SMT. DIVA SINGH, JUDICIAL MEMBER 
AND PRASHANT MAHARISHI, ACCOUNTANT MEMBER

Rohit Tiwari, CA and Anubhav Rustogi, Adv. for the Appellant.
Amit Mohan Govil, CIT(DR) for the Respondent.

ORDER

Smt. Diva Singh, Judicial Member - Both these appeals have been filed by the assessee assailing the correctness of the orders u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 dated 28.11.2014 and 29.01.2016 of AO pertaining to 2010-11 & 2011-12 AYs respectively.

1.1 Although various grounds have been raised by the assessee, however, at the time of hearing, Ld.AR submitted that he would be arguing only Ground No.4.5 in both the years as identical issues are raised in them and Ground No. 6 in ITA No.7079/Del/2014. For ready- reference, the Grounds from ITA No.7079/Del/2014 are reproduced hereunder:—

4.5. "erroneously including certain functionally dissimilar companies that are not comparable to the Appellant in terms of functions performed, assets employed and risks assumed and excluding certain comparable companies on arbitrary/frivolous grounds;

6. The Ld. AO erred in confirming the addition of imputed interest made by the Ld. TPO, without having considered the directions by the Ld.DRP and not giving any opportunity to the Appellant to be heard or to explain, that the Appellant has relevant documents to clearly lay out the terms of payment supported by the invoices and agreements in place (which clearly state the payment terms being 180 days)."

2. In the context of Ground No.4.5, the Ld.AR submitted that the assessee is engaged in IT enabled services and software development services to its group companies as per the TP study made available by the taxpayer. The assessee, it was submitted is primarily engaged in the provisions of Information Technology (hereinafter referred to as "IT") enabled back office support services in the nature of customized business/financial research support to Copal Group. In return for rendering these services the assessee was remunerated on an arm's length cost plus basis i.e. costs plus a mark-up thereon. In the year under consideration, it was submitted the assessee entered into the following international transactions:-

2.1. The assessee selected Transactional Net Margin Method (hereinafter referred to as "TNMM") as the most appropriate method selecting Profit Level Indicator (hereinafter referred to as "PLI") as Operation profit/Total Cost (hereinafter referred to as "OP/TC") in its transfer pricing study report. Selecting 15 comparables therein the assessee it was submitted claimed that its transaction was within arms length price as using multiple year data the mean margin of the 15 comparables was 14.27% and the assessee's margin was 18.29%. The TPO objected to the use of multiple year data and directed that a fresh search using the data from F.Y.2009-10 be made. In the fresh search carved out the assessee applied the following filters for conducting the comparable analysis in the benchmarking process:—

2.2. The following comparable companies were selected in the fresh search process applying the above quantitative filters which were analyzed qualitatively [including examination of related party transactions to exclude companies with RPT greater than 10% and the assessee came up with the following comparables:—

2.3 The economic analysis in the TP study as well as the fresh search undertaken by the assessee was objected to by the TPO who issued a show cause notice and proposed to substitute the results of the assessee's economic analysis with the results of fresh search undertaken by himself applying his own set of quantitative and qualitative filters.

2.4 In response to the show cause notice, the assessee filed submissions dated 10.12.2013 setting out its arguments/contentions against the approach proposed to be followed by the TPO. Some of the comparables sought to be excluded/included by the TPO were objected to on the basis of specific documents. Copy of these it was submitted is placed at pages 316 to 447 of the Paper Book.

2.5 Referring to the TPO's order dated 16.01.2014 it was submitted that notwithstanding the detailed submissions, the assessee was served with the aforesaid order wherein OP/TC margin of the following 10 comparables at 29.87% had been arrived at the by the TPO:—

[*-challenged in the present proceedings]

2.6. Thus it was his submission that the grievance of the assessee is posed on the comparables included/excluded by the TPO. Pursuant to the order of the TPO, a draft assessment order it was submitted was issued proposing the adjustment recommended by the TPO.

