Boeing International Corporation India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1127/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4296 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 25-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I-1 : NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.1127/DEL/2015 ASSESSMENT YEAR: 2010-11 BOEING INTERNATIONAL CORPORATION INDIA PVT. LTD., 3 RD FLOOR, DLF CENTRE, SANSAD MARG, NEW DELHI. PAN: AACCB3303J VS. DCIT, CIRCLE-5(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KANCHUN KAUSHAL, AR REVENUE BY : SHRI SANJAY I BARA, CIT, DR DATE OF HEARING : 25.10.2018 DATE OF PRONOUNCEMENT : 30.10.2018 ORDER PER N.K. BILLAIYA, AM: WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER DATED 17.02.2014 FRAMED U/S 143(3) READ WITH SECTION 147C READ WITH SECTION 92CA(3) OF THE ACT. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE DRP/TPO/A.O. ERRED IN ENHANCING THE INCOME OF THE A SSESSEE BY RS.13,38,73,412/- AND, IN DOING SO, ARBITRARILY SELECTED COMPANIES EN GAGED IN PERFORMING SERVICES WHICH ITA NO.1127/DEL/2015 2 ARE FUNCTIONALLY DIFFERENT FROM THE BUSINESS DEVELO PMENT, ADVISORY AND OTHER SUPPORT SERVICES RENDERED BY THE ASSESSEE. 3. THE APPELLANT IS A CAPTIVE SERVICE PROVIDER TO I TS ASSOCIATED ENTERPRISES (AES) AND IS PRIMARILY ENGAGED IN PROVIDING BUSINESS DEVE LOPMENT ADVISORY AND OTHER SUPPORT SERVICES TO ITS AES ON A COST PLUS BASIS. T HE INTERNATIONAL TRANSACTIONS REPORTED DURING THE YEAR READ:- SL. NO. DESCRIPTION OF TRANSACTION AMOUNT IN INR METHOD USE D 1. PURCHASE OF TRADED GOODS 20,928 TRANSACTIONAL NET MARGIN METHOD 2. PURCHASE OF FIXED ASSETS 7,21,51,740 TRANSACTIONAL NET MARGIN METHOD 3. PROVISION OF SERVICES 87,33,97,543 TRANSACTIONAL NET MARGIN METHOD 4. COMMISSION INCOME 39,54,027 TRANSACTIONAL NET MARGIN METHOD 5. REIMBURSEMENT OF EXPENSES PAID 36,02,54,953 TRANSACTIONAL NET MARGIN METHOD 6. REIMBURSEMENT OF EXPENSES RECEIVED 7,02,942 COMPARABLE UNCONTROLLED PRICE METHOD 131,04,82,133 4. THE TRANSACTION UNDER DISPUTE RELATES TO PROVIS ION OF BUSINESS SUPPORT SERVICES AMOUNTING TO RS.87,73,51,570/-. TNMM WAS TAKEN AS THE MOST APPROPRIATE METHOD WITH OP/TC AS THE PLI. THE ASSESSEE SHOWED PLI AT 18.82% BY USING FOLLOWING SET OF COMPARABLES:- (I) CYBER MEDIA EVENTS LTD. (II) MAHINDRA CONSULTING ENGINEERS LTD., (III) WAPCOS LTD. (IV) HINDUSTAN HOUSING COMPANY LTD., (V) EMPIRE INDUSTRIES (TRADING & INDENTING SEGMENT) (VI) ENTERTAINMENT NETWORK (I) LTD. ITA NO.1127/DEL/2015 3 (VII) HANSA VISION PVT. LTD. (VIII) PRIYA INTERNATIONAL LTD. 5. OUT OF THE ABOVE COMPARABLES, THE TPO ACCEPTED O NLY MAHINDRA CONSULTING ENGINEERS LTD. AND REJECTED ALL OTHER COMPARABLES H OLDING THAT THEY ARE FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. 