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M/s. Hyundai Motors India Engineering P. Ltd., Hyderabad V/s. Dy. Commissioner of Income-tax, Circle 2(2), Hyderabad
August, 05th 2014
       IN THE INCOME TAX APPELLATE TRIBUNAL
           HYDERABAD BENCH `B', HYDERABAD
      BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT
                         MEMBER
      AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER

                 ITA No.255/Hyd/14
               Assessment year 2009-10


M/s. Hyundai Motors India           V/s. Dy. Commissioner of
Engineering P. Ltd., Hyderabad             Income-tax, Circle
( PAN - AABCH 7867 C )                     2(2), Hyderabad


          (Appellant)                         (Respondent)


                    Appellant by     :     Shri H.Srinivasulu

                 Respondent by       :     Shri P.Soma
                                           Sekhara Reddy DR

                  Date of Hearing        29.05.2014
          Date of Pronouncement          31.07.2014


                         ORDER


Per B.Ramakotaiah, Accountant Member:


           This appeal by assessee is directed against the
order of assessment dated 13th January, 2014 passed under
S.143(3) read with S.92CA and 144C(5) of the Act, in
pursuance of the order of the Dispute Resolution Panel,
Hyderabad dated 26.12.2013, for the assessment year 2009-
10.
                                    2
                              ITA No.255/Hyd/2014 M/s. Hyundai
                              Motor India Engineering P. Ltd., Hyd.

2.          The   assessee     raised       four     grounds     involving
various sub-grounds out of which ground no.1, ground
No.2.1.1, 2.1.2, and ground No.4 are general in nature. In
the course of arguments, the learned counsel has not
pressed the grounds No. 2.4. on rejection of usage of
multiple year data by the assessee in its TP study. Issue in
these   appeals   is   with    reference        to    Transfer     Pricing
adjustments   made     by     the       Assessing    Officer/TPO;     and
charging of interest under S.234B and 234C. In the course
of arguments, the learned counsel confined his arguments to
the selection of comparables on various filters and the
arguments are accordingly made. Ground No.2.3.5 seeking
inclusion of comparables selected by the assessee in its
Transfer Pricing Study was not pressed. Therefore, the main
arguments relate to exclusion of seven comparables included
by the TPO in his transfer pricing order.


3.          We    have      heard         the   learned        Authorised
Representative and the learned Departmental Representative
in detail, perused the paper-books placed on record along
with the summary of the charts prepared about statements
of various comparables.       In the course of arguments, the
learned counsel relied on various decisions of the coordinate
benches for exclusion of certain comparables.                   What we
notice is that many of the orders pertain to earlier years and
not for the assessment year involved in this appeal. Transfer
pricing issues mainly rely on the factual matrix of each case
in each assessment year. Therefore, while considering some
of the principles established in various decisions of the
coordinate benches of earlier years, we could not apply the
                                            3
                                         ITA No.255/Hyd/2014 M/s. Hyundai
                                         Motor India Engineering P. Ltd., Hyd.

findings thereon unless facts are similar. Suffice to say that
we have considered all case-law while deciding the issues
relied   on        by   the    learned          counsel    for    the    assessee
particularly, of the Hyderabad benches of the Tribunal, in
Hyundai Motors India Engineering P. Ltd., Hyderabad V/s.
ITO Ward 2(2) Hyderabad (ITA No.1850/Hyd/2012 for
assessment year 2008-09 dated 21.2.2014); in Capital IQ
information Systems (India) Pvt. Ltd., Hyderabad V/s. Dy.
CIT (ITA No.1961/Hyd/2011 for assessment year 2007-08
dated 23.11.2012), and M/s. Zavata India Private Ltd.,
Hyderabad          V/s.       ITO        Ward     3(2),      Hyderabad       (ITA
No.628/Hyd/2008              for    assessment        year       2004-05    dated
13.1.2013), and of the Bangalore Bench of the Tribunal in
the      case           of         Symphony           Marketing          (IT(TP)A
No.1316/Bang/2012              dated        14.8.2013),          which   basically
pertain to earlier assessment years and not for the year
under appeal in this case.


