltd. ...... Appellant VeTSuU Deputy Commissioner of Income Tax, Circle 3,Gurgaon ...... Respondent CORAM: HON'BLE MR.JUSTICEKE AJAY TEWARIHON'BLE MRSJUSTICEALKA SARIN 111 Present :Mr. Tajender K.Joshi, Advocatefor the appellant (ITA-419-2016) and ITA-405-2016)_for the respondent (ITA-405-2018) Ms. Radhika Suri, Senior Advocate with Mr. M.S.Kanda, Advocatefor the appellant (ITA-405-2018)for the respondent(s) (ITA-419-2016) and(ITA-405-2016), 111 AJAY TEWARI, J. (Oral) ITA No. 419ot 2016 1. The present appeal is directed against the order of theIncome Tax Appellate Tribunal dated 21[St]January, 2016 for the A.Y.2010-11. The revenue has raised the following questions of law:- “I. Whether in the facts and circumstances of the case andin law, the Hon’ble ITAT was correct in excludingM/s Persistent Systems Limited used as a comparable fordetermining the ALP in the case of the assessee companywhen the assessee company as well as comparable companywere predominately software development _ servicproviders? 2. Whether in thefacts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s WiproTechnology Services Limited used as a comparable fordetermining the ALP in the case of the assessee companywhen services provided by the assessee company andcomparable company are similar in the nature of softwaredevelopment services? 3. Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s ZylogSystems Limited used as a comparable for determining theALP in the case of the assessee company in the absence ofany evidence that there is impact of amalgamation on theprofitability ofthe comparable? 4. Whether in the facts and circumstances of the case and in law, the Hon’ble ITAT was correct in excluding M/sAccentia Technologies Limited used as a comparable fordetermining the ALP in the case of the assessee companywhen the assessee company and comparable company areproviding similar nature of services in the category ofITESas these services are notified in the category of ITES innotification of CBDT dated 20.09.2009 and there is nofurther sub-classtfication of this segment? 5. Whether in thefacts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s FortuneInfotech Ltd used as a comparable for determining the ALPin the case of the Assessee Company when the AssesseeCompany and comparable company are providing similarnature ofservices in the category ofITES as the services arenotified in the category of ITES in notification of CBDTdated 20.09.2009 and there is no further sub-classificationof this segment? 6. Whether in thefacts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s InfosysBPO Ltd used as a comparable for determining the ALP inthe case of the Assessee Company when the AssesseeCompany and comparable company are providing similarnature ofservices in category ofITES? 5. Whether in thefacts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s FortuneInfotech Ltd used as a comparable for determining the ALPin the case of the Assessee Company when the AssesseeCompany and comparable company are providing similarnature ofservices in the category ofITES as the services arenotified in the category of ITES in notification of CBDTdated 20.09.2009 and there is no further sub-classificationof this segment? 6. Whether in thefacts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s InfosysBPO Ltd used as a comparable for determining the ALP inthe case of the Assessee Company when the AssesseeCompany and comparable company are providing similarnature ofservices in category ofITES? 7. Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s TCSk-Service International Ltd used as a comparable fordetermining the ALP in the case of the Assessee Companywhen the Assessee Company and comparable company areproviding similar nature ofservices in the category of ITES?5. Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s TCSE Service Ltd used as a comparable for determining theALP in the case of the Assessee Company when theAssessee Company and comparable company are providing similar nature ofservices in the category ofITES?”) 2. The respondent assessee Equant Solutions India Pvt. Ltd. isa wholly owned subsidiary of EGN BB Netherlands. The assessee isengaged in providing information technology and I.T. enabled services toits associated enterprises. 3. For the A.Y. 2010-11, the Respondent- Assessee filed itsreturn of income declaring a total income of Rs.2,76,18,542/- on30.09.2010. During the relevant financial year the assessee in its transferpricing analysis selected Transaction Net Margin Method (INMM) as themost appropriate method with operating profit divided by total costs(“OP/TC”) as relevant profit level indicator for both the segments underconsideration. Under the IT services segment, the Assessee selected 16comparable companies with a mean OP/TC of 12.21% whereas under theITES services the assessee selected 13 comparables with a mean OP/TCof 12.12%. The OP/TC earned by the assessee under both the segmentswas 15.02%. Thus, it was contended on behalf of the assessee that itstransactions with the associated enterprises are at arms length. © 4. A reference was made to the transfer pricing officer todetermine the arms length price. The transfer Pricing officer passed anorder under Section 19 CA(3) of the Income Tax Act, 1961 (for short the‘Act’) on 9[th]January, 2014 accepting TNMM as the most appropriatemethod, however, the Transfer Pricing Officer chose certain comparablesfor IT services and ITES services with a mean “OP/TC” of 25.17 of ITservices and 30.45% for IT enabled services and proposed transfer pricingadjustments at Rs.23,57,03,932/-. The draft assessment order was passed ITA No.419 of 2016 (O&M) 5 by the Assessing Officer on 14[th]March, 2014 making additionsRs.23,57,03,932/- on account of transfer pricing adjustment. 