M/s. Transcent MT Services Pvt. Ltd., Bangalore V. ACIT, New Delhi

CO 71/DEL/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2089 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I2
• Next Hearing Date: 28-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ATIA AHMAD
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; Rule of consistency
• Section: 92C; 133(6)

Judgement Text

1 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 2148/DEL/2013 (ASSESSMENT YEA R-2008-09) ACIT CIRCLE-16(1) C. R. BUILDING NEW DELHI (APPELLANT) VS TRANSCENT MT SERVICES PVT. LTD. B-4, SAGAR TOWERS JANAKPURI DISTRICT CENTRE NEW DELHI AAACH9232J (RESPONDENT) C.O .NO.-71 /DEL/2014 (ASSESSMENT YEA R-2008-09) TRANSCENT MT SERVICES PVT. LTD. 1/1, ARAKERE, BANNERGHATTA ROAD BANGALORE AAACH9232J (APPELLANT) VS ACIT CIRCLE-16(1) C. R. BUILDING NEW DELHI (RESPONDENT) APPELLANT BY SH. ATIA AHMAD, SR. DR RESPONDENT BY SH. VISHAL KALRA, ADV ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AND THE CROSS-O BJECTION IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 5/2/2 013 PASSED BY THE CIT (A)S XX, NEW DELHI. DATE OF HEARING 28.01.2016 DATE OF PRONOUNCEMENT 14.03.2016 2 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 2. THE GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDE R:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADJUS TMENT OF RS.1,21,84,936/- MADE BY THE A.O ON ACCOUNT OF ADJUSTMENT OF ARMS LENGTH PRICE. 3. THE GROUND OF APPEAL OF THE (CROSS-OBJECTION) AS SESSEE ARE AS UNDER:- 1. THE ORDER OF THE LD. CIT(A)/TPO ASSESSING OFFICE R IN SO FAR AS IT IS AGAINST THE RESPONDENT, IS OPPOSED TO LAW, WEIGH T OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE RESPONDENTS CASE. 2. THE RESPONDENT PRAYS LEAVE OF THE TRIBUNAL TO RA ISE THE FOLLOWING QUESTIONS IN THE CROSS OBJECTIONS WHICH A RE PURE QUESTIONS OF LAW AND IN ACCORDANCE WITH THE RATIO O F THE APEX COURT IN NATIONAL THERMAL POWER CORPORATION 229 ITR PAGE 383 HAS RAISED THE SAME FOR ADJUDICATION FOR THE ADVANC EMENT OF SUBSTANTIAL CAUSE OF JUSTICE. A. THE ORDER OF THE ASSESSMENT IS BAD IN LAW AS THE MANDATORY CONDITIONS TO INVOKE THE JURISDICTION U/S 92CA OF THE ACT DID NOT EXIST, OR HAVING NOT BEEN COMPLI ED WITH AND CONSEQUENTLY THE ORDERS OF THE ASSESSING OFFICE R IS BAD IN LAW FOR WANT OF REQUISITE JURISDICTION. B. THE ASSESSING OFFICER ERRED IN NOT PROVIDING THE COPY OF THE APPROVAL GRANTED BY THE COMMISSIONER WHICH IS IN VIOLATION OF THE SETTLED PRINCIPLES OF NATURAL JUST ICE AND THUS THE ORDER OF ASSESSMENT NEEDS TO BE SET ASIDE. C. THE AUTHORITIES FAILED TO APPRECIATE THAT AS THE ASSESSING OFFICER HAS TO PASS AN ORDER IN CONFORMITY WITH TH E ORDER OF THE TRANSFER PRICING OFFICER, IT IS INCUMBENT ON THEM TO GIVE US AN OPPORTUNITY OF BEING HEARD BEFORE REFERR ING THE MATTER TO THE TPO AND HENCE REFERENCE TO TPO WITHOU T HEARING US BEFORE THE REFERENCE IS IN VIOLATION OF THE 3 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 PRINCIPLES OF NATURAL JUSTICE AND ON THIS COUNT ALS O THE ORDER REQUIRES TO BE CANCELLED. 