2.7. Apart from the said grievance it was submitted that vide Ground No.6 the addition by way of adjustment of Rs.3.30 lacs to the income of the assessee is assailed. Referring to the facts relatable to it. It was submitted that for the delay in receipt of payment for services rendered to the AE, the TPO charged rate of 14.88% interest per annum for the period of delay in receipt of payments from the AE's beyond the time stipulated in the service agreement. Addressing the said ground it was submitted that the TPO in its order has ascertained that payment for invoices raised by the Appellant has not been received within the stipulated time as provided in the service agreement and accordingly, has treated delayed payments as an unsecured loan facility advanced to the AEs. The rate of interest charged it was submitted was very high.

2.7.1. These issues it was submitted were agitated by way of objections before the DRP. Qua the issue agitated in Ground No.6 it was submitted the DRP issued directions dated October 10, 2014 to the TPO to verify the amount of receivable: (i) incase the aggregate amount of receivables from the AEs does not exceed Rs.50 crores, apply Prime Lending Rate of SBI as on June 30 of the relevant previous year plus 150 basis points (ii) in case the aggregate amount of receivables from the AEs exceeds Rs.50 crores, apply Prime Lending Rate of SBI as on June 30 of the relevant previous year plus 300 basis points.

2.7.2. The said direction of the DRP it was submitted have not been carried out.

2.8. In this background referring to the finally set up comparables companies selected by the TPO, it was submitted that the comparable found mentioned at Sl.No.3, 4, 5, 9 & 10 are objected to and the objections posed in the written submission to the comparables found mentioned at Sl.No.6 is not being pressed.

2.9. In this background it was submitted that relying upon the said ground 4.5, the assessee has two fold requests that is the exclusion of the 7 (now six) specific comparable companies introduced by the TPO and inclusion of 6 new comparable companies which have not been included by the TPO or the DRP. The reasons in support of their exclusion and exclusion it was submitted is based on judicial precedent and facts as set out in the synopsis filed. The 7 (now six) comparable companies whose exclusion is sought, it was submitted are found mentioned at serial No. 3, 4, 6,5, 7, 9 and 10 and they read as under:—

2.10. Reiterating the request for modifying the request for seeking exclusion, it was submitted by the Ld. AR that instead of seeking exclusion of 7 comparable companies, he is under instructions to modify the request by stating that the exclusion of the comparable company at serial No. 6 i.e. Fortune Infotech Ltd is not being insisted upon and the request may be modified to seeking the exclusion of only the remaining 6 comparable companies.

2.11. The inclusion is sought of the following 6 comparable companies which have been excluded by the TPO:—

2.12. Accordingly it was his submission that if the assessee succeeds in his prayers to seek exclusion of 6 comparables and inclusion of another 6 comparables, the final margin of the comparable which would remain would show that the comparable mean of the 10 comparable would be 7.95% and when compared with the assessee's margin of 18.29% it can be said to be meeting the arm's-length test and the international transaction of provision of IT services can be considered to be at arm's-length. As a result thereof the addition on the base of transfer pricing adjustment may be required to be deleted.

2.13. The following chart was relied upon in support of the above submission:—

3.1. Addressing the reasons for seeking exclusion of the 7 comparable companies which has been modified to a list of 6 comparable companies, the Ld. AR submitted that exclusion of Accentia Technologies Ltd is sought on the ground that the said comparable is engaged in diversified activities such as knowledge process, outsourcing, legal process outsourcing, data process outsourcing, thus it is engaged in high-end software services. It was his submission that without assigning any reasons, the comparable has been retained. The objections it was submitted were before the DRP also.

3.1.1. Apart from that it was submitted that during FY 2009-10, Accentia amalgamated with one of its subsidiaries. Consequently, the extraordinary event impacted the overall profitability of Accentia as its financial results for the year ended March 31,2010 are inclusive of the figures of the amalgamating subsidiary due to which, Accentia has earned an abnormally high OP/TC of 42.97%. (please refer page 89 and 96 of ARC).

3.2. Exclusion of E4 E Healthcare Business Services Private Limited was sought on the ground that it was providing healthcare outsourcing services and software development services and the segmental information was not available. It was his submission that without assigning any reasons, the comparable has been retained. These objections were before the DRP also.