5. The assessee moved before the Dispute Resolution Panel,New Delhi contending that the comparables chosen by the TransferPricing Officer were functionally dissimilar and hence should beexcluded. The Dispute Resolution Panel excluded only one comparableM/s. Infosys Ltd. from the list of comparable companies and theobjections regarding the exclusion of other companies were rejected. |The final assessment order U/s 143(3) of the Act was passed by theAssessing Officer on 30[th]January, 2015 at an income ofRs.25,97,19,410/-. The assessee preferred an appeal before the ITAT.The ITAT accepted the submissions of the assessee that the comparableschosen by the Transfer Pricing Officer were functionally dissimilar and were liable to be rejected vide order dated 21 January, 2016. 5. The assessee moved before the Dispute Resolution Panel,New Delhi contending that the comparables chosen by the TransferPricing Officer were functionally dissimilar and hence should beexcluded. The Dispute Resolution Panel excluded only one comparableM/s. Infosys Ltd. from the list of comparable companies and theobjections regarding the exclusion of other companies were rejected. |The final assessment order U/s 143(3) of the Act was passed by theAssessing Officer on 30[th]January, 2015 at an income ofRs.25,97,19,410/-. The assessee preferred an appeal before the ITAT.The ITAT accepted the submissions of the assessee that the comparableschosen by the Transfer Pricing Officer were functionally dissimilar and were liable to be rejected vide order dated 21 January, 2016. 6. Being aggrieved by the impugned order dated 21 January,|2016 of the Tribunal, the revenue is in appeal raising the abovementioned question for consideration. Re:Question No.1 Persistent Systems Ltd. TiThe Transfer Pricing Officer had taken Persistent systemsLtd. which had a margin of 29.02% holding that the company is engagedin Software Developing Services. The Dispute Resolution Panel rejectedthe claim of the assessee for its exclusion. Before the ITAT, the assesseesubmitted that the company was functionally different because it renderedoutsourced product development services and developed product as ITA No.419 of 2016 (O&M) 6 Paxpro, ChemLMS etc. The assessee further contended that semengalinformation of sale of software services and sale of product were notavailable and therefore, it should be excluded. 8 The finding of the ITAT for its exclusion is as under:- “Further it is seem from the details of record that thiscompany 1.e. Persistent Systems Ltd. is engaged in productdevelopment and product design services, while the assesseeis engaged in contract software development services. Wefind that as submitted by the Assessee the segmental detailsare also not available separately. Therefore, followingthe principle enunciated in the decision of the MumbaiTribunal in the case of Telecordia Technologies India (P)Ltd. Vs. Asstt. 0712012] 137 ITD 1/22 taxmann.com 96(Mum).That in the absence’ of segmentadetails/information a company it cannot be taken intoaccount for comparability analysis. We hold that thiscompany i.e. Persistent Systems Ltd. ought to be omittedfrom the set of comparables for the year underconsideration, itis ordered accordingly ”’. QOThe said finding of fact has not been shown to be perverse bythe revenue and thus, the finding of fact that the comparable isfunctionally dissimilar and in the absence of segmental details of revenuegenerated from its services of product development and product designservices has been rightly excluded by the ITAT. Re:Question No.2 Wipro Technology Services 10.Transfer Pricing Officer had included Wipro Technologyservices having a margin of 73.35% which was upheld by the DisputeResolution Panel betore the Income Tax Appellate Tribunal, the assessee ITA No.419 of 2016 (O&M) 7 contended that this company had huge related party transactions as itstotal revenue was governed by Master Service Agreement with CitiTechnology Services Ltd. where the equity was owned by Wipro. Theturnover of the comparable was 24 times that of the assessee and hadhuge brand value of Wipro and therefore, it should be excluded. TheITAT recorded the following findings while excluding the saidcomparable; Re:Question No.2 Wipro Technology Services 10.Transfer Pricing Officer had included Wipro Technologyservices having a margin of 73.35% which was upheld by the DisputeResolution Panel betore the Income Tax Appellate