6. AFTER REJECTING THE COMPARABLES OF THE ASSESSEE, THE TPO CHOSE THE FOLLOWING COMPANIES AS COMPARABLES:- (I) CERTIFICATION ENGINEERS INTERNATIONAL LTD. (II) ENGINEERS INDIA LTD., (III) HSCC (INDIA) LTD., (IV) RITES (V) TCE CONSULTING ENGINEERS (VI) NTPC ELECTRIC SUPPLY CO. LTD. 7. THE FINAL COMPARABLES WERE CHOSEN AS UNDER:- (I) CERTIFICATION ENGINEERS INTERNATIONAL LTD. (II) ENGINEERS INDIA LTD., (III) HSCC (INDIA) LTD., (IV) MAHINDRA CONSULTING ENGINEERS LTD., (V) NTPC ELECTRIC SUPPLY CO. LTD. (VI) RITES (VII) TCE CONSULTING ENGINEERS ITA NO.1127/DEL/2015 4 (VIII) KITCO LTD., (IX) ALPHAGEO (INDIA) LTD. 8. AND, ACCORDINGLY, ARMS LENGTH PRICE AND THE ADJ USTMENT WAS COMPUTED AS UNDER:- OPERATING COST 739114405 ARMS LENGTH MARGIN (%) 41.3 ARMS LENGTH PRICE (ALP) 1044368654 PRICE RECEIVED 874100485 SHORTFALL BEING ADJUSTMENT U/S 92CA 170,268,169 9. THE ASSESSEE RAISED OBJECTIONS BEFORE THE DRP AN D AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE, THE DRP DIRECTED FOR TH E INCLUSION OF WAPCOS LTD., WHICH WAS REJECTED BY THE TPO. THE DRP FURTHER DIRECTED FOR THE EXCLUSION OF HSCC (INDIA) LTD. WHICH WAS TAKEN BY THE TPO. BEFORE US, THE CO UNSEL FOR THE ASSESSEE VEHEMENTLY OPPOSED INCLUSION OF FOLLOWING FIVE COMPARABLES:- (I) CERTIFICATION ENGINEERS INTERNATIONAL LTD. (II) ENGINEERS INDIA LTD., (III) NTPC ELECTRIC SUPPLY CO. LTD. (IV) KITCO LTD., (V) RITES LTD. 10. IT IS THE SAY OF THE COUNSEL THAT ALL THESE COM PANIES ARE GOVERNMENT COMPANIES OR PUBLIC SECTOR UNDERTAKINGS AND, THEREFORE, SHOUL D NOT BE TAKEN AS COMPARABLE. THE ITA NO.1127/DEL/2015 5 COUNSEL RELIED UPON SEVERAL JUDGMENTS OF THE COORDI NATE BENCHES WHERE THE COORDINATE BENCHES HAVE REJECTED GOVERNMENT COMPANIES TO BE TA KEN AS GOOD COMPARABLES. 11. PER CONTRA , THE DR STRONGLY OPPOSED THE CONTENTIONS OF THE CO UNSEL STATING THAT WHAT NEEDS TO BE COMPARED IS THE FUNCTIONAL SI MILARITY. IT IS THE SAY OF THE DR THAT IT DOES NOT MAKE ANY DIFFERENCE WHETHER A COMPANY I S A PRIVATE COMPANY OR A GOVERNMENT OWNED COMPANY AS LONG AS IT IS FUNCTIONA LLY SIMILAR TO THE ASSESSEE COMPANY. 12. TO A CERTAIN EXTENT WE MAY AGREE WITH THE DR, B UT, AT THE SAME TIME, WE MAY HAVE TO POINT OUT THAT NOT ONLY THE COMPARABLES SHO ULD BE FUNCTIONALLY SIMILAR, BUT, THE BUSINESS MODEL SHOULD ALSO BE SIMILAR, SO THAT THE TESTED PARTY AND THE COMPARABLES NOT ONLY HAVE A LEVEL PLAYING FIELD, BUT, ARE ALSO ON T HE SAME PLATFORM. FOR THIS PROPOSITION, WE DERIVE SUPPORT FROM THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD. (ITA NO.102 OF 2015). THE RELEVANT PARAGRAPHS OF THE JUDGMENT