The Pr. Cit v. Corporate Executive Board India P. Ltd.: Itano. 142 Of2018 (Respondent’s Own Casefor Ay 2008-09)

[TTA-540-201 1 230 IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA-540-2017 (O&M)Date of Decision: 20.8.2019 The Principal Commissioner of Income Tax, Gurgaon .- Appellant 5!-&3& Corporate Executive Board India P. Ltd., Gurgaon. _....... Respond CORAM : HON'BLE MR.JUSTICE AJAY TEWARI* HON'BLE MR. JUSTICK HARNARESH SINGH GILL Present :Mr. Tajender K. Joshi, Sr. Standing Counselfor the appellant. Mr. Vishal Kalra, Advocatefor the respondent. AJAY TEWARI, J. (Oral) inThis order shall dispose appeal bearing No. ITA No. 540-2017 preferred by the Revenue under section 260A of the Income TaxAct, 1961 (for short “the Act”) against the order dated March 17, 2017(Annexure A-III) passed by the Income Tax Appellate Tribunal, DelhiBench, New Delhi (hereinafter referred to as “the Tribunal’) in ITA No,963/Del/2015 tor Assessment Year 2010-11, claiming the followingsubstantial question of law:- “Whether in thefacts and circumstances ofthe case and in law,the Hon’ble ITAT was correct in excluding M/s. AccentiaTechnologies Limited, M/s. TCS E-Serve Ltd. and M/s. TCS E-Serve International Ltd. used as a comparable for determiningthe ALP in the case of the assessee company, since the TPO [TTA-540-201 had made detailedfindings by analyzingfunctionality, turnoverand profile of various comparables considered in his order.Further the ITAT was notjustified to consider issues pertainingto earlier years, since each year is a separate assessment yearand should be considered independently. The comparables hadbeen selected by the TPO by applying suitable and relevantparameters. © 2 A tew facts necessary for adjudication of the instant appealaS narrated therein may be noticed. The assessee was engaged inproviding data collection, web services, information research and relatedSupport services to its associated enterprises. It filed its return of incomeon 1.10.2010 for the assessment year 2010-11 declaring income ofRs.5,75,377. The Assessing Officer noticed that the assessee had enteredinto international transactions with its associated enterprises and,therefore, a reference was made to the Transfer Pricing Officer (in short“the TPO”) to determine the Arm’s Length Price (“ALP”). The TPO videorder dated 21.01.2014 (Annexure A-II) passed under Section 92CA(3) ofthe Act and determined the transfer pricing adjustment atRs.4,25,05,514./- Thereatter, draft assessment order was passed againstwhich the assessee approached the Dispute Resolution Panel-III, NewDelhi. The Dispute Resolution Panel-IIJ vide order dated 22.12.2014revised the adjustment to Rs. 2,40,24,399/- instead of Rs.4,25,05,514/-,Thereafter, the Assessing Officer vide order dated 6.2.2015 (Annexure A-1) framed the assessment under section 143(3) read with section 144C ofthe Act at a total income of Rs. 4,25,99,780/- including the addition ofRs.4,20,24,399/- on account of Transfer Pricing Adjustments. Feelingaggrieved, the assessee filed an appeal before the Tribunal. The Tribunalvide order dated 17.3.2017 (Annexure-A-III) partly allowed the appeal of [TTA-540-201 3 the assessee. Hence, the present appeal by the Revenue. | 3,Learned counsel for the Revenue submitted that the Tribunalhad erred in law in excluding comparables, namely, M/s AccentiaTechnologies Limited, M/sTCS E-Serve Ltd. and M/s TCS E-ServeInternational Ltd. used as comparables for determining the ALP in thecase of the assessee company when the assessee company and comparablecompanies are providing similar nature of services. He further relied uponthe order passed by the TPO while dealing with these companies ascomparables. 4On the other hand, learned counsel for the appellant besidesSupporting the order passed by the Tribunal has submitted that theTribunal had rightly excluded M/s Accentia Technologies Limited, M/sTCS HE-Serve Ltd. and M/s TCS E-Serve International Ltd. frocomparables for determining the ALP. In support of his contentions, hehas placed reliance upon the following judgments:- 4On the other hand, learned counsel for the appellant besidesSupporting the order passed by the Tribunal has submitted that theTribunal had rightly excluded M/s Accentia Technologies Limited, M/sTCS HE-Serve Ltd. and M/s TCS E-Serve International Ltd. frocomparables for determining the ALP. In support of his contentions, hehas placed reliance upon the following judgments:- (1)The Pr. CIT vs Corporate Executive Board India P. Ltd.: ITANo. 142 of2018 (Respondent’s own casefor AY 2008-09)No. 142 of2018 (Respondent’s own casefor AY 2008-09)(11)PCIT vs B.C. Management Services (P.) Ltd. [2018/ 403 ITR45 (Del)45 (Del) (111)Ameriprise India (P.) Ltd. vs DCIT: ITA No. 7014 of 2014 —.affirmed by the Hon’ble Delhi High Court: ITANo.461/2016).affirmed by the Hon’ble Delhi High Court: ITANo.461/2016) 5 The issue of excluding M/s. Accentia Technologies Limitedfor the list of comparables was decided by this Court in the case of theassessee 1n ITA No. 142 of 2018 for the A.Y. 2008-09, wherein it washeld that the ITAT has rightly excluded M/s Accentia TechnologiesLimited from the list of comparables as the same was not functionally [TTA-540-201 4 comparable. 