PER R.S. SYAL, AM : This appeal by the assessee arises out of the order passed by the Assessing Officer (AO) on 07.01.2014 u/s 144C(13) of the Income-tax Act, 1961 (hereinafter also called the Act) in relation to the Assessment year 2009-10. ITA No.966/Del/2014

2. The first issue agitated in this appeal is against the transfer pricing adjustment of Rs.6,16,24,726/- made by the AO on the same being proposed by the Transfer Pricing Officer (TPO) and as approved by the Dispute Resolution Panel (DRP).

3. Briefly stated, the facts of the case are that the assessee is a wholly owned subsidiary of Mercer Mauritius Ltd., Mauritius. The assessee, incorporated under the provisions of the Companies Act, 1956, is engaged in rendering IT and IT enabled services to its Associated Enterprises (AEs). The assessee is providing services in the nature of Applicant development, Quality assurance, Application maintenance, Implementation services, Helpdesk services, Administrative processing, Contribution processing, Health and benefits processing and Pension plan valuation services to the clients of its AEs for and on their behalf for which it is compensated on cost plus basis. The assessee reported three types of international transactions in Audit Report in Form 3CEB. Whereas two international transactions were accepted by the TPO at arms length price (ALP), the dispute in the present appeal is on the determination of ALP of the set of international transactions of rendering of IT enabled services to M/s Mercer (US) Inc., for which the assessee was compensated with a sum of Rs.59,19,89,199/-. In so far as the international transactions under this category are concerned, the factual matrix is that the assessees AEs undertook contracts and pricing negotiations with the end-customers. The prospective clients were made aware that the services will be provided through an ITA No.966/Del/2014 offshore delivery centre in India, i.e., the assessee. The assessee used Transactional Net Margin Method (TNMM) to benchmark this category of international transactions. In the TP study, the assessee arrived at a set of seven comparables with their weighted average profit rate of 19.14% on the basis of multiple- year data. As against this, the assessees profit margin was declared at 21.54%. In this backdrop of facts, the assessee claimed that its such international transactions were at ALP. The TPO called upon the assessee to submit the updated margins using only the current years data. In response to the TPOs letter, the assessee filed a fresh list of nine comparables (seven original + two new in the form of Aditya Birla Minacs and Cepha Imaging Pvt. Ltd.) and also stated that three of the comparables originally selected by it (Coral Hub Ltd., Cosmic Global Ltd. and Genesys International Ltd.) were functionally different and hence should be eliminated from the list of comparables. The mean margin of the remaining six comparables was calculated at 5.57% to claim once again that its international transactions under this segment were at ALP. The transfer pricing Officer found certain defects in the TP analysis carried out by the assessee. After applying certain quantitative and qualitative tests based on certain filters, the TPO finally chose the following five comparables:- Sr. No. Name OP/OC%

1. Aditya Birla Minacs Worldwide Ltd. 1.71%

2. Coral Hub Limited (earlier known as Vishal ITA No.966/Del/2014 Information Technology Limited), 36.93%

3. Cosmic Global Ltd., 50.7%

4. Genesys International Ltd. 58.45%

5. Informed Technologies India Ltd. 23.16% Average 34.19%

4. That is how the TPO determined arms length price (ALP) of this set of international transactions at a margin of 34.19% and proposed adjustment u/s 92CA for a sum of Rs.6,16,24,726/-. The assessee was unsuccessful before the DRP who upheld the draft order passed by the AO on the strength of the order passed by the TPO. The assessee is aggrieved against this TP addition made by the AO in his final order.

5. We have heard the rival submissions and perused the relevant materials on record. Certain issues on which there is no dispute are ALP of the other two international transactions in the nature of WAN charges and Reimbursement of expense; the application of TNMM on the third set of international transactions which are disputed in the present appeal; and determination of the assessees profit from such transactions. By and large, the assessee is mainly aggrieved against the exclusion of, inter alia, the following three comparables which the assessee insists for inclusion in the list of comparables, as were included by the assessee in its list of comparables :-

1. Allsec Technologies Ltd.;

2. CG.-VAK Software and Exports Ltd; and ITA No.966/Del/2014

3. R Systems International Ltd.

6. The assessee is also aggrieved against the inclusion of three cases, which were originally included by the assessee in its TP study on the basis of multiple-year data, but specifically withdrawn by claiming such cases to be not comparable. These cases are:

i) Coral Hub Ltd. (earlier known as Vishal Information Technology Ltd.); ii) Cosmic Global Ltd.; and iii) Genesys International Ltd.