READ:- 20. IN ORDER FOR THE BENCHMARKING STUDIES TO BE RE LIABLE FOR THE PURPOSES OF DETERMINING THE ALP, IT WOULD BE ESSENTIAL THAT THE ENTITIES SELECTED AS COMPARABLES ARE FUNCTIONALLY SIMILAR AND ARE SUBJEC T TO THE SIMILAR BUSINESS ENVIRONMENT AND RISKS AS THE TESTED PARTY. IN ORDER TO IMPUTE AN ALP TO A CONTROLLED TRANSACTION, IT WOULD BE ESSENTIAL TO EN SURE THAT THE INSTANCES OF UNCONTROLLED ENTITIES/TRANSACTIONS SELECTED AS COMP ARABLES ARE SIMILAR IN ALL MATERIAL ASPECTS THAT HAVE ANY BEARING ON THE VALUE OR THE PROFITABILITY, AS THE CASE MAY BE, OF THE TRANSACTION. ANY FACTOR, WH ICH HAS AN INFLUENCE ON THE PLI, WOULD BE MATERIAL AND IT WOULD BE NECESSAR Y TO ENSURE THAT THE COMPARABLES ARE ALSO EQUALLY SUBJECTED TO THE INFLU ENCE OF SUCH FACTORS AS THE TESTED PARTY. THIS WOULD, OBVIOUSLY, INCLUDE BU SINESS ENVIRONMENT; THE NATURE AND FUNCTIONS PERFORMED BY THE TESTED PARTY AND THE COMPARABLE ENTITIES; THE VALUE ADDITION IN RESPECT OF PRODUCTS AND SERVICES PROVIDED BY ITA NO.1127/DEL/2015 6 PARTIES; THE BUSINESS MODEL; AND THE ASSETS AND RES OURCES EMPLOYED. IT CANNOT BE DISPUTED THAT THE FUNCTIONS PERFORMED BY AN ENTITY WOULD HAVE A MATERIAL BEARING ON THE VALUE AND PROFITABILITY OF THE ENTITY. IT IS, THEREFORE, OBVIOUS THAT THE COMPARABLES SELECTED AND THE TESTE D PARTY MUST BE FUNCTIONALLY SIMILAR FOR ASCERTAINING A RELIABLE AL P BY TNMM. RULE 10B(2) OF THE INCOME TAX RULES, 1962 ALSO CLEARLY I NDICATES THAT THE COMPARABILITY OF CONTROLLED TRANSACTIONS WOULD BE J UDGED WITH REFERENCE TO THE FACTORS AS INDICATED THEREIN. CLAUSE (A) AND (B ) OF RULE 10B(2) EXPRESSLY INDICATE THAT THE SPECIFIC CHARACTERISTICS OF THE S ERVICES PROVIDED AND THE FUNCTIONS PERFORMED WOULD BE FACTORS FOR CONSIDERIN G THE COMPARABILITY OF UNCONTROLLED TRANSACTIONS WITH CONTROLLED TRANSACTI ONS. 21. RULE 10B(2) READS AS UNDER:- (2) FOR THE PURPOSE OF SUB-RULE (1), THE COMPARABI LITY OF AN INTERNATIONAL TRANSACTION OR A SPECIFIED DOMESTIC TRANSACTION WIT H AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFERENCE TO THE F OLLOWING, NAMELY:- (A) THE SPECIFIC CHARACTERISTICS OF THE PROPERTY TRANSF ERRED OR SERVICES PROVIDED IN EITHER TRANSACTION; (B) THE FUNCTIONS PERFORMED, TAKING INTO ACCOUNT ASSETS EMPLOYED OR TO BE EMPLOYED AND THE RISKS ASSUMED, BY THE RESPECTIV E PARTIES TO THE TRANSACTIONS; (C) THE CONTRACTUAL TERMS (WHETHER OR NOT SUCH TERMS AR E FORMAL OR IN WRITING) OF THE TRANSACTIONS WHICH LAY DOWN EXPLICI TLY OR IMPLICITLY HOW THE RESPONSIBILITIES, RISKS AND BENEFITS ARE TO BE DIVIDED BETWEEN THE RESPECTIVE PARTIES TO THE TRANSACTIONS; (D) 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 OR DERS IN FORCE, COSTS OF LABOUR AND CAPITAL IN THE MARKETS, OVERALL ECONOMIC DEVELOPMENT AND LEVEL OF COMPETITION AND WHETHER THE MARKETS ARE WH OLESALE OR RETAIL. 