4.             Briefly stated, assessee Hyundai Motor India
Engineering P. Ltd (in short "HMIEPL") is a company
incorporated in November, 2006 as a subsidiary of Hyundai
Motor India Limited (in short "HMIL"). The assessee HMIEPL
and HMIL formed part of Hyundai Motor Company, Korea.
The assessee is engaged in the business of providing support
services in connection with Computer Aided Engineering (in
short "CAE") / Computer Aided Design (in short "CAD"). The
assessee      is    involved        in    providing       support    services   in
connection of modeling and iterative simulation. It receives
the basic design from its group company. With respect to
CAD modelling, assessee makes a 3-D CAD modelling data of
                                 4
                              ITA No.255/Hyd/2014 M/s. Hyundai
                              Motor India Engineering P. Ltd., Hyd.

vehicle components using CAD software tools. The CAE
modelling services comprises of finite modelling for the
computer simulation which would involve breaking down the
model into various structures. The TPO as well as the
assessee charecterised assessee as a routine support service
provider with skilled and trained workforce and it assumes
less than normal risk associated with carrying out such
business.





5.           During the year assessee's operating revenue
was to the tune of Rs.24.91 crores and operating cost was
Rs.23.40 crores. The operating profit to cost ratio was
6.44%. In its transfer pricing report, assessee reported I.T.
Enabled services (in short "ITES") at Rs.22.03 crores and
reimbursement of expenditure of Rs.45,568. Assessee in its
Transfer    Pricing   Study   selected   TNMM     as   the   most
appropriate method.     Even though there is no dispute with
reference to the method adopted, the TPO rejected the
documentation maintained by assessee on the reasons that
multiple year data was used; has not applied export filters
properly; and also selected some of the companies which are
not functionally similar.     After analyzing the reasons, the
TPO undertook fresh search of comparables and after
detailed analysis, gave a show cause notice to assessee for
its objections to the selection of 14 comparables. Ultimately,
the TPO determined the following twelve companies as
comparables and arrived at the average Profit Level Indicator
(PLI) of 27.42%, as per the details tabulated hereunder-
                                 5
                              ITA No.255/Hyd/2014 M/s. Hyundai
                              Motor India Engineering P. Ltd., Hyd.



     Sl.   Company Name                 Operating      PBIT/Cost
     No.                                Revenue        %
                                        Rs.(in
                                        crores)

     1.    Accentia Technologies               78.73        49.40
           Limited
     2.    Acropetal Technologies              33.13        25.01
           Ltd. (Seg.)
     3.    Aditya Birla Minacs                231.57          0.53
           Worldwide Ltd.
     4.    Cosmic Global Ltd.                   7.76        48.20
     5.    Crossdomain solutions p.            33.76        29.38
           Ltd
     6.    Eclerx Services Ltd.               187.98        53.44
     7.    Infosys B P O Ltd.                 101.62        16.90
     8.    Jeevan Softech Technology            1.79        16.56
           Ltd.
     9.    Microland Limited                  144.05         2.35
     10.   Microgenetic Systems Ltd.            1.27        10.11
     11.   R.Systems International             26.55         5.77
           Ltd.(Seg.)
     12.   Genesys International Ltd.          83.18        71.50

                  Arithmetic Mean                           27.42


6.             Having arrived at the Arithmetic Mean PLI at
27.42%, the TPO allowed working capital adjustment at
2.05%. The Arithmetic Mean PLI was determined at 25.37%
and taking the Operating Cost of Rs.37.42 crores, the TPO
suggested adjustment of Rs.4,42,02,149 under S.92CA.


7.             The Assessing Officer issued a Draft Assessment
Order proposing to make the adjustment and assessee filed
its objections before the DRP. The DRP vide its order running
into 14 pages rejected grounds raised by the assessee on TP
adjustments.       As the DRP confirmed the Transfer Pricing
                               6
                            ITA No.255/Hyd/2014 M/s. Hyundai
                            Motor India Engineering P. Ltd., Hyd.

adjustment made by the Assessing Officer and the TPO,
assessee is in appeal before us.


8.            Assessee has raised grounds on various aspects
of Transfer Pricing adjustments, like rejection of assessee's
TP Study, use of filters, obtaining data under S.133(6) of the
Act which is not available in public domain, selection of
comparables and risk profile of assessee company vis-à-vis
comparable companies. As already stated, In the course of
arguments, learned counsel restricted his arguments to the
selection of comparables. Assessee is objecting to seven
comparables selected by the TPO.