7. The assessee has also objection to not being allowed working capital adjustment.

8. Firstly, we will take up such cases one by one to find out if these were rightly excluded/ included by the TPO. Allsec Technologies Limited 9.1. This case was included by the assessee in the list of comparables which was excluded by the TPO on the ground of diminishing sales for the last three years and the export revenues less than 75% of the total turnover. Here, it is relevant to mention that the TPO adopted certain filters which have been mentioned on pages 13 and 14 of his order. One of such filters is the exclusion of companies whose export sales are less than 75% of the total sales from ITES. Another filter applied by the TPO is the exclusion of cases with diminishing revenues. The TPO recorded ITA No.966/Del/2014 that this company has some peculiar problems and hence the same is not in line with the growth in software industry. However, he did not delve into the actual figures of diminishing revenues of this company. As against this, it is observed that Allsecs operating revenue has increased in the financial year 2008-09 over the previous year which is apparent from the Statement of facts given by the assessee. On a specific query, the ld. DR could not point out any material to indicate or support the TPOs assertion in his order about the diminishing revenue of Allsec Technologies Ltd for the last three years. The second reason given by the TPO for discarding this case from the list of comparables is export less than 75% of the total turnover. We observe that albeit this contention of the TPO is correct that this case does not pass the filter or test laid down by the TPO, but the fact of the matter is that the actual ratio of export revenue to total turnover of Allsec Technologies stands at 74.45% as shown on page 84 of the paper book. If we literally consider the filter applied by the TPO, this case does not pass the test. However, it is seen that the assessee included this case in the list of comparables by applying the filter of excluding the cases in which export revenue was less than 25% of the total revenue. There can be no hard and fast rule for putting a specific ceiling in a particular filter. The filters are not sacrosanct as not statutorily prescribed. These are used or modified for selection or rejection of comparables as per the convenience of the concerned party. If an assessee wants to include a certain case in the list of ITA No.966/Del/2014 comparables which suits its requirements, then, it will suitably modify the filter itself or the ceiling in such filter, so as to fit the bill. Position is no different when it comes to the turn of the Revenue. If it wants to include a particular case in the list of comparables, it will also modify the filter or ceiling in such filter to suit its interest. Equally, if both the sides want to exclude a case, they will modify the filter accordingly. The nutshell is that some sort of cherry-picking is done by both the sides. 9.2. The exclusion of this case has been done by increasing the limit in filter to 75% as against 25% applied by the assessee because the percentage was 74.45%. If the actual ratio in this case had been more than 75%, and the Revenue hell bent on excluding this case, then it would have resorted to increasing the ceiling in the filter to 80% or still more so as to ensure that it remains outside the limit set by it. As the ratio of 75% is not something which is scientifically proven and the export revenue of Allsec Technologies is 74.45% as against the TPOs filter of 75%, we are of the considered opinion that the same cannot be excluded for such a minuscule difference if it is otherwise comparable. It is patent that the TPO has not disputed the otherwise functional comparability of this case with that of the assessee. If we consider the case of Allsec Technologies on a criteria of preponderance of comparability, we find that the same merits inclusion in the list of comparables. Not only the TPOs reasoning about the declining revenue of Allsec Technologies over a period of three years is incorrect, this case is also passing the ITA No.966/Del/2014 test of the ratio of export turnover to total turnover on a pragmatic rational basis. We, therefore, hold that this case should be included in the list of comparables. CG-VAK Software & Exports Ltd. 10.1. The assessee included this case in the list of comparables noticing that its ratio of operating profit to operating cost was at 3.84% and this case was engaged in the similar activity as was being done by it. The TPO disqualified this case from the list of comparables on the basis of turnover filter of less than Rs.1 crore. 10.2. The ld. AR argued that the turnover filter of Rs.1 crore and above has no meaning and even the cases with low turnover should also be included. This was opposed by the ld. DR by relying on certain decisions of the tribunal bolstering his point of view. He submitted that the turnover filter is a recognized method to find out the comparability or otherwise of a case. It was stated that a case with a very low turnover cannot be compared with a high turnover case because such company may be operating with altogether different management model including lack of human resources and its margins were likely to fluctuate . 10.3. We find that CG-VAK Software & Exports Ltd. has total revenue of Rs.7.23 crore, out of which revenue from software services is to the tune of Rs.6.37 crore. It divulges that revenue under the BPO services segment, which has been claimed by the ld. AR to be relevant for our purpose, is only to the tune of Rs.86.10 lac. The assessee has computed operating profit ratio to ITA No.966/Del/2014 total operating cost at 4.01% of the BPO services segment of CG- VAK Software and Exports Ltd. While making this calculation, the assessee bifurcated operating income of CG-VAK Software & Exports Ltd. between software services and BPO services segment on the basis of revenue ratio of 637: 86. In the like manner, operating expenses were also bifurcated between these two segments again on the basis of revenue ratio. That is how, the assessee worked out OP/TC of BPO services segment of this company at 4.01%. 10.4. We are satisfied with the rejection of this case from the list of comparables. There are two reasons in support of our decision, viz., first being the incorrect application of TNMM and second, this being a captive unit vis-a-vis the assessee. 10.5. Section 92C of the Act deals with computation of ALP with the help of five specified and one general method. One of such methods is TNMM. The modus operandi for the computation of ALP under these five distinct methods has been enshrined in rule 10b (1). clause (e) of rule 10b (1) deals with the determination of ALP under TNMM, the prescription of whose relevant part is as under:- (e) transactional net margin method, by which,