3. THE LD. CIT (A), TPO AND THE ASSESSING OFFICER E RRED IN REJECTING THE COMPARABLES SELECTED BY THE RESPONDENT WITHOUT GIVING ANY COGENT REASONS. 4. THE LD. CIT (A), TPO AND THE ASSESSING OFFICER E RRED IN NOT APPLYING EMPLOYEE COST FILTERS FOR A LABOR INTENSIV E INDUSTRY WHEREIN THE RESPONDENT OPERATES. 5. WITHOUT PREJUDICE, THE LD. CIT (A), TPO AND THE ASSESSING OFFICER FAILED TO UNDERSTAND THE SPIRIT AND INTENT OF RULE 10B(1) (E)(II) AS PER WHICH EVEN IF ONE OF THE COMPARABLES SELECTED BY THE RESPONDENT SATISFIED THE COMPUTATION MECHANISM FOR DETERMINATION OF THE ALP, THE DETERMINATION OF ALP BY USING ARITHMETIC MEAN OF DIFFERENT COMPARABLES IS NOT WAR RANTED. FURTHER IN THE ABSENCE OF THE ASSESSING OFFICER DE MONSTRATING BY WAY OF RECORDS IN THE COURSE OF ASSESSMENT THAT TP ADJUSTMENT HAS BEEN MADE IN RESPECT OF HIS OWN COMP ARABLES WHICH THE TPO HAS ADOPTED AND WHICH ARE LESS THAN T HE % OFFERED BY THE RESPONDENT, THE QUESTION OF MAKING A NY TP ADJUSTMENT IN THE RESPONDENT CASE DOES NOT ARISE. 6. THE LD. CIT(A), TPO AND THE ASSESSING OFFICER H AVE ERRED IN DENYING THE RESPONDENT THE RIGHT TO CROSS-EXAMINE T HE COMPANIES WHOSE DATA CALLED FOR U/S133(6) WAS USED FOR THE COMPUTATION OF ALP MARGIN. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) WHILE DISPOSING THE APPEAL U/S 250 O F THE INCOME-TAX ACT 1961(THE ACT) HAS ERRED IN: 7. USING FINANCIAL INFORMATION OF THE COMPARABLE CO MPANIES TO THE FINANCIAL YEAR 2007-08 ALTHOUGH SUCH INFORMATION WA S NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF PREPARATIO N OF TRANSFER PRICING (TP) DOCUMENTATION AS PER THE REQUIREMENT OF THE ACT. 8. CONFIRMING THE REJECTION OF TRANSFER PRICING DOC UMENTATION BY TRANSFER PRICING OFFICER (TPO) 4 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 9. CONFIRMING THE APPLICATION OF ARBITRARY FILTERS BY TPO AND NOT ADJUDICATING ON UNJUST REJECTION OF CERTAIN FILTERS BY TPO APPLIED BY THE ASSESSEE FOR SELECTION/REJECTION OF COMPANIE S; 10. APPROVING USE OF INFORMATION GATHERED BY THE TP O BY EXERCISING POWER U/S 133(6) OF THE ACT WITHOUT APPRECIATING TH AT THE INFORMATION IS NOT AVAILABLE IN PUBLIC DOMAIN, WHIC H IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE; 11. REJECTING CERTAIN FUNCTIONALLY COMPARABLE COMPA NIES ACCEPTED BY THE ASSESSEE AND ACCEPTING CERTAIN NON-COMPARABL E COMPANIES SELECTED BY THE TPO WITHOUT GIVING ANY LO GICAL REASONS; 12. ACCEPTING CERTAIN COMPANIES ENGAGED