Tribunal, the assessee ITA No.419 of 2016 (O&M) 7 contended that this company had huge related party transactions as itstotal revenue was governed by Master Service Agreement with CitiTechnology Services Ltd. where the equity was owned by Wipro. Theturnover of the comparable was 24 times that of the assessee and hadhuge brand value of Wipro and therefore, it should be excluded. TheITAT recorded the following findings while excluding the saidcomparable; “We carefully considered that rival contention regardingexclusion of this comparable. This company had agreed anagreement with Citi Technology Services Ltd. which is100% _ subsidiary of Wipro Technology Ltd. The entirerevenue during the year is covered by a Master ServiceAgreement entered into by Wipro with Citi Group Services. Further, this company is also a subsidiary with Wipro Ltd.which company has a considerable brand name, thereforebenefit accruing to this company from the brand name ofWipro cannot be denied. Therefore, relying on the decisionof the Coordinate Bench in the case of Agnity TechnologyPvt. Ltd. in ITA No.955/Del./2015for A.Y. 2010-11 whereinthe Infosys Owns of its own brand name was held to beincomparable on the same analogy brand value of Wiprodoes help this comparable hence, we direct TPO to excludedthis comparable in its order accordingly. 11.The finding of fact has not been shown to be perverse in anymanner, the comparable excluded has a turnover which is 24 times that ofthe assessee and has also the benefit of the brand name of Wipro and theassured revenue from its agreement with Citi Technology Services. |Thus, the comparable has been rightly excluded. ITA No.419 of 2016 (O&M) 8 Re: Question No.3 M/s. Zylog Systems Ltd. 12.The Transfer pricing Officer had included Zylog System Ltd.which had a margin of 25.07% as it was functionally similar to theassessee according to the Transfer Pricing Officer. The DRP concurredwith the TPO before the ITAT, the Assessee submitted, that this companyderive its income from sale of Software Services as well as products andhas diversified operation in Wifi Space and Broadband connectivity. Itwas predominately an onsite service company, therefore it wasfunctionally different. The company had commenced acquisition duringthe year and therefore, due to extra ordinary special events thecomparable should be rejected. The assessee also submitted that 62% ofthe assets of the company were intangible and therefore it should beexcluded. The ITAT while excluding the said comparable returned thefollowing finding:- “We have considered the rival contention wherein it 1s statedthat the Zylog Systems Ltd. is engaged in the sale ofSoftware Services as well as its products and has operationin Wift place and broadband connectivity. It is apparentlyan onsite service company. This is evident from the variouscomparables of only reports and _ related documentproduced before us. Zylog Systems Ltd. has also undergoneinto the business of restructuring where it is clear dugoutfairflex matrix. Therefore, it is apparent that the companyhas undergone the business restructuring process during theyear. It cannot be held to be comparable in view of theextra ordinary circumstances. The company also owningsignificant intangibles and carrying on _ research adevelopment activity ownership significant intangibles cannot be held to be comparable with the assessee andtherefore, on this ground too, this comparable with theassessee and therefore on this ground too this comparable isordered accordingly to be excluded ” cannot be held to be comparable with the assessee andtherefore, on this ground too, this comparable with theassessee and therefore on this ground too this comparable isordered accordingly to be excluded ” 13.The said finding of the ITAT has not been shown to beperverse and thus, the exclusion of the comparable on the ground thatthe intangible assets owned by it are significant as compared to theassessee and it has also restructured its business is completely justifiedboth in facts and in law. Re:Question No.4 IT Enabled Services Accentia Technologies Ltd. 14.The Transfer Pricing Officer while evaluating theinformation technology enabled services segment of the assessee hadtaken this comparable as it was functionally similar. The said inclusionwas upheld by the Dispute Resolution Panel. Before the ITAT theassessee submitted that the com parable company provides high andfunctions such as knowledge process outsourcing, legal processoutsourcing. Further, the company is providing software in a service in|health care outsourcing area. The company also developed softwareproducts in BPO Management and Healthcare. Therefore it isfunctionally dissimilar to the assessee. The assessee also conducted thatcomparable had significant amount brand and IPR and further, it did notcontain segment wise results. Further, it was submitted by the ITATduring the financial year 2009-10, there was an amalgamation in thecomparable company which was an extra ordinary event and therefore it ITA No.419 of 2016 (O&M) 10 affected overall profitability of the company. The ITAT while excludingthe comparable returned a finding as under:- “We have considered the rival contention during the yearthat this comparable has gone into substantial businessrestructuring resulting into extraordinary circumstancesduring F.Y. 2009-10 subsidiary of ASCENTTIA gotamalgamated with this company and the figure of thebusiness results for the year ending 31[St]March, 2010. Inthis case also excluded the figures of amalgamated companydue to which comparable has high OP by TC margin”. 