(i) the net profit margin realised by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base ; ITA No.966/Del/2014

(ii) the net profit margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base ;

(iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market ;

(iv) the net profit margin realised by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii) ;

(v) the net profit margin thus established is then taken into account to arrive at an arms length price in relation to the international transaction. 10.6. Sub-clause (i) of Rule 10B (1) (e) deals with the computation of net profit margins realised by the enterprise from an international transaction entered into with its AE in relation to a particular base such as cost incurred or sales effected, etc. Sub-clause (ii), which is currently relevant, provides in unequivocal terms that the net profit margins realised of comparable uncontrolled cases shall be computed having regard to the same base. The word realised assumes significance both under sub-clause (i) and sub-clause (ii). As it is the actual net profit margin for the current year realised by the assessee from its international transactions which is covered under sub-clause ITA No.966/Del/2014

(i), it is the net profit margin actually realised by the comparable cases which is set out in sub-clause (ii). What is relevant for consideration under the TNMM in respect of comparable cases is that the amount of net profit realised from uncontrolled transactions should be available so as to enable the activation of sub-clause (ii) of Rule 10B(e). We find that every business has its own unique features. Key functions of a business vary from case to case. Even if the key functions are similar, still some peculiarities make one different from another. Only the concerned businessman knows its salient features. In the absence of any separately identifiable figures of each segment, mechanism for allocation of revenue and expenses depends upon the critical features of each business. In one business, such allocation may be justified on one yardstick, while in another, it may be justified on another. The crux is that it is not possible for an outsider to precisely calculate the profit realised of a particular segment when the results are reported on entity level. That is reason for which the entire machinery for computation of ALP under TNMM comes to a standstill for the lack of the availability of the figure of net profit realised if the results of a particular segment are not available of an otherwise comparable case to that particular extent. When the delegated legislature has employed the word realised in the context of net profit margin of comparables, it must be the amount of net profit reported as realised by such case. Nothing more or less than that can be accepted. The Special Bench of the Tribunal in LG Electronics India Pvt. Ltd. vs. ITA No.966/Del/2014 ACIT (2013) 140 ITD 41 (Del) (SB) has held that the procedure prescribed under the relevant Rule must be scrupulously adhered to and it is not permissible to deviate from the same in any circumstance. This manifests that the amount of `net profit realised cannot be substituted with certain other hypothetical arithmetical exercise. 10.7. Coming back to CG-VAK Software & Exports Ltd., it is seen that net profit margin realized from the BPO services segment is not separately reported by such company. Thus this case needs to be excluded at the very outset for lack of the availability of the data of the BPO segment. Proceeding further, it is seen that the assessee proceeded to calculate the so called amount of net profit realised at 4.01% of the BPO segment by bifurcating operating income and operating expenses in the ratio of revenue from these segments. If such ratio of revenue of two segments is to be applied both to the operating income and operating expenses, that it would lead to the supposition that the net operating profit of both the segments are equal. If this presumption is brought to a logical conclusion then the very need to calculate the net profit realised from BPO segment comes to a naught. If such calculation is allowed to prevail, then it would mean that the result of the entity level have been taken into consideration in the garb of the net profit realised from the BPO segment. Patently, such a proposition is not capable of acceptance. As we have to compare the result of a similar segment and not the entity, the exercise done by the assessee in ITA No.966/Del/2014 considering this case as a comparable has frustrated the calculations. 10.8. The second reason for which this case is held to be rightly excluded from the list of comparables is the total revenues under BPO segment at Rs.86.10 lac, as against the assessees revenue at Rs.59 crore and odd. Whereas, the case of the assessee is that the turnover filter of Rs.1 crore and above should not be applied to exclude the case of CG-VAK, the ld. DR has relied on certain decisions to bring home the point that the application of such a filter is in order. At this juncture, we deem it expedient to consider the judgment of the Honble jurisdictional High Court in CIT vs. Agnity India Technologies Pvt. Ltd. (2013) 219 Taxman 26 (Del) in which that assessee was a wholly owned subsidiary of foreign company engaged in the business of development of software of parent company. The TPO included the cases of