Tribunal Decides on Revenue and Assessee Appeals

Outcome: The Tribunal partially allowed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, upholding the CIT(A)'s decisions on the exclusion and inclusion of various comparables based on functional differences and adherence to relevant filters and thresholds.

---

---

Issues Involved:
1. Exclusion of Bhilwara Infotechnology Ltd. from the final set of comparables for Software Development Services (SDS).
2. Inclusion of Aspire Systems (India) Pvt. Ltd. in the final set of comparables for SDS.
3. Exclusion of Jindal Intellicom Ltd. from the final set of comparables in IT Enabled Services (ITES) segment.
4. Exclusion of MPS Ltd. from the final set of comparables for ITES segment.
5. Inclusion of M/s. Domex E-Data Pvt. Ltd., CES Ltd., and Manipal Digital Systems Pvt. Ltd. in the final set of comparables for ITES segment.
6. Exclusion of One Touch Solutions (India) Pvt. Ltd. from the final set of comparables for ITES segment.

Detailed Analysis:

1. Exclusion of Bhilwara Infotechnology Ltd.:
The Revenue disputed the exclusion of Bhilwara Infotechnology Ltd. from the final set of comparables for the SDS segment. The CIT(A) excluded this company because its entire earnings from the software and IT segment were from the domestic market, failing the export filter applied by the TPO. The Tribunal upheld the CIT(A)'s decision, confirming that Bhilwara Infotechnology Ltd. was rightly removed as a comparable in the SDS segment.

2. Inclusion of Aspire Systems (India) Pvt. Ltd.:
The Revenue sought the inclusion of Aspire Systems (India) Pvt. Ltd. in the final set of comparables for the SDS segment. The CIT(A) excluded this company due to its failure to meet the Related Party Transactions (RPT) filter, with an RPT ratio of 37%, above the 25% threshold. Additionally, the company underwent amalgamation during the relevant financial year, making it functionally different. The Tribunal upheld the CIT(A)'s decision, referencing a similar judgment by the Hyderabad Bench in the case of Infor (India) Pvt. Ltd. vs. DCIT.

3. Exclusion of Jindal Intellicom Ltd.:
The Revenue wanted the exclusion of Jindal Intellicom Ltd. from the final set of comparables in the ITES segment. The TPO rejected this company due to its foreign exchange earnings being less than 75%. The CIT(A) included it as a comparable, noting its functional comparability and previous acceptance in earlier assessment years. However, the Tribunal upheld the TPO's decision, stating that the export turnover ratio of 70.80% was a significant deviation from the 75% filter, thus rejecting Jindal Intellicom Ltd. as a comparable.

4. Exclusion of MPS Ltd.:
The Revenue contested the exclusion of MPS Ltd. from the final set of comparables for the ITES segment. The CIT(A) excluded MPS Ltd. based on its functional differences, as it was engaged in high-end activities akin to IT services rather than ITES. The Tribunal upheld the CIT(A)'s decision, referencing previous Tribunal decisions that highlighted MPS Ltd.'s involvement in knowledge processing outsourcing services, making it functionally different from the assessee's ITES activities.

5. Inclusion of M/s. Domex E-Data Pvt. Ltd., CES Ltd., and Manipal Digital Systems Pvt. Ltd.:
The Revenue sought the inclusion of these companies in the final set of comparables for the ITES segment. The CIT(A) excluded them, referencing the Pune Tribunal's decision in the case of Credence Resource Management Pvt. Ltd. The Tribunal upheld the CIT(A)'s decision, noting that these companies were functionally different, engaged in high-end research, IT activities, and KPO services, which were not comparable to the assessee's low-end back-office ITES activities.

6. Exclusion of One Touch Solutions (India) Pvt. Ltd.:
The assessee sought the exclusion of One Touch Solutions (India) Pvt. Ltd. from the final set of comparables for the ITES segment. The CIT(A) included this company, noting that it was engaged in ITES activities as defined under Rule 10TA(e). The Tribunal upheld the CIT(A)'s decision, confirming the inclusion of One Touch Solutions (India) Pvt. Ltd. as a comparable, given its functional similarity to the assessee's ITES activities.

Conclusion:
The Tribunal partially allowed the Revenue's appeal and partly allowed the assessee's appeal for statistical purposes, upholding the CIT(A)'s decisions on the exclusion and inclusion of various comparables based on functional differences and adherence to relevant filters and thresholds.

---