9.            We have heard the learned counsel for assessee
and the learned Departmental Representative in detail, and
their arguments are considered at the appropriate stages of
this order.    As briefly stated, assessee is objecting to the
following seven comparables out of twelve comparables
selected by the TPO.


     Sl.              Company Name
     No.

     1.        Infosys B P O Ltd.
     2.        Genesys International Ltd.
     3.        Eclerx Services Ltd.
     4.        Cosmic Global Ltd.
     5.        Acropetal Technologies Ltd. (Seg.)
     6.        Accentia Technologies Limited
     7.        Crossdomain solutions P. Ltd

It was submitted that if these comparables were considered,
other issues relating to Transfer pricing adjustment become
academic in nature.
                                   7
                               ITA No.255/Hyd/2014 M/s. Hyundai
                               Motor India Engineering P. Ltd., Hyd.

10.          We have considered the contentions of the
parties and examined the documents and paper-books
placed on record. Correctness of inclusion of the above
companies is decided hereunder case by case.

(1) Infosys B P O Ltd. :


11.          It was the contention of assessee that this BPO
is a giant in its area and has              brand value   of Infosys
Technologies Limited. Assessee's main contention was that it
is not functionally similar and its turnover is much more
when compared to that of assessee. It was also contended
that the Infosys BPO has done brand building exercise by
incurring large amounts of brand building and advertisement
expenditure and undertaking brand campaigning outside
India.   Further, it also has huge asset base and therefore,
this company is not functionally comparable to assessee.
Assessee relied on the decision of the Hon'ble Delhi High
Court in the case of CIT V/s. Agnity India Technologies Pvt.
Ltd. (2013) 219 Taxman 26 (Del), wherein it was held that
huge turnover companies like Infosys and Wipro cannot be
considered    as    comparable         to   smaller   companies   like
assessee.


11.1         We are in agreement with the contentions of the
comparability      on   turnover   ratio     of assessee with this
company on the ground that assessee's turnover is about
Rs.15.79 crores, as against turnover of Rs.1016 crores of the
Infosys. We are also of the view that other contentions with
regard to the       brand value and brand building exercise,
having huge asset base, can be considered to arrive at the
                                        8
                                     ITA No.255/Hyd/2014 M/s. Hyundai
                                     Motor India Engineering P. Ltd., Hyd.

conclusion that Infosys BPO is functionally not similar to that
of assessee.       Infosys BPO stands on its own as an exclusive
BPO of the Infosys Technologies and in earlier years,
generally Infosys BPO is excluded in many of the                      cases.
Considering these aspects, we are of the opinion that even
though the profits of the Infosys BPO Ltd. is reasonable and
no super profits are earned, because of its big brand value
this company has to be excluded on the grounds of
functional dissimilarity on FAR Analysis. Therefore, we direct
the Assessing Officer/TPO to exclude this company.


(2) Genesys International Ltd.


12.           It    was        the   contention   that   this    company
functions in two horizontals, and is having super profits. It
was further submitted that this company is not only in
software development but also in Geospatial Services, which
are highly technical.          It also involved in consulting activity.
It was the contention that this company was analysed by the
coordinate Bench of the Tribunal at Delhi in the case of M/s.
Mercer Consulting (India) Ltd.              V/s DCIT (vide order dated
6th   June,    2014       in     ITA   No.966/Del/2014),        for   same
assessment year, wherein this company was excluded in that
case. Learned counsel for assessee relied upon the findings
of the Tribunal vide paras 14.2 and 14.3, in that case, which
read as follows-


      "14.2. We have heard the rival submissions and
      perused the rival materials on record. It has been
      noticed supra that assessee is basically providing
      various services to the customers of its AEs in
      relation to human resources which are more or
      less centered   around    the  employees   of  the
                        9
                     ITA No.255/Hyd/2014 M/s. Hyundai
                     Motor India Engineering P. Ltd., Hyd.

prospective clients. When we consider the nature
of services provided by Genesys International
Corporation Ltd., it comes to the forefront that
they are providing full range of geospatial services to
its customers. In simple terms, geospatial services
means the services relating to the relative position
of things on the earth's surface. These basically
include 3D mapping, Navigation maps, Image
processing, Cadastral mapping, etc.       If we take
into account the nature of services provided by
the    assessee,   being    financial and retirement
security, health, productivity of employees and
employment relationships and then try to compare
them with those rendered by Genesys, it is
manifested that both are totally incomparable.