Satyam Computer Services Ltd., L&T Infotech Ltd. and Infosys Technologies Ltd. in the list of comparables for working out ALP of the assessees international transactions. The DRP excluded Satyam Computer Services only. The Tribunal, inter alia, held that the Infosys also should be excluded from the list of comparables as it was a giant company in the area of development of software, whereas the assessee was a captive unit of parent company assuming only limited risks. The Revenue challenged the decision of the Tribunal before the Honble High Court against the exclusion of Infosys from the list of comparables. The Honble High Court approved the view taken by the Tribunal by observing ITA No.966/Del/2014 that a giant company cannot be compared with a captive unit. Reverting to the facts under consideration, we find that the turnover of CG-VAK from BPO services segment is only to the extent of Rs.86 lac against the assessees whopping turnover of Rs.59 crore. By no standard, the turnover of Rs.86 lac can be compared with that of Rs.59 crore. The same analogy as approved by the Honble High Court in Agnity India Technologies Pvt. Ltd. (supra) that a giant company cannot be compared with a captive unit, applies with full force to the instant case as well. The only difference being, that, whereas in the case of Agnity India, the assessee was a captive unit and the comparable chosen by the TPO was a giant company, the position is converse in the present case inasmuch as the assessee is a giant company and BPO segment of CG-VAK is only a captive one. If a giant company cannot be considered as comparable to a small company, in the like manner, a small company cannot be equally compared with a giant company. In our considered opinion, the case of CG-VAK cannot be held to be comparable on the strength of its volume of business. We want to make it clear that we have desisted from expressing any opinion on the applicability or otherwise of a turnover filter, but, simply held that a giant company cannot be compared with a captive unit. 10.9. Seen from both the angles the computation of net profit margin realised by the BPO unit of CG-VAK is not adequately workable; and the same being a captive unit vis-a-vis ITA No.966/Del/2014 the assessee, we hold that this case has been rightly held to be not includible in the list of comparables. R. Systems International Limited 11.1. The assessee included this case in a list of comparables. The TPO applied a filter of excluding companies whose data for the financial year 2008-09 was not available. As the data considered by R. Systems International Ltd. was for the year ending other than March, the TPO held that this case was not comparable. The assessee is contesting the exclusion of this case. 11.2. The ld. AR fairly conceded that R. Systems was following calendar year for maintaining its annual accounts and, as such, the assessee adopted data for 31.12.08 for including it in the list of comparables. It was, however, stressed that this case ought not to have been excluded on this count alone, when it was otherwise comparable. The ld. DR opposed this contention by placing reliance on certain decisions in which it has been held that if the data for the financial year of the comparable case similar to that of the tested party is not available, then, such case should be expunged from the list of comparables. 11.3. In order to appreciate the rival submissions on this issue, it would be apt to note the relevant part of sub-rule (4) of Rule 10B which is as under:- `(4) The data to be used in analysing the comparability of an uncontrolled transaction with an international transaction shall be ITA No.966/Del/2014 the data relating to the financial year in which the international transaction has been entered into 11.4. On circumspection of the above part of this sub-rule, it comes to fore that the comparability of an uncontrolled transaction can be analysed with the data relating to the financial year in which the transaction has been entered into. As per this mandate, it is clear that if the tested party has March ending, then the comparables must also have the data relating to the financial year ending on 31st March itself. If such a data is not available, then the case should be disqualified from the list of comparables. 11.5. Turning to the facts of the instant case, we find that the assessee has adopted the figures of this company for the calendar year ending 31.12.2008. Since the assessee is closing its accounts as on 31.3.2009, naturally, the data of R. Systems does not pass the test laid down in sub-rule (4) of Rule 10B. The ld. AR invited our attention towards the Annual accounts of R. Systems available at page 144 of the assessees paper book. It can be seen from the audited accounts of R. Systems that the data for year ending 31.12.08 has been given under one column and the data for quarter ending 31.3.09 and 31.3.08 (both audited) has been given in the other two columns. This shows that if we take up the yearly data ending 31.12.08 and exclude the results of quarter ending 31.3.08 and include the results of quarter ending 31.3.09, what we get is the data for the financial year ending ITA No.966/Del/2014 31.3.09, being the same financial year in which the instant international transactions were entered into by the assessee. 