IN PERFORMI NG KNOWLEDGE PROCESS OUTSOURCING (KPO) FUNCTIONS OTHERWISE NOT COMPARABLE, AS COMPARABLE TO THE ASSESSEE ENGAGED IN PROVIDING MEDICAL TRANSCRIPTION SERVICES WHICH ARE IN THE NATURE OF BACK-END IT ENABLED SERVICES; 13. ACCEPTING CERTAIN COMPANIES WITH ABNORMALLY HIG H MARGINS AND CERTAIN COMPANIES WITH HIGH TURNOVER OTHERWISE NOT COMPARABLE TO THE ASSESSEE; 14. NOT GRANTING COMPARABILITY ADJUSTMENT ON ACCOUN T OF DIFFERENCE IN RISK ASSUMED BY THE ASSESSEE VIS A VIS THE COMPA RABLE COMPANIES AND IN IGNORING THE QUALIFICATION OF ABOV E ADJUSTMENTS FOR SUCH DIFFERENCE; 15. ACCEPTING THE INCORRECT COMPUTATION OF THE OPER ATING MARGINS OF SOME OF THE COMPARABLE COMPANIES BY THE TPO; AND 16. REJECTING THE PLEA THAT THE ASSESSEE IS A SOFTW ARE TECHNOLOGY PARK OF INDIA (STPI) UNIT WHICH IS ENTITLED TO TA X HOLIDAY AND CONSEQUENTLY THERE IS NO MOTIVATION FOR SHIFTING PR OFITS THROUGH TRANSFER PRICING MECHANISM. 17. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, DELE TE, MODIFY ANY OF THE GROUNDS WHICH ARE URGED ABOVE. 5 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 18. FOR THE ABOVE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING THE RESPONDENT PRAYS YOUR HONOUR TO CONSIDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND JUSTICE BE RENDERED. 4. THE ASSESSEE IS A COMPANY INCORPORATED IN INDIA AND WAS ENGAGED IN PROVIDING MEDICAL TRANSCRIPTION SERVICES TO ASSOCIATED ENTERPRISES. FOR THE RELEVANT ASSESSMEN T YEAR, CASE OF THE APPLICANT WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER (A.O) REFERRED THE SAME TO THE TRANSFER P RICING OFFICER (TPO) FOR DETERMINATION OF ARMS LENGTH PRICE (A LP). THE TPO DETERMINED THE ALP OF THE INTERNATIONAL TRANSAC TION AT RS.19,55,47,963/- THEREBY PROPOSED AN ADDITION OF RS.1,21,84,936/- TO THE TOTAL INCOME OF THE APPLICA NT, WITHOUT GIVING BENEFIT OF ADJUSTMENT OF +-5% AS PER PROVISI ONS OF SECTION 92C(2) OF THE INCOME-TAX ACT, 1961 (THE AC T), AS WERE PREVAILING PRIOR TO OCTOBER 1, 2009. CONSEQUENTLY, FOLLOWING THE RECOMMENDATION OF THE TPO, A.O MADE ADDITIONS T O THE TOTAL INCOME OF THE APPLICANT. THE ASSESSEE APPEAL ED AGAINST THE SAID ORDER OF THE A.O BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS) [CIT (A)]. THE CIT (A) DID NOT ADJ UDICATE THE SAID GROUND, RELATING TO THE DEDUCTION OF 5% FROM T HE ALP. THE ASSESSEE CHALLENGED THE SAID ORDER OF CIT (A) B EFORE THIS HONBLE TRIBUNAL IN PRESENT APPEAL AND ALSO RAISED THE ADDITIONAL GROUND, WHICH READS AS UNDER:- (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) AS WE LL AS THE 6 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 ASSESSING OFFICER / TRANSFER PRICING OFFICER ERRED IN NOT PROVIDING RELIEF OF 5% STANDARD DEDUCTION AS PER SE CTION 92C(2) OF THE