3.3. Exclusion of Fortune Infotech Ltd has been given up. However, exclusion of I Gate Global Solution Limited it was submitted is requested on the ground that the said company is engaged in diversified business activities i.e. IT and IT enabled services, offshore outsourcing solutions which are not comparable to services provided under the ITES service segment of the assessee and for this specific segment segmental information/details are not available. It was his submission that without assigning any reasons, the comparable has been retained. These objections were before the DRP also.

3.4. Exclusion of Infosys BPO Limited it was submitted is sought on the ground that Infosys BPO is engaged in providing high-end integrated services holds brand value by assisting its clients in improving their competitive positioning by managing the business processes in addition to providing increased value whereas the assessee engaged in provisions of ITES services only. It was submitted that these objections have been placed before the DRP however without assigning any reasons, the said comparable has been retained.

3.5. The exclusion of TCS E-Serve International Ltd was sought on the ground that it was engaged in the provision of business process outsourcing activities and technical services like software testing verification and validation of the software. The said facts it was submitted were evident from financial details at page 570 of the ARC indicates that the revenue from Transaction Processing and Other services. The other services, it was submitted includes technical services which have been defined on page 684 of the ARC as "the company's operation broadly comprise of transaction processing and technical services. Transaction processing includes the broad spectrum of activities involving the processing, collections, customers care and payments in relation to the services offered by Citigroup to its corporate and retail clients. Technical services involve software testing, verification and validation of software at the time of implementation and data centre management activities." These objections it was submitted were before the DRP despite that the comparable has been retained without assigning any reasons.

3.6. Exclusion of TCS E-Serve Limited, it was submitted has been sought on the ground that this company is into provision of Business Process Outsourcing activities and technical services like software testing, verification and validation of the software. The ownership of IPRS also makes payment for the brand Tata, the said comparable an incomparable.

4. Addressing the inclusion of the 6 comparables which was requested the Ld.AR submitted that the comparables have been wrongly rejected by the TPO and the objections of the assessee have been over-ruled by the DRP.

4.1. Addressing Sparsh BPO services Ltd it was submitted it has been excluded by the TPO on the ground that it fails the export sales filter and the net worth filter on which reasoning the DRP has refused to interfere. The Ld. AR submitted that the assessee does not agree with the rejection of companies having the export sales filter less than 75% and has made detailed submissions to substantiate the argument. Apart from that the TPO has also rejected the said company on the ground that it did not pass the net worth filter. The Ld. AR submitted that the said reasoning of the TPO is not correct as the said comparable had a positive net worth.

4.2. Addressing the reasons for inclusion of In-house Productions Ltd healthcare segment it was submitted that the TPO has held that the company fails the export sales filter. The DRP has upheld the export sales filter. Addressing the synopsis filed the Ld. AR submitted that this objection of the TPO has not been accepted by the assessee. The healthcare segment it has been argued is functionally comparable to the assessee.

4.3. The inclusion of AOK In-House BPO Services Ltd it was submitted has not been permitted by the TPO again on the grounds that it does not meet the export sales filter which filter has been upheld by the DRP and has been objected to by the assessee.

4.4. The inclusion of Informed Technologies India Ltd it was submitted has been not permitted by the TPO on the ground that the company fails the total sales filter which has been upheld by the DRP as the turnover of the Informed Technologies was found to be less than 5 crores. The said reasoning was not agreed to by the assessee.

4.5. The inclusion of Technoprocess Solutions Limited Processing Services Segment is requested on the ground that the reasoning of the TPO that it was functionally not comparable was incorrect and the DRP has upheld the conclusion of the TPO on the ground that though it passes the turnover filter, it fails the export filter of 75%.

4.6. The inclusion of Cameo Corporate Services Ltd it was submitted is requested on the ground that the TPO has held that the company fails the export sales filter which reasoning has been upheld by the DRP and is still objected to by the assessee.

5. The Ld. CIT DR addressing Ground No.6 is agreed that the TPO had no occasion or call to disregard the directions of the DRP and the prayer of the assessee that the TPO be directed to carry out the directions were not objected to.