11.6. The ld. DR relied on an order passed by the Mumbai Bench of the Tribunal in ACIT vs. Hapag Lloyd Global Services Ltd. 2013- TII-68-ITAT-MUM-TP (authored by one of us, namely, the AM) in which it has been held that a company with a different financial year ending cannot be compared and is likely to be excluded. There is not and cannot be any dispute over this proposition that an otherwise comparable company having a different financial year cannot be considered as comparable. But if the data relating to the financial year in which the international transaction has been entered into is directly available from the annual accounts of that comparable, then it cannot be held as not passing the test given under sub-rule (4) of Rule 10B. In the case under consideration before the Mumbai Bench, there is no mention of the audited quarterly data of such comparable being available for consideration. It is quite natural that if the data of the financial year is not available or not capable of being directly deduced from the annual accounts of such company, then such case deserves to be excluded. If, however, the audited accounts of such comparable directly give the figures in such a manner that the data of the financial year in which the assessee has entered into an international transaction can be easily deduced, then there is no reason for excluding such an otherwise comparable case. ITA No.966/Del/2014 11.7. We find that R. Systems International Ltd. has been excluded by the TPO solely for the reason that its financial year is different without considering that the data for the financial year adopted by the assessee can be easily compiled from the audited statements of such company. We, therefore, set aside the impugned order on this issue and remit the matter to the TPO/AO for including the case of R. Systems International Ltd. in the list of comparables by working out the figures relevant to the financial year ending 31.3.09 from the audited accounts of R. Systems International Ltd. Coral Hub Ltd. 12.1. This case was earlier included by the assessee in the list of comparables in the transfer pricing study by considering multiple-year data. However, when the TPO required the assessee to furnish data of comparables for the current year alone, the assessee requested for the exclusion of this case from the list of comparables. The ld. DR opposed this contention by urging that the assessee cannot be allowed to resile from its original stand. 12.2. We are disinclined to sustain the legal objection taken by the ld. DR that the assessee should be prohibited from taking a stand contrary to the one which was taken at the stage of the TP study or during the course of proceedings before the authorities below. It goes without saying that the object of assessment is to determine the income in respect of which the assessee is rightly ITA No.966/Del/2014 chargeable to tax. As the income not originally offered for taxation, if otherwise chargeable, is required to be included in the total income, in the same breath, any income wrongly included in the total income, which is not otherwise chargeable, should be excluded. There can be no estoppel against the provisions of the Act. Extending this proposition further to the context of the transfer pricing, if the assessee fails to report an otherwise comparable case, then the TPO is obliged to include it in the list of comparables, and in the same manner, if the assessee wrongly reported an incomparable case as comparable in its TP study and then later on claims that it should be excluded then, there should be nothing to forbid the assessee from claiming so, provided the TPO is satisfied that the case so originally reported as comparable is, in fact, not comparable. The Special Bench of the Tribunal in DCIT vs. Quark Systems Pvt. Ltd. (2010) 132 TTJ (Chd) (SB) 1 has also held that a case which was included by the assessee and also by the TPO in the list of comparables at the time of computing ALP, can be excluded by the Tribunal if the assessee proves that the same was wrongly included. 12.3. Reverting to the facts of the extant case, we find that the position as obtaining in the present case is rather simple inasmuch as the assessee, having originally included this case in the list of comparables, made a categorical claim before the TPO for excluding it because of non-comparability. As no reason has been given by the TPO for accepting or rejecting the assessees request, it would be worthwhile to take up the reasons now given ITA No.966/Del/2014 by the assessee for consideration and decision. The ld. AR has pointed out that Vishal Information Technologies Ltd., now known as Coral Hub Ltd., outsources significant portion of its work from outside vendors. We find from the material on record suggests that outsourcing charges constitute 90% of the total operating cost in this case. On a specific query, the ld. DR admitted that our assessee is engaged in the business of doing activities at its own without any outsourcing. This crucial factor, having a greater bearing on the profitability, makes it distinguishable from the assessee. The Mumbai Bench of the Tribunal in the case of Hapag Lloyd Global Services (supra) has held that Vishal Information Technologies Ltd. cannot be considered as comparable because of the overwhelming outsourcing activity carried out by it. This view was taken by relying on another order passed by the Mumbai Bench of the Tribunal in ACIT