INCOME-TAX ACT, 1961, AS PREVAILING P RIOR TO OCTOBER 1, 2009. IT IS SUBMITTED THAT THE SAID GROUND/ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS H ONBLE TRIBUNAL FOR THE ASSESSMENT YEAR 2006-07. THE RELE VANT OBSERVATIONS OF ITAT, ARE INTER ALIA AS UNDER: 5 PER CENT STANDARD DEDUCTION HAS BEEN DENIED ON T HE GROUND THAT PROVISO TO SECTION 92C (2) OF THE ACT H AS BEEN AMENDED THOUGH THE SAID AMENDMENT HAS BEEN MADE BY FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 1/10/2009 . PRIOR TO THIS AMENDMENT AS PER PROVISO TO SECTION 92C (2) THE ASSESSEE WAS ELIGIBLE FOR 5 PERCENT OF ADJUSTMENTS. SINCE THE AMENDMENT HAS BEEN MADE EFFECTIVE FORM 1/10/2009 IT IS HELD THAT THE ASSESSEE WILL BE ELIGIBLE FOR 5 PERCE NT OF ADJUSTMENT WHILE COMPUTING ARMS LENGTH PRICE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. THUS, FOLLOWING THE PRINCIPLE OF CONSISTENCY, THE A PPLICANT SHALL BE ALLOWED THE BENEFIT OF 5 % STANDARD DEDUCT ION WHILE DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIO NS. IT IS FURTHER SUBMITTED THAT THE AFORESAID ADDITION AL GROUNDS OF APPEAL IS PURELY LEGAL IN NATURE AND DOES NOT INVOL VE ANY FRESH INVESTIGATION INTO FACTS, AND THE APPLICANT BY WAY OF THIS 7 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 APPLICATION, CRAVES LEAVE OF THIS HONBLE BENCH TO RAISE THE AFORESAID ADDITIONAL GROUNDS. RELIANCE IS PLACED ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT [1998] 229 ITR 383 (S.C)AND IN THE DECISION IN THE CASE OF JUTE CORPORATION OF INDIA VS. CIT [1991] 187 ITR 68 8 (S.C). IT WAS STATED THAT THE DISCRETION VEST IN THE I.T.A .T UNDER RULE 11 OF THE INCOME-TAX (APPELLATE TRIBUNAL ) RULES, 1963, IT IS PRAYED THAT THE AFORESAID ADDITIONAL GR OUND OF APPEAL MAY KINDLY BE ADMITTED AND ADJUDICATED ON ME RITS. THE ASSESSEE EMPHASISES THAT THE REQUEST SHOULD BE ACCEDED TO. 5. THE LD. AR FURTHER SUBMITTED THAT HE IS NOT PRES SING GROUND NO. 1, 2(B), 2(C), 3 TO 15, 17 & 18 OF ASSESSEES C ROSS-OBJECTION AND CONTESTING ONLY GROUND NO. 2(A) READ WITH 16. HENCE , GROUND NO. 1, 2(B), 2(C), 3 TO 15, 17 & 18 ARE DISMISSED. 6. THE LD. DR SUBMITTED THAT AFTER MERGER AND DE-ME RGER OF THE ASSESSEE COMPANY THERE WAS AN ABNORMAL PROFIT AND T HEREFORE, THE COMPARABLE RELATED TO MOLD-TEK TECHNOLOGIES LTD. SH OULD HAVE BEEN ADDED AS COMPARABLE BECAUSE CORE BUSINESS WAS SIMIL AR TO THAT OF THE ASSESSEE COMPANY. 