5.1. Addressing the request of the Ld. AR that the 6 specific comparables whose exclusion is sought the Ld. CITDR had strong objection. It was his argument that merely raising arguments that there has been "restructuring" or "amalgamation" in the case of a company by itself can not lead to the conclusion that the net profitability of the comparable company has been impacted so as to exclude the same. It was his submission that the law requires that the assessee demonstrates that as a result of some extraordinary event the net profitability of the company is impacted only then it should be taken out from the list of comparables. Advancing general arguments without demonstrating this fact it was his submission can be of no help to the assessee. Relying upon judicial precedent where these facts were not argued by the Revenue and wherein on account of absence of any argument from the Revenue the mere event of amalgamation or restructuring has been taken to be a situation that the comparable has to be excluded, it was submitted cannot be said to be precedent for all times to come. The objection of the Revenue it was submitted has to be addressed by the assessee and the law requires the assessee to demonstrate the impact of the event on the comparables net profitability. It was his submission that the method followed is TNMM and the requirements of the TNMM are well understood by this time and thus the arguments of the assessee after having selected the method to draw out fine distinctions in the comparable companies should not be allowed. The tax payer it was argued well knows that minor differences in functionality are tolerated by the TNMM and this is an accepted position. The very fact that the taxpayer has also selected the TNMM as a method itself demonstrates that the data is not robust. Consequently resort has been made to the said method. It was his submission that these very arguments have not been accepted by the DRP and though the assessee may be within his rights to argue that the DRP may not have passed a very speaking order. However the fact remains that on functionality, the requirements of TNMM method are fully fulfilled as each of these comparables fully satisfies the level of comparability expected. The functional profile of the assessee infact demonstrates that it was a high end IT enabled service and not a low end routine IT service provider because if the intangibles used by the assessee are seen, it has access to all the trademarks, processes and intangibles of the Copal group and thus in the comparables selected vis-à-vis the assessee there is not much marginal difference. Accordingly it was his prayer that the comparable maybe retained and the prayer of the assessee be dismissed.

5.2. Addressing the request of the assessee to include 6 new comparables, it was his submission that no arguments justifying their inclusion has been advanced. The general argument that the inclusion is justified despite failing the export sales filter can be no argument the application of the filter by the TPO has been upheld by the DRP. What is wrong with the said conclusion has not been brought out in the order. Merely saying that it is wrongly applied cannot be a justification. It was also his submission that the assessee has not submitted under which ground the said argument is being made as the filters have not been objected to by the assessee in the present proceedings. Referring to the record, it was argued that in the face of the clear cut finding of the TPO upheld by the DRP that the export sales filter is not fulfilled. The prayer for inclusion of these 6 comparables it was submitted may be dismissed. Five out of these six comparables, it was submitted do not fulfill the export sales filter as per the TPO and Tech Process Solutions Limited Processing Services Segment though the TPO has given a finding that functionally it is not comparable, the DRP has categorically observed that it fails the export filter and thus the argument of the assessee may be dismissed.

6. We have heard the rival submissions and perused the material available on record. A perusal of the TPO's order shows that Copal India has an ITES agreement with Copal Group under which it provides services to its foreign AE. It primarily provides back office support for Copal Group's global operations through customized research and information support service, data entry and data mining services etc. It has been described that the range of services provided by the Company varies from business information/data gathering, transaction processing, library document services, data mining/entry and general business information research support services. In the year under consideration, the following international transaction was disclosed by the assessee in this transfer pricing report:-

6.1. In the FAR analysis carried out by the TPO, the assessee was described as under:-

"Copal India has an ITES agreement with Copal Group under which it provides back-office support for Copal Group's global operations through customized remote research and information support services.

In addition to the above, during the year under consideration, Copal India has also provided same/ similar services to a third party in India.