15.The finding of fact recorded by the tribunal has not beenshown to be perverse in any manner. The fact that the amalgamation hasresulted in a higher OP by TC is an aberration and thus, the tribunal hasrightly excluded the said comparable. Re: Question No.5 Fortune Infotech Ltd. 16.The Transfer Pricing Officer included the said comparablewhich had a margin of 22.80%. The assessee contended before theTransfer Pricing Officer and the DRP that the profile of the comparablewas not similar to that of the assessee. The said submission was rejectedand before the ITAT, the main contention of the assessee was that thecomparable was engaged in Web Application, Mobile Application, WebDesigning and SEO Provider. Therefore, it was functionally different andwas liable to be excluded. 17.The ITAT returned the following findings: “We have carefully considered the rival contentions. Wehave heard both the parties and considered the material onrecord. There is no dispute that the assessee is operating purely in the ITES Sector providing services to its associatesenterprises, whereas comparable selected by the TPO hasdeveloped and owns its unique web based software by whichit provide niche services to its customers ” 18.The finding of the fact recorded by the ITAT has not beendisputed or shown to be perverse in any manner. The ITAT hasconcluded that Fortune Infotech has unique web based software andprovided niche services to its customers and thus, was dissimilar to theassessee and has been right excluded as a comparable. Re: Question No.6Infosys BPO Ltd. 17.The ITAT returned the following findings: “We have carefully considered the rival contentions. Wehave heard both the parties and considered the material onrecord. There is no dispute that the assessee is operating purely in the ITES Sector providing services to its associatesenterprises, whereas comparable selected by the TPO hasdeveloped and owns its unique web based software by whichit provide niche services to its customers ” 18.The finding of the fact recorded by the ITAT has not beendisputed or shown to be perverse in any manner. The ITAT hasconcluded that Fortune Infotech has unique web based software andprovided niche services to its customers and thus, was dissimilar to theassessee and has been right excluded as a comparable. Re: Question No.6Infosys BPO Ltd. 19,The Transfer Pricing Officer included Infosys BPO as acomparable which had a margin of 31.44%. Before the TPO, the assesseecontended that this comparable had a very high turnover and had hugebrand value. The TPO rejected the contention of the assessee holding thatthe assessed had failed to establish which brand has influenced theincreased profitability of the comparable. Before the ITAT, the assesseesubmitted that the comparable was engaged in high and integratedservices in improving the comparative position of the clients andmanaged their business process and provided value added services tothem. The ITAT concluded as under:- “We have considered the rival contentions regardingexclusion of Infosys BPO which is engaged in high andintegrated services and _ therefore it is functionaldissimilar. The Infosys Branch 1s indisputably a hugebrand and definitely result of this brand goes to thiscomparable. Therefore, the brand of Infosys definitelyresults in opening higher profits to this company. In view of the following decision the same is required to be excludedand hence 1s ordered accordingly”. 2()The findings of the ITAT have not been shown to beperverse in any manner. The brand of Infosys definitely results in higherprofits and hence the ITAT has rightly excluded the same from the list ofcomparables. Re: Question No.7. TCS E Serve [International Ltd 21.The Transfer Pricing Officer had included the comparablewhich had a margin of 54.02% holding it to be comparable. Thecontention of the assessee that the company was functionally dissimilarwas rejected by the TPO and the DRP. Before the ITAT the contentionof the assessee was that in addition to BPO Services the comparablecompany was engaged in providing technical services like softwaretesting, common verification and validation of software which falls underSoftware Development Activity which includes transaction process,technical services, therefore, it was functionally dissimilar. Further it wasalso contended that there was no segmental data ITES and SoftwareDevelopment Activity of the company and the comparable own suchsubstantial intangibles and had a volatile margin which had gone up by173% in the present year. The ITAT concluded as under:- “We have considered the rival contention regarding theexclusion of