vs. Maersk Global Service Centre (India) Pvt. Ltd. (ITA No.3774/M/2011). In the later case also, the Tribunal held that the case of Vishal Information Technologies Ltd. or Coral Hub Ltd. was not includible in the list of comparables because of major outsourcing. Since the facts of the instant case are on all fours with these two cases, we are of the considered opinion that this case is required to be excluded from the list of comparables. We order accordingly. Cosmic Global Limited 13.1. This case was also originally included by the assessee in the list of comparables in its TP study. However, the same was ITA No.966/Del/2014 requested for exclusion because of several reasons. Unimpressed, the TPO included this case in the list of comparables which action came to be upheld by the DRP. In view of the foregoing discussion, we hold that the assessee cannot be prohibited from demonstrating that this case is incomparable. 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 the tune of ITA No.966/Del/2014 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-VAKs 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. Genesys International Corporation Ltd. 14.1. Now we espouse the case of Genesys International Corporation Ltd. which was originally taken by the assessee as comparable in its TP study. However, during the course of proceedings when the assessee was called upon to furnish the list of comparables with the current year data, the assessee claimed that this case should be excluded as the same is functionally ITA No.966/Del/2014 incomparable. It was stated that this company was engaged in the business of Geographical Information Services comprising of Photogrammetry, Remote sensing, etc., which was quite different from that of the assessee. Not convinced, the TPO included this case. The assessee is aggrieved against such inclusion. 14.2. We have heard the rival submissions and perused the rival materials on record. It has been noticed supra that the 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 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 earths 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, the ITA No.966/Del/2014 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. 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 ITA No.966/Del/2014 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 the 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. 15.1. Apart from the inclusion and exclusion of the above discussed six cases, the ld. AR also challenged the non-inclusion of Cepha Imaging Pvt. Ltd., Micro Genetic Systems and Fortune Infotech in the list of comparables, which were argued to be included by the assessee during the course of proceedings before the authorities below. Firstly, we take up the case of Cepha Images which is engaged in the business of e-publishing services. E-publishing services include typesetting, composition, art work, proof reading, project management, XML conversions and multimedia services provided to publishers of books and journals. When we consider the nature of services provided by Cepha Imaging vis-a-vis those rendered by the assessee, which are basically in the nature of human resources or payroll, we find that the same are not comparable. The view taken by the TPO in excluding this case from the list of comparables is upheld. 15.2. In so far as the case of Micro Genetics Systems Ltd. is concerned, we find from a perusal of their Annual accounts of, a copy of which is available on pages 719 onwards of the paper book, that this company is basically engaged in rendering Medical ITA No.966/Del/2014 transcription services. We are at loss to appreciate as to how medical transcription services can be compared with the human resources and payroll services provided by the assessee to the clients of its AEs. The reasons which led to the exclusion of the case of Genesys International Corporation Ltd. from the list of comparables drawn by the TPO, fully apply against the non- inclusion of the case of Micro Genetics Systems Ltd., which is operating in an altogether different line of activity making it totally incomparable with that of the assessee. We, therefore, approve the action of the TPO in not treating this case as comparable. 15.3. A feeble attempt was made by the ld. AR to press for the inclusion of the case of Fortune Infotech in the list of comparables. Even though this company is engaged in IT Enabled Services, but it was not shown by the ld. AR as to how the services rendered by it were comparable with that of the assessee. It is trite that the onus to prove that a case is comparable is on the one who claims so. In the absence of any functional comparability having been brought to our notice, we uphold the view of the authorities below in not treating this case as comparable. 