The various services rendered by Copal India to the third party client are in the nature of collating coverage initiation reports, quarterly reports, reports against occurrence of significant events as per redefined templates provided by the client

In addition to all of the above. Copal India also provides certain other services in die nature of human resource, finance and general administrative support to a few third parties in India." (Emphasis provided)

6.2. Considering the request of the assessee wherein inclusion of 6 comparables is sought on the ground that the assessee does not agree with the consistent view of the tax authorities that these specific companies who admittedly fail the export earnings filters should still be included, we find that no reason except that despite failing the filter they should be retained has been given. The fact remains that no objection to the application of this filter by way of any ground has been agitated before us. The record shows that the assessee had objected to the application of this filter before the tax authorities which has not met with success at the stage of the TPO as would be evident from the following extract:—

7.3 Export earnings filter

'Assessee has objected to the application of this filter to eliminate companies with export turnover less than 75%. The threshold of 75 % has been utilized to get comparables closer to the assessee as it is entirely export oriented. There is no merit in the argument of the taxpayer that once functionality is proved the same is sufficient to select a comparable. Apart from similarity in functionality the economic circumstances in which the tested party and the comparable companies are operating are equally important It will not be correct to say that if a company is performing similar functions then irrespective of the economic circumstances including vastly different geographical locations the same should be taken as a comparable. The rationale of this filter is discussed below:

As per Sub-Rule (1) of Rule 10B, the comparability of an international transaction with an uncontrolled transaction shall be judged with reference to conditions prevailing in the markets, the geographical location, the size of the market, costs of labour, overall economic development, level of competition etc. In this regard, the relevant portion of Rule 10B is reproduced as under:

"conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail".

The domestic companies cannot be treated as comparable to the taxpayer who is wholly or mainly export oriented because:

As the pricing for services differs in the domestic market vis-a-vis with the export market, the level of competition, the size of the market, cost advantage differ in the domestic market vis-a-vis with the exports and the incentives differ for exporters vis-a-vis with the domestic players, a predominantly domestic company in the service sector cannot be compared with the taxpayer who is mainly a IT Enabled Service provider.

It may be mentioned that the operating market is one of the influencing factor in determining the profitability but not the sole factor. Secondly, the margin is not the determining factor in applying this filter. As there are major differences in pricing, markets etc, these differences would influence the prices in the domestic market. Pricing is determined by the market forces and it is the equilibrium point where the willingness to pay and capability to deliver the services. In the case of export market, the pricing is determined by what the company located in US or other similarly developed countries are willing to pay. This would be determined by the cost arbitrage between India and the US or other similarly developed countries. In the case of domestic market, as the cost arbitrage is not available, the willingness to pay for services is decided by the domestic market. Thus these two prices would be different. The price a person willing to pay from India and the price a person willing to pay from US or other developed countries for same or near similar service will be different. The main reason for applying this filter is that geographical markets of the other party in the transactions i.e. customer is different in the case of domestic market which is India and export market of the taxpayer and also pricing mechanism is influenced by such factors for which reasonable adjustments cannot be made to account for the differences in geographical markets, and. other prevailing market conditions like level of competition etc.'

6.3. The said issue was agitated before the DRP and rejected on the following reasoning:—

"On this issue, the reasoning of the TPO and the arguments of the taxpayer has been considered by this Panel. The taxpayer is mainly an export oriented software development service provider getting primarily revenues from exports in this segment. Hence, minimum threshold limit of 75% export earnings from software development services was applied wherein the companies whose export revenues from software developments services are less than 75% of the operating revenues were excluded as these companies operate predominantly in India when compared to the taxpayer whose practically entire revenue come from exports. Exports of taxpayer in IT enabled services are 100%. So, comparable companies will be those companies where most of the income is from exports. Hence, the TPO was justified in applying a threshold of 75%. This will ensure further refinement of functional proximity in FAR analysis. The objection of the taxpayer is, therefore, rejected."