13. THE COORDINATE BENCH IN THE CASE OF PHILIP MORRIS SERVICES INDIA S.A. (2018) 95 TAXMANN.COM 156 (DELHI-TRIB.) OBSERVED AS UNDER:- ITA NO.1127/DEL/2015 7 28. THE PROFILE OF THIS GLOBAL PROCUREMENT CONSULT ANTS LTD., AS NARRATED BY THE LD. TPO HIMSELF SPEAKS IN UNEQUIVOC AL TERMS THAT THIS GLOBAL PROCUREMENT CONSULTANTS LTD., IS A COMPANY E STABLISHED BY THE GOVERNMENT TO SERVE THE PURPOSE OF PROFESSIONAL PRO CUREMENT AND MANAGEMENT SERVICES NEEDS AND ALSO TO PROVIDE COMBI NES MANAGEMENT SERVICES REQUIRED BY THE GOVERNMENT DEPARTMENTS OR THEIR PROJECT EXECUTION AGENCIES TO CARRY OUT THE PROCUREMENT IN A TIME BOU ND AND EFFICIENT MANNER WITHIN THE FRAMEWORK OF GOVERNMENT REGULATIONS AND GUIDELINES OF INTERNATIONAL INSTITUTIONS, WHICH IS NOT SUCH A CHA RACTERISTIC OF THE BUSINESS OF THE ASSESSEE. THE BUSINESS MODEL ITSELF IS DIFFE RENT, LET ALONE THE DISPROPORTION IS OF THE FINANCIALS. WE HAVE NO HESI TATION, IN THE FACE OF THE PROFILE OF GLOBAL PROCUREMENT CONSULTANTS LTD., THA T IT IS NOT A GOOD COMPARABLE AT ALL TO THE ASSESSEE AND FOR THAT MATT ER TO ANY PRIVATE MARKETING SUPPORT SERVICE PROVIDER, AS SUCH WE DIRE CT THE LD. TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES TO BENCHM ARK THE INTERNATIONAL TRANSACTION OF THE ASSESSEE IN PROVIDING THE MARKET SUPPORT SERVICES TO ITS AES. 14. AGAIN, THE MUMBAI BENCH OF THE ITAT IN M/S NOVARTIS HEALTHCARE PVT. LTD. (ITA NO.7643/M/2012), HAS OBSERVED AS UNDER:- THE REVENUE HAS NOT DISPUTED THAT RITES LTD. IS A GOVERNMENT COMPANY ESTABLISHED UNDER THE MINISTRY OF INDIAN RAILWAYS A ND IS PROVIDING THE SERVICES IN THE FIELD OF ARCHITECTURE AND PLANNING, BRIDGE AND TUNNEL ENGINEERING, CONSTRUCTION PROJECT, ELECTRICAL ENGIN EERING ETC. TO THE GOVERNMENT ORGANIZATIONS AND PUBLIC SECTION UNDERTA KINGS. THE FUNCTIONS PERFORMED AND CARRIED OUT BY RITES LTD. ARE ENTIREL Y DIFFERENT FROM THE FUNCTIONS AND SERVICES PROVIDED BY THE ASSESSEE TO ITS AE. THE ASSESSEE IS PROVIDING THE SUPPORT SERVICE IN THE FIELD OF PHARM ACEUTICAL AND MEDICAL SUPPORT SERVICE, THEREFORE ON THE FACE OF IT, THIS COMPANY CANNOT BE A FUNCTIONALLY COMPARABLE WITH THE ASSESSEE. AN IDENTICAL ISSUE HA S COME UP BEFORE DELHI BENCHES OF THIS TRIBUNAL IN THE CASE OF 'NORTEL NET WORKS INDIA PVT. LTD.' (SUPRA) WHEREIN THE TRIBUNAL HAS OBSERVED IN PARA 11 AND 11 .1 AS UNDER: '11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. APROPOS THE ISSUE OF COMPARABI LITY AND THE EXCLUSION OF CHOKSI, RITES AND WAPCOS, DELHI TRIBUN AL IN THE CASES OF M/S MCI COM INDIA P. LTD. AND M/S VERIZON INDIA P. LTD. HAS HELD THAT COMPANIES LIKE EIL, RITES, WAPCOS AND TCE ARE ENGINEERING COMPANIES WHICH PROVIDE END TO END SOLUTIONS AND TH EREFORE THEY CANNOT BE COMPARED WITH ASSESSEES WHO PROVIDE MARKE TING SUPPORT ITA NO.1127/DEL/2015 8 SERVICES TO THE PARENT COMPANY. THEY WERE HELD TO B E FUNCTIONALLY NOT COMPARABLE WITH THESE ENGINEERING COMPANIES. 