16.1. The next issue raised by the ld. AR is against non- granting of working capital adjustment claimed by the assessee for the first time before the TPO. The assessee requested the TPO to grant working capital adjustment. The assessees claim was ITA No.966/Del/2014 jettisoned on the ground that the assessee failed to demonstrate that there was a difference in the levels of working capital employed by it vis-a-vis the comparables. The TPO further observed that : The claim of working capital adjustment is not a matter of right. He further went on to add that the issue of working capital can be relevant when there is a situation of inventory remaining tied up or receivables being held up and such situation will not be relevant to the service industry. That is how the assessees contention on this issue was repelled. The DRP also followed the suit by noticing that the working capital adjustment is difficult to apply due to the lack of accurate and reliable data. It also held that the issue of working capital would be relevant only when there is a situation of inventory remaining tied up or receivables being held up. The assessee contests the non-granting of the working capital adjustment. 16.2. Having heard the rival submissions and perused the relevant material on record, we find that the viewpoint canvassed by the authorities below is sans merit. Working capital adjustment is ordinarily confined to inventory, trade receivables and trade payables. If a company carries on high trade receivables, it would mean that it is allowing its customers a relatively longer period to pay their amount which will result into higher interest cost and the resultant less profit. Similarly, by carrying high trade payables, a company benefits from a relatively longer period available to it to pay back its suppliers ITA No.966/Del/2014 which lowers the interest cost and accelerates profits. To have a level playing field, it is sine qua non that the working capital adjustment should be carried out to bring two otherwise comparable cases at par with each other. We are unable to comprehend any reason or rhyme to restrict the grant of working capital adjustment only in the case of manufacturers or traders. What is true for these categories of businesses, is fully true for a service provider as well. It is a different matter that in the case of service provider, no working capital adjustment would be required towards higher or lower inventory, but the same may be warranted in respect of higher or lower trade receivables/payables. Since the authorities below have rejected the assessees contention for grant of working capital adjustment at the threshold, which in our considered opinion is not correct, we set aside the impugned order and remit the matter to the file of the TPO/AO for examining the assessees claim for grant of working capital adjustment on merits and thereafter, allow the same, if it is available. Needless to say, the assessee will be allowed an adequate opportunity of hearing. 17.1. The next issue raised in the present appeal is against the reduction in the amount of deduction u/s 10AA of the Act. This issue has two components, viz., denial of deduction on interest income of Rs.8,84,313/- and reduction of communication expenses incurred in foreign currency for the purposes of computing export turnover. ITA No.966/Del/2014 17.2.1. In so far as the first issue is concerned, we find that the assessees net profit amounting to Rs.10.57 crore included interest income amounting to Rs.8,84,313/- on which deduction was claimed u/s 10AA of the Act. The AO held that this interest income could not be construed as profits derived from the business of the undertaking. He, therefore, reduced such interest income from the total net profit for the purposes of computing deduction u/s 10AA. 17.2.2. After considering the rival submissions and perusing the relevant material on record, we find that section 10AA(1)(i) of the Act provides that in computing the total income of an assessee, a deduction of hundred percent of profits and gains `derived from the export of the eligible articles or things shall be granted for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the unit begins to manufacture, etc. When we examine the prescription of sub-section (7) of section 10aa, it comes to light that the expression profits derived from the export of articles, etc., has been specifically defined as the amount which bears to the profits of the business of the undertaking the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on. A conjoint reading of sub-sections (1) and (7) of section 10aa makes it manifest that the expression profit and gains derived from.. has been given a specific meaning in ITA No.966/Del/2014 section 10AA as the proportionate part of the profits of the business in the ratio of export turnover to total turnover. The term profits of the business has not been specifically defined in this section. This divulges that the expression profits of the business would mean the same as it is understood in common parlance, being the profit of any nature related to the business. The ambit of such profit cannot be restricted to that directly and immediately arising there from. Even if the relation between the income and business is indirect, that would also qualify as business profit. But there must be relation between the income and business. Such income to be eligible for inclusion must have some direct or indirect relation with the business. Once the position is so, we fail to understand as to how interest income which is if otherwise in the nature of business income, can be excluded from the eligible qualifying income for the purposes of deduction u/s 10AA. The position would have been different if the legislature had not incorporated sub-section (7) to give meaning to the expression profits derived from the export of articles, etc., as given in sub-section (1). In that case, a narrow interpretation of the phrase derived