14.3.       The TPO on page 48 of his order has
examined CBDT Circular SO 890 (E) dated 26.9.2000
which provides a detailed list of products or services
that can be covered under the ITES for the purposes
of Section 10A and 10B of the Act. In this
Circular,      Information      Technology       Enabled
Products/Services have been divided into fifteen
categories,     starting with Bank Office operations,
Call   centres     etc.  and   ending     with   Website
services. From      the   very   description   of   such
services, it is palpable that even though these fall
under the overall ITES category, but some of them
are quite different from each other. To cite,
service at Sl.No. (vi) of this Circular is `Geographic
Information System services and at Sl. No. (vii) is
`Human Resources Services.'         No doubt, all these
fifteen categories of products/services have been
included under the major head of `Information
Technology Enabled Services' (ITES), but most of
them are quite distinguishable from others. In our
considered opinion, the fifteen broad categories set out
in this Circular cannot per se be claimed as similar to
each other. A cursory look at these products/services
transpires that some of them are functionally quite
different from each other. Further the level of
investment required for providing such services is
also not consistent. In our considered opinion, the
mere fact that two services are placed under this
category do not become automatically comparable.
                                   10
                                 ITA No.255/Hyd/2014 M/s. Hyundai
                                 Motor India Engineering P. Ltd., Hyd.

        If a case providing one category of services under
        ITES is claimed as comparable with another in the
        category of service under ITES as per this circular,
        then it must be shown ex facie that it is broadly
        similar. Adverting to the facts of the instant case,
        we find that the services rendered by Genesys fall
        under clause (vi) with the heading `Geographical
        Information     Systems    Services',   whereas those
        rendered by the assessee fall partly under clause
        (vii) with the heading `Human Resources Services' and
        partly under clause (xi) with the heading `Payroll'.
        On juxtaposition examination of these two sets of
        services, we find that there is a vast difference which
        make one quite distinct from the other. In view
        of such functional incomparability between assessee
        and Genesys, we hold that this company cannot be
        treated as comparable. We, therefore, direct to
        exclude this case from the list of comparables."

12.1.        On      careful     consideration    of     the   matter,
respectfully following the above decision of the coordinate
Bench, we are also of the opinion that there is vast
difference between the functions of the above company and
that of assessee. This company as such, cannot be treated
as comparable on FAR analysis. We therefore, direct the
Assessing Officer/TPO to exclude this company.


(3) Eclerx Services Ltd.


13.          The objection of assessee to this comparable is
that this company is functionally dissimilar.             It is in the
business of consultancy and advisory service and provides
only analytical data. It is also involved in quality monitoring.
It is the stand of the assessee that this company offers
solutions     that     include      data    analytics,     operations
management, audits and reconciliation and therefore has to
be classified as high end KPO. In support of the stand of the
                                 11
                               ITA No.255/Hyd/2014 M/s. Hyundai
                               Motor India Engineering P. Ltd., Hyd.

assessee, extracts from the annual report of this company
have been pointed out.         Therefore, the functions of the
above company are dissimilar to assessee, which is a captive
service provider. On the principles laid down by the Hon'ble
Special Bench of the ITAT (Mumbai) in the case of Maersk
Global    Centres    (India)    Pvt.    Ltd.   V/s.    ACIT    (ITA
No.7466/Mum/2012 for assessment year 2008-09 dated
7.3.2014) and the principles laid down by the coordinate
bench of the Tribunal(Delhi) in the case of M/s. Mercer
Consulting (India) Pvt. Ltd., (supra), assessee submits that
this company cannot be selected as a comparable.


13.1        The     Learned      Departmental     Representative,
however, submitted that having accepted Aditya Birla Minacs
Worldwide Ltd., as a comparable company, this company
should also be included, as otherwise, both the companies
should be excluded.