11.1. FOLLOWING THE ORDERS OF COORDINATE BENCHES OF LTAT IN THE CASES OF M/S MCI COM INDIA P. LTD.; M/S VERIZON INDIA P. LTD. (SUPRA); ESTEL IN ITA NO.584/BANGALORE/06 AND OUR OWN DECISION IN CASE OF ACTIS ADVISERS PVT. LTD. ITA NO. 6390/DEL/2012, WE HOLD T HAT CHOKSI, RITES AND WAPCOS BEING FUNCTIONALLY DIFFERENT CANNOT BE A PPLIED AS APPROPRIATE COMPARABLE TO THE ASSESSEE. THEREFORE, THEY ARE TO BE EXCLUDED FROM TP ADJUSTMENT WHILE DETERMINING THE A LP. 'A SIMILAR FINDING HAS BEEN GIVEN BY THE TRIBUNAL REGARDING TH E COMPARABILITY OF THIS COMPANY IN THE CASE OF MCI COM INDIA PVT. LTD. AS WELL AS M/S. CHEMTEX GLOBAL ENGINEERS PVT. LTD. THUS, HAVING REG ARD TO THE NATURE OF FUNCTIONS AND ACTIVITIES PERFORMED BY THE RITES LTD., WE FIND THAT THIS COMPANY CANNOT BE REGARDED AS A GOOD COMPARABLE FOR DETERMINING THE ARMS LENGTH PRICE IN RESPECT OF THE SERVICES RENDER ED BY THE ASSESSEE TO ITS AE.' 15. THE BANGALORE BENCH OF ITAT IN KHF COMPONENTS PVT. LTD. [IT (TP) A NO.1748/BANG/2013 , WHILE DECIDING THE INCLUSION/EXCLUSION OF A GOVER NMENT COMPANY, OBSERVED AS UNDER:- WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS U NDISPUTED FACT THAT THIS COMPANY IS A PUBLIC SECTOR UNDERTAKING COMPANY. ITS OPERATI ONS ARE BASED ON POLICY REQUIREMENTS OF THE GOVERNMENT AND IT IS A PREFERRE D COMPANY OF THE GOVT. OF INDIA FOR ENTRUSTING OF WORK AND THEREFORE, IT T OTALLY OPERATES IN A CONTROLLED ENVIRONMENT. HENCE, THIS COMPANY CANNOT BE COMPARED WITH THAT OF THE ASSESSEE-COMPANY, WHICH IS A PRIVATE COMPANY OPERATING IN UNCONTROLLED BUSINESS ENVIRONMENT. IN THIS REGARD W E RELY ON THE DECISION OF CO- ORDINATE BENCH IN THE CASE OF DELHI ADIDAS TECHNICA L SERVICES (P) LTD. VS. DCIT (69 TAXMANN.COM)' 16. A SIMILAR VIEW WAS TAKEN BY THE TRIBUNALS MUMB AI BENCH IN CHEMTEX GLOBAL ENGINEERS PVT. LTD. [ITA NO.3590/MUM/2010]. THE RELEVANT OBSERVATIONS READ: 25. EVEN WITH REGARD TO THE COMPARABLE COMPANIES WHICH ARE TAKEN INTO CONSIDERATION BY THE A.O./TPO, THE LEARNED CIT(A) H AS CORRECTLY HELD THAT RITES LIMITED IS A GOVERNMENT OF INDIA ENTERPRISE AND CON SIDERING THE NATURE OF THE CONTRACTS AND THE IMPLICIT GUARANTEE PROVIDED BY TH E GOVERNMENT OF INDIA, ETC. ITA NO.1127/DEL/2015 9 RITES LIMITED CANNOT BE TAKEN AS A COMPARABLE CASE AND HENCE THE LEARNED CIT(A)WAS JUSTIFIED IN EXCLUDING THE SAME. 17. WE WILL NOW TAKE UP EACH COMPARABLE ONE BY ONE. (I) CERTIFICATION ENGINEERS INTERNATIONAL LTD . 