"ITA No.99/Del/2016 \n \n1 \n \n \nIN THE INCOME TAX APPELLATE TRIBUNAL \nDELHI BENCH “I” NEW DELHI \n \nBEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER \nAND \nSHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER \n \nआ.अ.सं/.I.T.A No.99/Del/2016 \nिनधा\tरणवष\t/Assessment Year:2011-12 \n \nBT e-Serve (India) Pvt. Ltd., \n11th Floor, Eros Corporate Tower, \nNehru Place, New Delhi. \nPAN No.AADCB2533M \nबनाम \nVs. \nITO, \nWard 5(2), \nNew Delhi. \nअपीलाथ\u0014 Appellant \n \n\u0016\u0017यथ\u0014/Respondent \n \nAssessee by \nShri Nageswar Rao, Adv. and \nShri Parth, Adv. \nRevenue by \nShri Ashish Tripathi, Sr. DR \n \n \nसुनवाईक\bतारीख/ Date of hearing: \n07.03.2025 \nउ\u000eोषणाक\bतारीख/Pronouncement on \n21.03.2025 \n \nआदेश /O R D E R \nPER C.N. PRASAD, J.M. \n \n \nIn this case the appeal of the Assessee was disposed of by the \nTribunal in ITA No.99/Del/2016 for the AY 2011-12 in a common \norder dated 30/10/2017 along with appeal in ITA No.565/Del/2015 \nfor the AY 2010-11. However, the assessee filed a miscellaneous \napplication in MA No.279/Del/2018 in ITA No.99/Del/2016 for the \nassessment year under consideration i.e. AY 2011-12 pointing out \n\nITA No.99/Del/2016 \n \n2 \n \ncertain defects in the order passed by the Tribunal dated \n30/10/2017. The Tribunal after considering the miscellaneous \napplication filed by the assessee vie order dated 03/12/2021 \nrecalled its order in ITA No.99/Del/2016 for AY 2011-12 dated \n30/10/2017 for the limited purpose of adjudicating one of the \ncomparables (Infosys BPO Ltd.) which was inadvertently overlooked \nwhile passing the order. The Tribunal also recalled its order to \nadjudicate on working capital adjustment which was omitted to \nconsider while disposing of the appeal. Therefore, in this appeal \nonly the following two issues have to be decided as per the order of \nthe Tribunal in MA No.279/Del/2018 dated 03/12/2021: \ni) Infosys BPO Limited whether to be included or excluded \nfrom the final set of comparables; \nii) for granting working capital adjustment. \n2. \nIn so far as the Infosys BPO Limited is concerned the Ld. \nCounsel submits that, Infosys BPO Limited is functionally dissimilar, \nit has significantly high turnover and high brand value. Referring to \nthe annual report of Infosys BPO Limited the Ld. Counsel submits \nthat the company is engaged in providing wide array of services. \nReferring to page 41 Ld. Counsel submits that significantly reporting \n\nITA No.99/Del/2016 \n \n3 \n \nof the company shows the Industry segment in which the company \noperates and page 67 of the annual report shows that the company \nis engaged in Software and others. Ld. Counsel submits that income \nstatement on page 68 also does not provide any further details. \nReferring to page 70 Ld. Counsel submits that there is no clarity, as \nit shows the same Revenue under Software Development and ITES. \nIt is submitted that Infosys BPO Ltd. incurs expenses in nature of \ntechnical services costs, which is linked to consultancy charges \nthereby indicating that the company is engaged in outsource \nactivities as opposed to the assessee which is engaged in providing \nroutine support services in nature of data collection and analysis to \nits AE which is in nature of low end services as shown by the \nassessee at page 301 of appeal set. Ld. Counsel further referring to \nfinancials of the assessee at page 141 to 164 and at page 149 of \nprofit and loss account and page 159 the relevant schedule, \nsubmitted that there is no outsourcing involved by the assessee. \nTherefore, Ld. Counsel submits that this difference in business \nmodels itself has been found a sufficient reason for non-\ncomparability of companies, in the case of Ramp Green by Delhi \nHigh Court. \n\nITA No.99/Del/2016 \n \n4 \n \n3. \nReliance was also placed on the decision of the Hon’ble Delhi \nHigh Court in PCIT Vs. Cadensce Design Systems (India) Pvt. Ltd. in \nITA No.333/2019 dated 06/08/2019 which is placed at 310 of the \nPaper Book, wherein Infosys BPO Ltd. has been excluded from the \nfinal set of comparables. Ld. Counsel finally submitted that in \nassessee’s own case for the AY 2012-13 the Tribunal in ITA \nNo.6690/Del/2016 excluded Infosys BPO Ltd. from the final set of \ncomparables. \n4. \nWith respect to working capital adjustment, Ld. Counsel for \nthe assessee submitted that working capital adjustment should be \nallowed after verification for which necessary details were already \nplaced on record before the DRP at page no.35 & 36 of the Paper \nBook as well as before the Tribunal at pages 202 & 203 of the Paper \nBook. Therefore, Ld. Counsel prays that a direction may be given to \nAO/TPO for allowing working capital adjustment. \n5. \nOn the other hand, Ld. DR strongly supported the orders of \nthe authorities below. \n6. \nHeard rival submissions, perused the orders of the authorities \nbelow. In so far as the Infosys BPO Ltd. as comparable company is \nconcerned, we find that in assessee’s own case for the AY 2012-13 \n\nITA No.99/Del/2016 \n \n5 \n \nthe Tribunal in ITA No.6690/Del/2016 has excluded this company \nfrom the final set of comparables observing as under: - \n “5.1 Infosys BPO Limited \n \nIt is assessee’s contention that this company was \nfunctionally dissimilar to the assessee company as this \ncompany was engaged in providing high-end integrated \nservices. It has been submitted and demonstrated from \nthe annual report of BPO Infosys Ltd. that this company is \nrendering a wide array of BPO services in the nature of \nbusiness platforms, customer service outsourcing, finance \nand accounting, human resources outsourcing, legal \nprocess outsourcing, sales and fulfillment sourcing and \nprocurement outsourcing etc. On the other hand, it is \nseen that the assessee provides only back office support \nservices in the nature of IT enabled services and it is \nessentially a captive service provider. Although, the \nassessee has pleaded for exclusion of BPO Infosys Ltd. on \nother grounds also, it is our considered opinion that the \nwide functional dissimilarity between the two companies \nis sufficient to accept the assessee’s plea for exclusion of \nthis company from the final set of comparables. We also \nfind that BPO Infosys Ltd. was directed to be excluded by \nITAT Delhi Bench in the case of Baxter India Pvt. Ltd. vs. \nACIT in ITA 6158/Del/2016 which also provided captive IT \nEnabled Services to its AE. The year under consideration \nbefore the ITAT in the case of Baxter India (P) Ltd. was \nalso AY 2012-13. The relevant observations are contained \nin para 23 of the said order and the same are being \nreproduced for a ready reference: \n“23. In so far as exclusion of Infosys BPO Ltd. is \nconcerned, we find from the submissions made by \nthe \nassessee \nbefore \nthe \nAssessing \nOfficer/TPO/DRP is that Infosys BPO Ltd. is \npredominantly into areas like Insurance, Banking, \nFinancial Services, Manufacturing and Telecom \nwhich are in the niche areas, unlike the assessee. \nFurther it was also submitted that the Infosys \nBPO Ltd. comprises brand value which will tend \nto influence its business operation and the pricing \n\nITA No.99/Del/2016 \n \n6 \n \npolicy thereby directly impacting the margins \nearned by the Infosys BPO Ltd. We find the \nsubmissions of the Ld. Counsel for the assessee \nbefore TPO/DRP that in order to maintain the \nbrand image of Infosys BPO Ltd. in the market, \nthe company incurs substantial selling and \nmarketing expenditure whereas the assessee \nbeing a contract service provider does not incur \nsuch expenses to maintain its brand has not been \ncontroverted by them. Further, Infosys BPO Ltd. \nbeing a subsidiary of Infosys has an element of \nbrand value associated with it. This can be \nfurther confirmed by the presence of brand \nrelated expenses incurred by Infosys BPO Ltd. \nFurther, Infosys BPO Ltd. has acquired Australian \nbased company M/s Portland Group Pvt. Ltd. \nduring financial year 2011-12. They provide \nsourcing and category management services in \nSydney, Australia. Therefore, his company also \nfailed the TPO’s own filter of rejecting companies \nwith peculiar circumstances. In view of the above \ni.e. functionally not comparable, presence of \nbrand and extraordinary event that has taken \nplace during the year on account of acquisition of \nAustralian based company, we are of the \nconsidered opinion that Infosys BPO Ltd. should \nnot be included in the list of comparables. We \naccordingly direct the Assessing Officer/TPO to \nexclude Infosys BPO Ltd. from the list of \ncomparables for the purpose of computing the \naverage margin.” \n5.1.1 \nRespectfully following the order of the \ncoordinate bench, on identical facts, we direct the \nAO/TPO to exclude BPO Infosys Ltd. from the final set of \ncomparables.” \n \n \n \n\nITA No.99/Del/2016 \n \n7 \n \n \n7. \nFacts being similar, respectfully following the decision of the \ncoordinate bench, we direct the AO/TPO to exclude Infosys BPO \nLtd. from final set of comparables for this assessment year also. \n8. \nIn so far as working capital adjustment is concerned, the \nAO/TPO is directed to look into the workings furnished by the \nassessee and appropriate relief may be granted in accordance with \nlaw after providing adequate opportunity of being heard to the \nassessee. With these observations, the recalled grounds in ITA \nNo.99/Del/2016 dated 30/10/2017 are disposed of accordingly. \n9. \nIn the result, appeal of the assessee is partly allowed as \nindicated above. \nOrder pronounced in the open court on 21.03.2025 \n \n \n Sd/- \n \n \n \n \n \n \nSd/- \n (NAVEEN CHANDRA) (C.N. PRASAD) \n ACCOUNTANT MEMBER JUDICIAL MEMBER \nDated: 21.03.2025 \n*Kavita Arora, Sr. P.S. \nCopy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT \n(DR)/Guard file of ITAT. \nBy order \n \nAssistant Registrar, ITAT: Delhi Benches-Delhi \n"