13.2        We have considered the issue and examined the
Annual Report and the objections of assessee. As seen from
the Annual Report, the above            company is involved in
diverse nature of services which are of high end nature. In
earlier year this comparable was accepted as a KPO and
excluded. Similar facts exist in this year also. We therefore,
direct the Assessing Officer/TPO to exclude this company.


(4)    Cosmic Global Ltd.


14.         The main objection of assessee with reference to
the inclusion of this company is with reference to outsourcing
of its main activity. Even though this company was selected
                             12
                           ITA No.255/Hyd/2014 M/s. Hyundai
                           Motor India Engineering P. Ltd., Hyd.

as comparable in assessee's TP study, it has raised objection
before the TPO that this company's employee cost is less
than 21.30% and most of the cost is with reference to the
outsourcing charges or translation charges, and as such this
is not a comparable company. The TPO, though considered
these submissions, rejected the same, on the reason that
this does not impact the profit margin of the company.
Opposing the view taken by the TPO, it is submitted that this
company cannot be      selected as comparable, as similar
issue was discussed     by the coordinate Bench of the
Tribunal(Delhi) in the case of Mercer Consulting (India) P.
Ltd. (supra), vide paras 13.2 to 13.3 which read as under-


     "13.2.     Now coming to the factual matrix of this
     case,    we   find from the material on record that
     outsourcing charges of this case constitute 57.31% of
     the total operating costs. This does not appear to
     us to be a valid reason for eliminating this case
     from the list of comparables. On going through the
     Annual accounts of Cosmic Global Limited, a copy
     of which has been placed on record, we find that
     its total revenue from operations are at Rs.7.37
     crore divided into three segments, namely, Medical
     transcription and consultancy services at Rs.9.90 lacs,
     Translation charges at Rs.6.99 crore and Accounts
     BPO at Rs.27.76 lac. The ld. AR has made out a
     case that outsourcing activity carried out by this
     company constitutes 57% of total expenses. The
     reason for which we are not agreeable with the ld. AR
     is that we have to examine the revenue of this case
     only from Accounts BPO segment and not on the
     entity level, being also from Medical transcription
     and Translation charges. When we are examining
     the results of this company from the Accounts
     BPO segment alone, there is no need to examine
     the position under other segments. The entire
     outsourcing is confined to Translation charges paid
     at Rs.3.00 crore, which is strictly in the realm of the
     Translation segment, revenues from which are to
                                 13
                              ITA No.255/Hyd/2014 M/s. Hyundai
                              Motor India Engineering P. Ltd., Hyd.

      the tune of Rs.6.99 crore.      If this segment of
      Translation is not under consideration for deciding
      as to whether this case is comparable or not, we
      cannot take recourse to the figures which are relevant
      for segments other than accounts BPO. Thus it is
      held that this case cannot be excluded on the
      strength of outsourcing activity, which is alien to the
      relevant segment.

      13.3.          However,  we    find    this  case   to
      incomparable on the alternative argument advanced
      by the ld. AR to the effect that total revenue of
      the Accounts BPO segment of Cosmic Global
      Limited is very low at Rs.27.76 lacs. We have
      discussed this aspect above in the context of CG-
      VAK's case and held that a captive unit cannot be
      compared with a giant case and thus excluded
      CG-VAK with turnover from Accounts BPO segment
      at Rs.86.10 lacs.    As the segmental revenue of
      BPO segment of Cosmic Global Limited at Rs.27.76
      lac is still on much lower side, the reasons given
      above would fully apply to hold Cosmic Global
      Limited as incomparable. This case is, therefore,
      directed to be excluded from the list of comparables."


In view of the detailed analysis of the coordinate Bench of
the Tribunal in the above referred case, in this case also we
accept the contentions of assessee and direct the Assessing
Officer/TPO    to   exclude   this    comparable   for    the same
reasons.


(5)   Acropetal Technologies Ltd. (Seg.)