6.4. The record shows that the issue in the present proceedings is addressed in ground No. 4.3. However the Ld.AR has started his opening arguments in the facts of the present case by stating that the only issue agitated in the present appeal is addressed in ground No. 4.5 and Ground No.6 thus it cannot be said that any challenge has been posed to the filters. The record shows that the opening prayer of the Ld. AR has been made in the background where originally the appeal is shown to have been argued before another Constitution on 15.06.2015; 16.06.2015 and finally concluded on 17.06.2015, thereafter it was fixed for clarification on various dates from 17.08.2015 to 05.11.2015 and finally released from a fresh hearing. The assessee may have prepared a synopsis to argue the appeal on various grounds however in the present proceedings the Ld.AR has started his arguments by stating that only addressing ground No. 4.5 and 6 in the present proceedings are being pressed and the ground addressing the filters has not been pressed. We find that despite the Ld.CIT DR's objecting to the assessee's arguments, no effort was made by the Ld.AR to revise his position by praying that the ground assailing the filter is being pressed. Thus it is found that the Ld.AR has attempted to argue the issue without a specific ground in the face of the departmental opposition. Thus, the arguments in these peculiar facts without a ground or a prayer cannot be permitted. We further find that the Ld.AR has not cared to advance any argument making out a case that the application of the said filter is inappropriate in the facts of the present case. Accordingly in the facts as they stand the prayer of the assessee for the inclusion of the 6 comparable cannot now be accepted. This exclusion, we find has been based on the basis of speaking reasons justifying the action wherein no infirmity has been pointed out by the Ld. AR.