6.The Tribunal further in this year directed the AO/TPO toexclude TCS H-Serve Ltd. and TCS E-Serve International Ltd. from thelist of comparables on the ground that the same were functionallydissimilar to the assessee company. The tribunal held that the abovementioned comparable companies were engaged in providing technicalservices such as software testing, verification and validation of softwareat the time of implementation and data centre management activities andno segmental information was available to bifurcate the income andexpenses between the ITES services and technical services. The ITAT,while excluding the comparable followed the decision of the coordinateBench of the Tribunal in the case of Ameriprise India Private limited(supra) and Equant Solutions India Private Limited ITA No. 1202/ Del/2015 wherein both the above said companies were discussed and held tobe not comparable with assessees providing back office ITeS services. Itwas also pointed out by the learned counsel for the respondent that thedecision in the case of Ameriprise India (P.) Ltd. vs DCIT (supra) reliedupon by the Tribunal in the instant case has been affirmed by the DelhiHigh Court in ITA No.461/2016.. vaIn addition to the tactual matrix noticed by the Tribunal forexcluding these comparables, it was urged by the learned counsel for theassessee that various High Courts in respect of these very comparables inthe same line of industry have already held them to be not validcomparables. § The Delhi High Court in the case ofPCIT vs B.C.Management Services (P) Ltd (supra)while upholding the decision of [TTA-540-201 the Tribunal in excluding Accentia Technologies Pvt. Ltd and TCS E-Serve from the list of comparables in the line of assessee’s industry hadheld as under:- vaIn addition to the tactual matrix noticed by the Tribunal forexcluding these comparables, it was urged by the learned counsel for theassessee that various High Courts in respect of these very comparables inthe same line of industry have already held them to be not validcomparables. § The Delhi High Court in the case ofPCIT vs B.C.Management Services (P) Ltd (supra)while upholding the decision of [TTA-540-201 the Tribunal in excluding Accentia Technologies Pvt. Ltd and TCS E-Serve from the list of comparables in the line of assessee’s industry hadheld as under:- “13. The exclusion of second comparable ICRA TechnoAnalytics Ltd. was on the basis that it had engaged itself inprocessing and providing software development andconsultancy and engineering services/web developmentservices. Ihe reasons for execution were _ functiondissimilarities and that segmental data were unavailable.Again the findings of the ITAT are reasonable and based onrecord. The third comparable that the AO/TPO excluded isTCS E-serve. The ITAT observed that though there is a closefunctional similarity between that entity and the assessee,however, there is a close connection between TCS E-serve andTATA Consultancy Service Ltd. which was high brand value;that distinguished it and marked it outfor exclusion. The ITATrecorded that the brand value associqted with TCSConsultancy reflected impactedTCS kE-serve profitability in very positive manner. This inference too in the opinion ofCourt, cannot be termed as unreasonable. The rationale forexclusion 1s therefore upheld. The assesse was aggrieved by theinclusion of Accentia a Software Development Company. TheRevenue is aggrieved by the exclusion ofAccentia from the TPanalysis. The DRP had directed its deletion. We observe thatthe ITAT has noticed the unavailability of the segmental dataso far as these comparables are concerned. Furthermore, thefunctionality of this entity was concerned, it is different fromthat of the assessee; Accentia was engaged in KPO services inthe healthcare sector. — 14. In view of the above findings, this Court is of the opinionthat no substantial question of law arises. The appeals aredismissed. “ [TTA-540-201 < 9)Learned counsel for the Revenue was unable to demonstratethat the order of the Tribunal suffers from any illegality or perversity as ithad failed to consider or appreciate any relevant circumstances forexcluding these three comparables, namely, M/s. Accentia TechnologiesLtd., M/s. TCS E-Serve Ltd. and Ms. TCS E-Serve International Ltd. fordetermining the ALP. 10)In view of the above, it cannot be held that the aforesaidfindings recorded by the Tribunal in the appeal warrant any interferenceby this Court. ll.Accordingly, no _ substantial question of law_ ariseConsequently, the appeal is dismissed. (AJAY TEWARIT) JUDGE 20.8.2019anuradha (HARNARESH SINGH GILL)JUDGE (Whether speaking/reasoned(Whether reportable Yes/NoYes/No