7. WHILE GIVING REJOINDER, THE AR SUBMITTED THAT TH E ASSESSEES BUSINESS IS OF MEDICAL TRANSCRIPTION AND THE COMPAR ABLE WHICH HAS BEEN EXCLUDED BY THE CIT (A) WAS RIGHTLY EXCLUDED. THIS COMPANY 8 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 HAS OP/TC OF 93.06% IN THE ITES SEGMENT: IN THIS C ASE, THE ASSESSEE HAD RAISED SERIOUS OBJECTIONS BEFORE THE T PO AS WELL. THE ASSESSEE CONTENDED THAT THE COMPARABLE EXCLUDED BY THE LD. CIT(A) WAS FUNCTIONALLY NOT SIMILAR. THE FUNCTIONS PERFOR MED ARE MAINLY ENGINEERING DESIGN AND DETAILING SERVICES, WEBSITE DESIGN SERVICES, SOFTWARE TESTING, IN-HOUSES SOFTWARE DEVELOPMENT ET C. AS A RESULT OF THIS, THIS COMPANY WAS TREATED AS FUNCTIONALLY NOT SIMILAR. FURTHER, THE APPELLANT HAS PLACED RELIANCE ON THE DECISION O F THE I.T.A.T IN THE CASE OF ADOBE SYSTEMS INDIA PVT. LTD. (ITA NO. 5043) WHICH HAS UNDERLINED THE SIGNIFICANT PRINCIPLE THAT IF HIGH L OSS MAKING COMPANIES ARE NOT ACCEPTED, THE HIGH PROFIT MAKING COMPANIES SHOULD ALSO NOT BE ACCEPTED AS COMPARABLES. 8. THE LD. AR PRESENTED A TABLE INDICATING THE REVE NUE GROWTH RATE OF THE COMPANY AS UNDER:- TABLE-2: PARTICULARS FINANCIAL YEAR 2005 FINANCIAL YEAR 2006 FINANCIAL YEAR 2007 FINANCIAL YEAR 2008 SEGMENTAL SALES IN CRORES 1.18 3.75 11.40 17.85% CAGR OF THE COMPANY FOR 2005 TO 2007 147% ON THE BASIS OF THE ABOVE TABLE IT WAS SUBMITTED TH AT, THE COMPANY GREW WITH A COMPOUNDED ANNUAL GROWTH RATE (CAGR) OF 147% FOR 3 YEARS, WHICH IS EVIDENTLY ABOVE THE INDUSTRY AVER AGE. HENCE ON 9 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 THE BASIS OF THE EVIDENCE AS PROVIDED ABOVE, IT WAS SUBMITTED THAT MOLD-TEK OUGHT TO BE REJECTED AS A COMPARABLE COMPA NY DUE TO THE CONSISTENTLY ABNORMAL PROFITS EARNED BY THE COMPANY . FURTHER THE ASSESSEE STATED THAT COMPANY WAS INVOLVED IN MERGER AND ACQUISITION ACTIVITIES DURING THE YEAR UNDER CONSID ERATION. 9. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE ORDER OF THE TPO AND THE ANNUAL REPORT OF THE C OMPANY, CAME TO THE CONCLUSION THAT THERE WAS MERIT IN THE CLAIM OF THE ASSESSEE THAT THE COMPANY HAD MERGERS AND ACQUISITION ACTIVI TIES DURING THE YEAR. HE ALSO POINTED OUT THAT THERE WERE SEVERAL OTHER IRREGULARITIES IN THE FINANCIAL STATEMENTS OF M/S M OLD TEK TECHNOLOGIES LTD. WHICH HAD BEEN CONFIRMED BY HYDER ABAD ITAT IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PVT. LTD. THE LD. CIT(A) ACCORDINGLY REJECTED MOLD TEK TECHNOLOGIES L TD AS A COMPARABLE. 10. BEFORE US, THE LD. AR ALSO RELIED UPON THE JUDG MENT IN CASE OF MAERSK GLOBAL CENTRE INDIA PVT. LTD VS. ADDL. COMMI SSIONER OF INCOME TAX DECIDED BY SPECIAL BENCH OF ITAT MUMBAI REPORTED AT (2014) 147 ITD 83 WHEREIN THE SAME COMPANY WHICH WA S EXCLUDED BY THE CIT(A) IN THE PRESENT CASE, HAS BEEN EXCLUDE D BY THE TRIBUNAL ON THE FOLLOWING REASONING: PARA 81. IN SO FAR AS THE CASE OF MOLD-TEK TECHNOL OGIES LTD. IS CONCERNED, IT IS OBSERVED FROM THE ANNUAL REPORT OF THE SAID COMPANY FOR THE FINANCIAL YEAR 2007-08 PLACED AT PA GE 139 TO 151 OF THE PAPER BOOK THAT THE SAID COMPANY WAS PIO NEER IN 10 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 