15.           The objection of assessee with reference to this
company is that the company is involved in engineering
design services and high end services and has products in its
inventory. It is also involved in R&D activity and developing
sophisticated delivery system. It was further submitted that
this company is not functionally comparable              at segment
                                14
                              ITA No.255/Hyd/2014 M/s. Hyundai
                              Motor India Engineering P. Ltd., Hyd.

level also, as engineering design services are high end
services, as considered in other          cases.    It is further
submitted that allocation of expenses between segments is
not possible and depreciation was not allocated between the
segments. There are extra-ordinary events which impact
profit also, as can be seen from the Annual Reports. It is
further submitted that this company is not selected in the list
of comparables selected in the case of         Mercer Consulting
(India) Pvt. Ltd. and therefore, selection of the company by
the TPO in this case, which is also in similar ITES services,
is not proper.


15.1          After considering the rival contentions, we agree
with the objections raised by assessee partially. As seen
from the Annual Report, this company is involved in
engineering design services and has products also, which
makes it functionally not comparable at entity level. However
TPO has considered only segmental profits of ITES. At the
segmental level, it provides engineering design services,
which was considered as high end, by the coordinate bench
of the Tribunal in the case of Mercer Consulting (India) Pvt.
Ltd. (supra).     Assessee also provides engineering design
services. Last year also this comparable was analysed in
assessee's own case by ITAT and held as under:




       "We have considered the submissions of the learned
       counsel for the Assessee. Ld Counsel submission was that
       this company was excluded in the case of Symphony
       Marketing Solutions India(p) Ltd (supra) by the Bangalore
       Bench, so the same require exclusion. In the above case it
       was considered like this:
                               15
                             ITA No.255/Hyd/2014 M/s. Hyundai
                             Motor India Engineering P. Ltd., Hyd.

          13. We have considered the submissions of the learned
         counsel for the Assessee. On a perusal of the Note
         No.15 of notes to accounts which gives segmental
         revenue of this company, it is clear that the major
         source of income for this company is from providing
         Engineering Design Service and Information Technology
         Services. The functions performed by the Engineering
         Design Services segment of the company cannot be
         considered as comparable to the ITES/BPO functions
         performed by the Assessee. The performance of
         Engineering Design Services is regarded as providing
         high end services among the BPO which requires high
         skill whereas the services performed by the Assessee
         are routine low end ITES functions. We therefore hold
         that this company could not have been selected as a
         comparable, especially when it performs engineering
         design services which only a Knowledge Process
         Outsourcing [KPO] would do and not a Business
         Process Outsourcing [BPO].

      As can be seen above, even though said company was
      excluded on the differentiation of high end services being
      provided by this company, as noticed assessee also
      provide high end services in CAD / CAE designing areas.
      These are High end services as considered by the
      Bangalore bench. Therefore we are of the opinion that
      functions of assessee are similar to the above Company.
      The objections of assessee are rejected.

15.2.   We accordingly hold that this company is functionally
similar at segment level. However assessee objects on
adopting segmental profits particularly lack of information
how     the   expenditure/   depreciation    was    apportioned.
Therefore the issue of adopting the segmental results in
analyzing the profit and PLI is restored to TPO/AO for fresh
examination. Assessee should be given due opportunity to
make its objections which should be dealt with appropriately.
                                      16
                                 ITA No.255/Hyd/2014 M/s. Hyundai
                                 Motor India Engineering P. Ltd., Hyd.



(6) Accentia Technologies Limited.


16.           This company was objected to by assessee on
the reason of super profits as well as extra-ordinary events.
It was submitted that acquisition of Oak Technologies &
Trans Services has impact on the profits of the company and
has taken inorganic growth as strategy to increase the
profits because of the peculiar economic circumstances and
brand value.       The same in these circumstances cannot be
selected.    It was submitted that assessee was in medical
transcription services.


16.1.         The        Departmental        Representative     however,
objected     to    the    pleas of    assessee stating        that        the
extraordinary events occurred in earlier year and therefore,
the same cannot be considered as having any impact in the
year under consideration.


16.2          We have considered the rival contentions and
noticed that this company            operates in a different business
strategy of acquiring companies for inorganic growth as its
strategy.    In earlier years on the reason of acquisition of
various companies, being an extraordinary event which had
an impact on the profit, this company was excluded.                       As
submitted by the learned counsel, this year also, the
acquisition of some companies by that company may have
impact on the profit. Considering the profit margins of the
company and insufficient segmental data, we are of the
opinion     that   this    company         cannot   be   selected    as    a
comparable. Moreover, this is also not a comparable in the
                               17
                            ITA No.255/Hyd/2014 M/s. Hyundai
                            Motor India Engineering P. Ltd., Hyd.

case of M/s. Mercer Consulting (India) P. Ltd. (supra), which
indicates that the TPO therein has excluded it at the outset.
In view of this, we direct the Assessing Officer/TPO to
exclude this comparable, from the list of comparables
selected.