6.5. Addressing the exclusion of the 6 comparables which have been retained by the DRP and introduced by the TPO, we find that as far as the law is concerned, it is very clear in as much as Knowledge Process Outsourcing cannot be equated to a low-end ITES enabled service provider. The Hon'ble Delhi High Court in order dated 10.08.2015 has categorically held in the case of Rampgreen Solutions (P.) Ltd. v. CIT [2015] 377 ITR 533/234 Taxman 573/60 taxmann.com 355 (Delhi) that a company who is providing routine call centre services cannot be equated to a KPO. The Hon'ble Court has held that KPO indicates the involvement of advance skills; the services provided may include analytical services, legal research, engineering and design services, intellectual managements etc. A KPO is understood as a high-end value added process chain wherein the processes are dependent on advanced skills, domain knowledge and the experience of the persons carrying on such processes. Thus, the prayer on facts needs to be considered. We also find that instances where segmental have not been made available necessitate that the said comparable should be excluded. Instances where the services are shown to be outsourced or for that matter the services are performed off-site and it can be shown that the net profitability of the company is impacted would again necessitate their exclusion. Similar would be the position where related party transactions filter is not fulfilled would justify its exclusion. Instances where the assessee can demonstrate that the comparable has undergone an extraordinary event by way of amalgamation/Acquisition etc wherein net profitability of the specific comparable company has been impacted or by inclusion of financials of the amalgamating subsidiary having any extraordinary abnormality have also been included has impacted the net profitability prayer for exclusion is justified. As such comparables on facts can become tainted and justify their exclusion. There is also precedent available to seek exclusion of a comparable which has been included despite owning significant IPRs brands etc as a result of impacting the net profitability of the said comparable. This is notwithstanding the fact that the Revenue at times has been able to argue and insist upon the reasoning being recorded that unless and until the impact on net profitability is demonstrated, the comparable company should not be excluded as merely because it owns IPRS and has access to brands and is considered to be thus commanding high bargaining power for services rendered in terms of prices on account of the availability of in-house IPRs or brands then the costs incurred for the usage of the IPRs and brands impacting the gross returns would be addressed in the net profitability which is what a TNMM addresses. The impact of IPRs and brands on net profitability the Revenue can argue would be negated. There may be a valid point in the said argument which is why the mere ownership of brands by itself may not be a good enough ground to exclude a comparable unless the assessee is able to demonstrate that as a result of this fact the net profitability is impacted. Mention of these basic fundamental facts is necessitated in view of the fact that on account of the intense arguments advanced by the parties before the Bench the focus is known to shift from the fundamentals of the method being applied to the hair splitting exercise of seeking inclusion/exclusion of comparables. It needs to be kept in mind that whenever the taxpayer chooses TNMM as the most appropriate method and the selection of this method has not been upset by the Revenue then it can be said to be a position that both the parties fully agree that the choice of method would dictate the selection of comparables. It is an accepted position that in a TNMM method what is necessary to be seen is the net profitability and the minor differences in functional comparability to the extent insisted upon by the taxpayer before the ITAT is not in the true spirit of the method and in fact violates and is contrary to the reasoning and rational of the methodology having been chosen and accepted. In the facts of the present case, we find that intense hair splitting exercise which has been done by the taxpayer on the basis of which exclusion of the 6 comparables is sought agreeing fundamentally that the judicial precedent is clear by the decision of the Hon'ble jurisdiction High Court in the case of Rampgreen Solutions Pvt. Ltd. (supra) that KPO cannot be said to be equated to a low-end ITES enabled company. We find that in the facts of the present case the FAR analysis characterization which is the fundamental foundational fact is an exercise which is required to be addressed. Considering the arguments raised, we find that the occasion to raise argument for exclusion of six comparables and inclusion of another six comparables which argument we have rejected has arisen solely on account of the fact that the foundational exercise of proper FAR analysis of the assessee has not been done. Drawing support from the order dated 13.07.2016 in Virage Logic International India Brand v. Jt. CIT [2016] 72 taxmann.com 11 (Delhi - Trib.), we find that in the facts of the present case also this fundamental exercise which is the foundation on which the case for either side is to be built is unfortunately an exercise which is attempted in haste without adequate care and attention either by the tax payer or by the tax authorities who both rush through this fundamental exercise at the initial stages in undue haste satisfied easily as long as their respective stand appears to be reflected in the comparables selected. The selection when challenged at the appellate stage often results in a situation where the entire edifice crumbles despite a valiant patch work attempt to uphold the edifice it has been seen that the entire selection process offered and considered stands wiped out. Though, we note that the tax payer at the stage of the TP study no doubt may be handicapped by the insufficiency of data in the public domain as it may not be sufficiently robust and readily available completely. However at this stage availability of data cannot be a handicap. We are of the view that in a TNMM methodology identical FAR analysis cannot be insisted upon and the method is infact resorted to when the complete data is not available. In that case the impact on the net profitability of the minor variations in the comparable companies so selected is considered capable of tolerating minor variations in the FAR analysis of the comparables. The selection of this method is resorted to for this very purpose and the method is robust enough to tolerate minor variations if any. It is a fact that a perfect near identical comparable company is a rarity and generally can be said to be a virtually impossible condition incapable of being fully fulfilled. We are of the view that it is for this very purpose that TNMM as a method is often resorted to. The minor difference if any are addressed by comparing net profitability of the comparables. Thus broad comparability of a fairly large number of comparable companies can further ensure that minor variations if any are offset by taking a fairly large sample. Any major impact of their FAR on their net profitability if still so warranted on facts can be addressed by carrying out appropriate adjustments the need for which has to be demonstrated on the basis of record so as to bring their FAR in alignment with that of the tested party i.e. the assessee. The Rules moreover permit adjustments in the comparables selected if it can be demonstrated that these would impact the profitability of the comparable selected. Thus before considering the comparables the FAR analysis on the basis of the functions performed assets available and risks assumed need to be analyzed in detail if need be to the level of hair splitting which the tax payers attempt for the comparables. Thereafter the selection of comparables is an exercise which would be hugely facilitated and relatively free from the need to address micro variations. Accordingly, the issue is restored to the file of the TPO to carry out this exercise and pass a speaking order in accordance with law. Needless to say that the assessee shall be afforded a reasonable opportunity of being heard.

7. Ground No.6 stands restored to the TPO directing him to carry out the directions of the DRP wherein no infirmity has been pointed out by the parties.

8. In the result, ITA No.7079/Del/2014 is partly allowed for statistical purposes.

9. Since facts and arguments qua the issue of comparables addressed in Ground No.4.5 is stated to be identical to ITA No.7079/Del/2014. On account of similar reasoning on facts, the issue with identical direction is restored to the file of the TPO.

10. In the result, ITA No.1113/Del/2016 is partly allowed for statistical purposes.

11. In the result, ITA No.7079/Del/2014 and ITA No.1113/Del/2016 are allowed for statistical purposes.