STRUCTURAL ENGINEERING KPO SERVICES AND ITS ENTIRE BUSINESS COMPRISED OF PROVIDING ONLY STRUCTURAL ENGINEERING SERVICES TO VARIOUS CLIENTS. FURTHER INFORMATION OF MOLD-TEK T ECHNOLOGIES LTD. AVAILABLE ON THEIR WEBSITE IS FURNISHED IN THE FORM OF PRINTOUT AT PAGE 158 TO 165 OF THE PAPER BOOK AND A PERUSAL OF THE SAME SHOWS THAT IS LEADING PROVIDER OF ENGINEER ING AND DESIGN SERVICES WITH SPECIALIZATION IN CIVIL, STRUC TURAL AND MECHANICAL ENGINEERING SERVICES. IT IS STATED TO H AVE A STRONG TEAM OF SKILLED RESOURCES WITH WORLD CLASS RESOURCE S AND SKILL TESTS. IT IS ALSO STATED TO HAVE CONSISTENTLY HELP ED THE CLIENTS TO CUT DOWN DESIGN AND DEVELOPMENT COSTS OF CIVIL, MEC HANICAL AND PLANT DESIGN BY 30-40% AND DELIVERED TECHNOLOGICALL Y SUPERIOR OUTPUTS TO MATCH AND EXCEED EXPECTATIONS. IT IS CL AIMED TO HAVE IN-HOUSE SOFTWARE DEVELOPMENT TEAM, QUALITY CONTROL TRAINING AND TROUBLESHOOTING FACILITIES. M/S MOLD-TEK IS AL SO RENDERING WEB DESIGN AND DEVELOPMENT SERVICES WITH EXPERIENCE IN TURNING THEM INTO AN EFFECTIVE GRAPHIC DESIGN REPRE SENTATION AND CREATING DYNAMIC AND GRAPHIC RICH WEB APPLICATIONS FROM IT SPECS, DESIGN PRINTS ETC. KEEPING IN VIEW THIS INF ORMATION AVAILABLE IN THE ANNUAL REPORT OF MOLD-TEK AS WELL ON ITS WEBSITE, WE ARE OF THE VIEW THAT THE SAID COMPANY I S MAINLY INVOLVED IN PROVIDING HIGH-END SERVICES TO ITS CLIE NTS INVOLVING HIGHER SPECIAL KNOWLEDGE AND DOMAIN EXPERTISE IN TH E FIELD AND THE SAME CANNOT BE TAKEN AS COMPARABLE TO THE ASSES SEE COMPANY WHICH IS MAINLY INVOLVED IN PROVIDING LOW-E ND SERVICES. IT MAY BE PERTINENT TO NOTE HERE THAT TH E FINANCIAL 11 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 YEAR 2007-08 WAS A UNIQUE YEAR FOR MOLD-TEK TECHNOL OGIES LTD. AS THE SCHEME OF ARRANGEMENT INVOLVING AMALGAMATION BETWEEN TEKMEN TOOL PVT. LTD. AND MOLD-TEK TECHNOLOGIES LTD . AND DE- MERGER BETWEEN MOLD-TEK TECHNOLOGIES LTD. SIMULTANE OUSLY WAS SANCTIONED BY THE HONBLE AP HIGH COURT BY 15 TH JULY, 2008 WITH THE APPOINTED DATE FOR AMALGAMATION AND D E-MERGER BEING 1 ST OCTOBER, 2007 AND 1 ST APRIL, 2007 RESPECTIVELY. IT IS ALSO PERTINENT TO NOTE THAT WHILE WORKING OUT THE O PERATING MARGIN OF THE SAID COMPANY, PROVISION FOR DERIVATE LOSS OF RS.6.43CRORES MADE BY MOLD-TEK TECHNOLOGIES LTD. WA S EXCLUDED BY THE A.O. TREATING THE SAME AS NON-OPERA TING EXPENSES WHEREAS IN THE CASE OF RUSHABH DIAMOND (SU PRA), IT WAS HELD BY THE DIVISION BENCH OF THIS TRIBUNAL TH AT THE GAIN OR LOSS ARISING FROM THE FORWARD CONTRACT ENTERED INTO FOR THE PURPOSE OF FOREIGN CURRENCY EXPOSURE ON THE EXPORT AND IMPORT HAS TO BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE OPERATING PROFIT. 