(7)   Crossdomain solutions P.Ltd:


17.         Assessee's main objection pertains to violation of
principles of natural justice in selecting this comparable.
Before the TPO, assessee objected to obtaining information
under S.133(6) which is not available in the public domain.
Vide Annexure 16 to the objection assessee raised two
grounds, mainly on obtaining information under S.133(6)
and violation of principles of natural justice. Before us also,
the main contention is with a reference to the variation in
Revenue between the information in the Annual Report and
the figures adopted by the TPO. Even though an issue was
raised that this company was not functionally comparable,
we do not see any merit in that argument, as no such
objection   was   raised   before   the   Revenue   authorities.
Further, we have seen the Annual Report and most of the
Revenue of this company is from services only. Company is
in the pay roll service activity. Therefore, we are of the
opinion that the company is functionally similar to the
activities of the assessee company which is in the ITES field.
In view of this, we are not inclined to exclude this company
on the basis of functional dissimilarity, as contended by the
assessee before us. But, we direct the AO/TPO to examine
the variation in Revenue between the information in Annual
Report and the figures adopted by the TPO. The Assessing
                                   18
                                 ITA No.255/Hyd/2014 M/s. Hyundai
                                 Motor India Engineering P. Ltd., Hyd.

Officer/TPO is directed to work out the PLI after giving
proper opportunity to the assessee and considering the
objections of the assessee. Subject to these remarks,
assessee's contentions are rejected.

18.         With reference to ground No.2.5 on risk profile,
learned   counsel   for    the    assessee    contended    that   the
Assessing Officer/DRP have not considered the risk profile of
the assessee and necessary adjustments have not been
made in order to          mitigate the differences between the
assessee's risk profile and the comparables selected by the
TPO. Assessee contends that adjustment of 1%, which was
granted by the coordinate bench in the case of Hellosoft
India P. Ltd. in ITA 645/Hyd/2009, should have been
allowed. Even though it was contended that the coordinate
Bench order in that behalf is binding on the Assessing
Officer, we are not inclined to agree with that contention, as
risk profile of each assessee differs depending on its own
business activity when compared to that of the comparable
company, and in each case separate risk profile has to be
analysed in FAR analysis. Therefore, allowing deduction of
1% towards risk profile uniformly cannot be adopted as a
norm. Further, this aspect requires to be re-examined by the
TPO. Therefore, after excluding the above companies, if any
adjustment is required to be made, Assessing Officer is
directed to consider the risk profile and allow necessary
deduction, based on the facts of each comparable case.            The
Assessing Officer/TPO should also allow the working Capital
Adjustment already provided in the computation by the TPO.
This ground is decided accordingly.
                              19
                            ITA No.255/Hyd/2014 M/s. Hyundai
                            Motor India Engineering P. Ltd., Hyd.

19.         As for ground No.3, it relates to charging of
interest under Sec.234B and 234C of the Act, which is
merely consequential, and the Assessing Officer/TPO are
directed to re-compute the same as per law while giving
effect to this order.


20.         In the result, assessee's appeal is partly allowed.


      Order pronounced in the court on 31st July 2014.




 Sd/-                                      Sd/-
(Saktijit Dey)                           (B.Ramakotaiah)
Judicial Member                          Accountant Member

Hyderabad, Dt/- 31st July, 2014

Copy forwarded to:

1.    M/s. Hyundai Motors India Engineering P. Ltd.,
      Survey No.5/2 & 5/3, Opp Hitech City Railway Station,
      Izzatnagar, Lingampally Mandal, R.R. Dist., Hyderabad
      00 084

2.    Dy. Commissioner of Income-tax, Circle 2(2),
      Hyderabad
3.    Disputes Resolution Panel, Hyderabad
4.    Departmental Representative, ITAT, Hyderabad.

B.V.S

 
 
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