ICS E Service International Ltd.. Thecomparable is engaged in the business of BPO Service andprovides high and technology service such as SoftwareTesting, Verification and Validation of the Software.Therefore, it is functionally dissimilar to the assessee. Further, annual report of the company does not provide anysegmental information related to ITES as well as SoftwareDevelopment Services. The company also owns intangibleof substantial amount and is benefited usually by the TATAbrand”. The company is also making the appellant use ofsuch brand, therefore, this aspect also makes thiscomparable in appropriate and therefore, the order toexclude this comparable ” 2).The finding recorded by the ITAT have not been shown to beperverse and cogent reasons have been given showing the dissimilarity ofthe comparable to the assessee and thus, the exclusion of the abovecomparable cannot be faulted in any manner. Re: Question No.8. Further, annual report of the company does not provide anysegmental information related to ITES as well as SoftwareDevelopment Services. The company also owns intangibleof substantial amount and is benefited usually by the TATAbrand”. The company is also making the appellant use ofsuch brand, therefore, this aspect also makes thiscomparable in appropriate and therefore, the order toexclude this comparable ” 2).The finding recorded by the ITAT have not been shown to beperverse and cogent reasons have been given showing the dissimilarity ofthe comparable to the assessee and thus, the exclusion of the abovecomparable cannot be faulted in any manner. Re: Question No.8. TCS E Serve Ltd: 23.The Transfer Pricing Officer included this comparable whichhad a margin of 63.42%. The assessee before the ITAT contended thatthe company was dissimilar functionally. In addition to BPO Service isalso engaged in technical service such as Software Testing, Verificationand Validation. It has also developed software such as _ transportmanagement Software. The ITAT concluded as under: “We have considered rival contention for exclusion of TCS EServe Ltd. it is mainly involved in transaction processingand technology services. It carries on business ofprovidingtechnology service such as software testing, verification andvalidation. It is also developed a software such as transportmanagement software. Therefore, functionally this companyis dissimilar to the assessee company. It also owns hugeintangible and use of TATA brand which has definitelybenefited this comparable. It is directed to be excluded”. D4.The findings of facts regarding exclusion of the comparablehave not been shown to be perverse in any manner. The ITAT has thusrightly concluded that the comparable is functionally dissimilar and thus,has to be excluded. D5.The findings of fact by the ITAT regarding exclusion of thecomparables are thus upheld and thus the same do not merit anyinterference. The questions of law are answered against the revenue andin favour of the assessee. Similar views have been taken by the BombayHigh Court in the case of CIT Vs. PTC Software 395 ITR 176 and in thecase of Principal Commissioner of Income Tax Vs. Barclays TechnologyCentre India Pvt. Ltd. 409 ITR 108 and by the Karnataka High Court inPrincipal Commissioner of Income Tax Vs. Softbrands India Pvt. Ltd.406 TTR 513.. ITA No. 405 of 2016 26.The appeal filed by the Revenue tor A.Y. 2011-12 hasassailed the order of the [TAT dated 31![St]May, 2016 whereby theexclusion of comparables mentioned below is disputed: 1) M/s. Persistent Systems Ltd, 11) Wipro Technology Services Ltd. 111) Zylog Systems Ltd. iv) Accentia Technology Ltd. Vv) Infosys BPO vi) TCS E Service Ltd. QT.The following questions of law have been raised :- ?1. Whether in thefacts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s Persistent Systems Limited used as a comparable fordetermining the ALP in the case of the assessee company asthe assessee company as well as the comparable companywere software service providers? 2. Whether in the facts and circumstances of the case and inlaw the Hon’ble ITAT was correct in excluding M/s WiproTechnology Services Limited used as a comparable fordetermining the ALP in the case of the assessee company asthe assessee company and the comparable company wereproviding similar nature ofservices in the nature ofsoftwaredevelopment services? 3. Whether in thefacts and circumstances of the case and inlaw the Hon’ble ITAT was correct in excluding M/s ZylogSystems Limited used as a comparable for determining theALP in the case of the assessee company as there is noimpact of amalgamation on the functionality of thecomparable and, thus, the same cannot be rejected on theground ofamalgamation only ? 2. Whether in the facts and circumstances of the case and inlaw the Hon’ble ITAT was correct in excluding M/s WiproTechnology Services Limited used as a comparable fordetermining the ALP in the case of the assessee company asthe assessee company and the comparable company wereproviding similar nature ofservices in the nature ofsoftwaredevelopment services? 