from would have been applicable. The reliance of the ld. DR on the case of Pandian Chemicals Vs. CIT (2003) 262 ITR 278 (SC) urging us to exclude the amount of interest income from the eligible profits, is misplaced. In that case, the question under consideration was whether interest earned by industrial undertaking on deposits with Electricity Board qualifies for relief under section 80HH. The Honble Apex ITA No.966/Del/2014 Court answered this question in negative by holding that such interest income cannot be characterized as derived from the eligible industrial undertakings. At this stage, it will be relevant to note the language of sub-section (1) of section 80hh which provides that : Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking.. there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. It is pertinent to note that the language of sub-section (1) of section 80hh and that of section 10aa is similar insofar as the use of the expression `profits and gains derived from the eligible units is concerned. The reason which makes the interest income eligible for deduction u/s 10AA and ineligible u/s 80HH is the separate definition of the expression in sub-section (7) of section 10aa and absence of any analogous provision u/s 80HH. Because of sub- section (7), the otherwise restricted meaning of the expression `profits and gains derived from u/s 10AA has become more liberal by encompassing not only the items of income directly derived from the eligible unit, but also other items of income, which are in the nature of business profits, though not derived from the eligible unit. In the absence of any such provision u/s 80HH, the scope of the expression derived from has been held by the Honble Summit Court to be a restricted one confined only to those items which have first degree of relation with the eligible ITA No.966/Del/2014 industrial undertaking. That is why, this judgment relied by the ld. DR is not applicable to the facts of the instant case. However, we find that the Mumbai Bench of the Tribunal in Living Stone Jewellery (P) Ltd. vs. DCIT (2009) 31 SOT 323 (Mum) has also taken view similar to that we are taking in the present appeal in the context of Section 10A, which, in turn, also uses the expression profits and gains as derived by an undertaking in sub-section (1) and has been specifically defined in sub-section (4). In view of the foregoing discussion, we are of the considered opinion that the interest income which falls under Chapter IV-D of the Act, viz., Profits and gains of business or profession is eligible for deduction u/s 10AA of the Act. As the necessary details about the nature of interest income are not available on record, we deem it expedient to set aside the impugned order and remit the matter to the file of the AO for firstly, deciding as to whether the items of interest income fall under the head Profits and gains of business or profession. If the answer is in affirmative, then, deduction should be allowed on such interest income u/s 10AA. 17.3.1. The only other aspect is the reduction of communication expenses incurred in foreign currency from the computation of export turnover u/s 10AA of the Act. The AO observed that communication expenses amounting to Rs.57,02,875/- were in the nature of telecommunication charges incurred in foreign currency attributable to delivery of computer software outside India. Relying on sub-section 1(i) of section 10aa, the AO held that such expenditure in foreign currency was required to be ITA No.966/Del/2014 reduced from the amount of export turnover. That is how, he brought down the amount of export turnover to Rs.58.61 crore from the original amount of Rs.59.18 crore, while keeping the figure of export turnover at Rs.59.18 crore. 17.3.2. We have heard both the sides on the issue and perused the relevant material on record. It is seen that the assessee is a 100% exporter inasmuch as its export turnover as well as the total turnover before the reduction of telecommunication charges stood at Rs.59.18 crore. The ld. AR has not assailed the action of the AO in reducing the amount of telecommunication charges from export turnover, but limited his arguments for simultaneous reduction from the amount of total turnover. 17.3.3. In our considered opinion, this issue is no more res integra in view of the judgement of the Honble jurisdictional High Court in CIT vs. Genpact India (2011) 203 Taxman 632 (Del) rendered in the context of Section 10A of the Act. In this case, the Honble High Court has held that communication expenses should also be excluded from total turnover for the purposes of computation of deduction under this section. As the facts and circumstances prevailing in our case are mutatis mutandis similar to those considered and decided by their Lordships of the Honble jurisdictional High Court, we cannot countenance the view taken by the authorities below on this issue. The same is ergo overturned and it is directed to reduce the amount of ITA No.966/Del/2014 communication charges from the amount of total turnover as well. To this extent, the assessees contention is accepted.

18. In the result, the appeal is partly allowed. The order pronounced in the open court on 06.06.2014. Sd/- Sd/- [A.T. VARKEY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated, 06th June, 2014. Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT AR, ITAT, NEW DELHI.