11. THE LD. AR FURTHER RELIED UPON THE CASE OF TATA CONSULTANCY IN RESPECT OF THE GROUND OF ASSESSEE IN CROSS-OBJEC TION RELATED TO INVOCATION OF JURISDICTION U/S 92CA, THE SAID JUDGM ENT BY THE ITAT MUMBAI IN PARA 26 HAS GIVEN A FINDING THAT IT WAS T HE STATUTORY DUTY OF THE ASSESSING OFFICER TO DECIDE INDEPENDEN TLY, WHETHER THE DETERMINATION OF ARMS LENGTH PRICE OF THE ASSESSEE SHOULD BE ACCEPTED OR WHETHER OR NOT AFTER APPLYING THE PROVI SIONS OF SECTION 92CA THE TRANSFER PRICING ADJUSTMENT SHOULD BE MADE . THIS IS A STATUTORY SAFEGUARD FOR THE ASSESSEE. 12 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 12. WE HAVE PERUSED ALL THE RECORDS AND TAKEN INTO CONSIDERATION THE CONTENTIONS OF THE PARTIES AS RELATES TO REVENU ES APPEAL THE SAME IS ONLY ON THE ISSUE THAT EXCLUSION OF MOLD-TE K TECHNOLOGIES LTD AS COMPARABLE BY THE CIT(A) IS NOT JUST AND PRO PER BUT WHEN WE TAKE INTO ACCOUNT, THE SPECIAL BENCH JUDGMENT IN CA SE OF MOLD-TEK GLOBAL CENTRE INDIA PVT. LTD IT CAN CLEARLY BE TAKE N INTO ACCOUNT THAT THE COMPANY GREW WITH A COMPOUNDED ANNUAL GROW TH RATE (CAGR) OF 147% FOR 3 YEARS WHICH IS EVIDENT FROM TH E CHART GIVEN IN THE IMPUGNED ORDER OF THE LD.CIT(A) AND ON THE BASI S OF THE SAID CHART, CIT(A) HAS RIGHTLY REJECTED MOLD-TEK AS COMP ARABLE COMPANY DUE TO THE CONSISTENTLY ABNORMAL PROFITS EARNED BY THE COMPANY. THE CIT(A) BY DECIDING THIS ISSUE HAS STUDIED ANNUA L REPORT OF THE COMPANY AND FOUND THAT THERE WERE SEVERAL IRREGULA RITIES IN THE FINANCIAL STATEMENTS. WHEN WE LOOK INTO ALL THESE A SPECT, WE FIND THAT THE CIT(A) WAS CORRECT IN EXCLUDING MOLD-TEK T ECHNOLOGIES LTD. AS COMPARABLE AND HENCE THE REVENUE IS NOT PROPER I N HARPING THAT MOLD-TEK HAS TO BE TAKEN INTO ACCOUNT AS A COMPARAB LE IN TP STUDY. AS REGARDS TO THE CROSS-OBJECTION OF THE ASSESSEE I S CONCERNED THE LD. A.R DURING THE COURSE OF HEARING STATED THAT TH E SAME MAY BE TREATED AS NOT PRESSED IF THE APPEAL OF THE DEPARTM ENT IS DISMISSED. SINCE IN THE FORMER PART OF THE ORDER, WE HAVE DISM ISSED THE APPEAL OF THE DEPARTMENT, THE CROSS OBJECTION OF THE ASSES SEE WHICH MAINLY SUPPORTS THE IMPUGNED ORDER OF THE CIT(A) IS DISMISSED AS NOT PRESSED. 13 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 12. IN RESULT, APPEAL OF THE REVENUE AS WELL AS CRO SS-OBJECTION ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14TH OF MARCH 2016. SD/- SD/- ( N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14/03/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 28/01/2016 PS 2. DRAFT PLACED BEFORE AUTHOR 29/01/2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 03.2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 14.03.2016 PS/PS 14 ITA NO.2148/DEL/13 &C.O 71/DEL/2014 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 14.03.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.