3. Whether in thefacts and circumstances of the case and inlaw the Hon’ble ITAT was correct in excluding M/s ZylogSystems Limited used as a comparable for determining theALP in the case of the assessee company as there is noimpact of amalgamation on the functionality of thecomparable and, thus, the same cannot be rejected on theground ofamalgamation only ? 4. Whether in the facts and circumstances of the case and inlaw the Hon’ble ITAT was correct in excluding M/s AccentiaTechnologies Limited used as a comparable for determiningthe ALP in the case of the assessee company as the assesseecompany and comparable company are providing similarnature ofservices in the category ofITES? 5. Whether in the facts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s InfosysBPO Ltd used as a comparable for determining the ALP inthe case of the assessee company when the assesseecompany and comparable company are providing similarnature ofservices in the category ofITES? 6. Whether in thefacts and circumstances of the case and inlaw, the Hon’ble ITAT was correct in excluding M/s TCS EService Ltd used as a comparable for determining the ALPin the case of the assessee company when the assessee company and comparable company are providing similarnature ofservices in category ofITES?” DS. |The Income Tax Appellate Tribunal has followed its ownorder for A.Y. 2010-11 to exclude the comparables mentioned above.|The order passed by the ITAT has been examined and upheld in ITA No.419 of 2016 and the findings of fact recorded by the ITAT have not beenshown to be perverse in any manner, 29.The questions of law thus raised in the present appeal areanswered against the revenue and in favour of the assessee holding thatthe exclusion of comparables was correct both in law and in facts andmerits no interferences. ITA No. 405 of 2018 30.The present appeal has been filed by the assessee for A.Y.2013-14 raising the following substantial question of law:- “l) Whether the Hon’ble ITAT erred in rejecting thesegmental information pertaining to IT and ITES presentedby the Appellant? il) Whether the Hon’ble ITAT erred in law in setting asidethe matter for carrying out the benchmarking analysis byaggregating the IT and ITES segment ofthe Appellant? 111) Whether the Hon’ble ITAT erred in law in setting asidethe matter for carrying out the benchmarking analysis byselecting the comparable companies involved in provision ofboth ITES and IT services ? iv) Whether the Hon’ble ITAT erred in law in not givingsufficient time to the Appellant, during the course ofproceedings, for placing relevant evidence on records?” 31.The brief facts leading to the present appeal are that theAppellant is a company engaged in IT Services and IT Enabled Services| ITA No.419 of 2016 (O&M) 17 which has been accepted by the assessing officers and the TransferPricing Officer vide orders for A.Y. 2010-11 and 2011-12, however, forthe present year i.e. A.Y. 2013-14, the Transfer Pricing Officercharacterized the Appellant as ITES Service Provider only rejecting itsclaim of providing IT Services in the nature of Software Developmentwhich had been accepted for all preceding years. The claim of theassessee before the Dispute Resolution Panel that it had two distinctsegments of IT i.e. Software Development and ITES were also rejectedand the findings of the TPO were upheld. The Assessee appellant filed anappeal before the ITAT and during the course of hearing on 8[th]February,2018, the Appellant was directed by the ITAT to submit additionalevidence demonstrating that the appellant was engaged in IT servicesincluding software development activity. The hearing on 8[th]February, 2018 being a Thursday was adjourned to 12[th]February, 2018, thus, theAppellant was provided one working day before the final hearing on 12February, 2018 which was a Monday. The present appeal has been filedalongwith an application for additional evidence wherein voluminousevidence has been filed by way of Annexure A-6 to A-13 indicating thatthe assessee was engaged in software development. | 32.Keeping in view the fact that the Transfer Pricing Officerhad in the preceding years accepted that the assessee was engaged in ITServices (i.e. including software development and ITES) as is evidentfrom the assessment order, which are part of the ITAs 419 of 2016 and405 of 2016 and considering the fact that due to paucity of time, theassessee could not produce evidence before the ITAT. The order of the ITA No.419 of 2016 (O&M) 18 ITAT dated 15[th]February, 2018 is set aside and the ITAT is directed toexamine the issue whether the assessee is engaged in the activity ofsoftware development after considering the additional evidence placedbefore this Court namely Annexures A-6 to A-13 and any other evidencewhich may be produced after hearing both the parties and allowingsufficient opportunity to the revenue to verify the same. 33.Appeals stand disposed of in the above terms, 34.Since the main cases have been decided, the pending CivilMisc. Applications, if any, also stand disposed of, (AJAY TEWARITJUDGE 30.10.2019pooja sharma-l ( ALKA SARIN)JUDGE Whether speaking/reasonedWhether Reportable | Yes/No Yes/No