18. THIS COMPANY IS A WHOLLY OWNED SUBSIDIARY OF EN GINEERS INDIA LTD., A GOVERNMENT OF INDIA UNDERTAKING. IT HAS THE SUPPORT AND BACKING OF THE GOVERNMENT WHICH IS SUFFICIENT TO MAKE IT UNCOMPARABLE TO THE APPELLANT. THIS COMPANY IS ENGAGED IN CERTIFICATION, RE-CERTIFICATION, SAFETY AUDIT AND HSB MANAGEMENT SYSTEMS FOR OFFSHORE AND ONSHORE OIL AND GAS FACILITIES. I T ALSO SUPPLIES MANPOWER TO ITS HOLDING COMPANIES. THESE ACTIVITIES CAN BE SEEN FR OM THE ANNUAL REPORT AND THE WEBSITE OF THIS COMPANY. AS DISCUSSED ELSEWHERE, B EING A GOVERNMENT COMPANY, WE ARE NOT INCLINED TO ALLOW THE TPO TO USE THIS COMPA NY AS A COMPARABLE. WE, ACCORDINGLY, DIRECT FOR ITS EXCLUSION. (II) ENGINEERS INDIA LTD. 19. AS MENTIONED ELSEWHERE, THIS IS A GOVERNMENT O F INDIA UNDERTAKING WHICH HAS THE SUPPORT AND BACKING OF THE GOVERNMENT AND IS EN GAGED IN PROVIDING ENGINEERING PROCUREMENT, CONSTRUCTION, LUMPSUM TURNKEY PROJECT S AND TOTAL SOLUTIONS CONSULTANCY, HIGH END AND FULL-FLEDGED ENGINEERING AND RELATED T ECHNICAL SERVICES FOR PETROLEUM REFINERIES, PIPELINES AND OTHER INDUSTRIAL PROJECTS . THE VARIOUS ACTIVITIES CARRIED OUT BY EIL IN ENGINEERING SERVICE DIVISION INCLUDE FEASIBI LITY STUDIES, PROJECT MANAGEMENT, PLANNING AND SCHEDULING, COST ENGINEERING, PROCESS AND EQUIPMENT DESIGN, TOTAL ENGINEERING, PROCUREMENT AND CONSTRUCTION MANAGEMEN T, MATERIALS AND MAINTENANCE ITA NO.1127/DEL/2015 10 SERVICES. AS COMPARED TO ITS DIVERSIFIED ACTIVITIE S, THE ACTIVITIES OF THE ASSESSEE ARE NOT ONLY LOW-END, BUT, ARE ALSO RESTRICTED TO CAPTIVE S ERVICE PROVIDED TO ITS AE. THIS COMPANY IS NOT ONLY FUNCTIONALLY DISSIMILAR, BUT, A LSO A GOVERNMENT OWNED COMPANY, HENCE, WE DIRECT FOR THE EXCLUSION OF THIS COMPANY. (III) NTPC ELECTRIC SUPPLY COMPANY 20. THIS COMPANY IS ALSO A GOVERNMENT OF INDIA UNDE RTAKING AND, THEREFORE, HAS THE SUPPORT AND BACKING OF THE GOVERNMENT AND IS ENGAGE D IN ELECTRIFICATION SERVICES AND HAS UNDERTAKEN SEVERAL ACTIVITIES FOR THE GENERATIO N OF POWER DURING THE YEAR. NTPC HAS ALSO UNDERTAKEN SEVERAL RURAL ELECTRIFICATION P ROJECTS UNDER RAJIV GANDHI GRAMIN VIDYUT YOJANA (RGGVY) DURING THE RELEVANT YEAR. IT IS SEEN THAT 87% OF ITS OPERATING REVENUES ARE EARNED FROM ELECTRIFICATION SERVICES. SUCH FUNCTIONS, IN ADDITION TO BEING A GOVERNMENT COMPANY, MAKES THIS COMPANY FUNCTIONAL LY DISSIMILAR FROM THE APPELLANT COMPANY, HENCE, WE DIRECT THE A.O./TPO TO EXCLUDE THIS COMPANY FROM THE FINAL SET OF COMPARABLES. (IV) RITES LTD. 21. THIS, AGAIN, IS A GOVERNMENT OF INDIA UNDERTAKI NG AND HAS THE SUPPORT AND BACKING OF THE GOVERNMENT. THE WEBSITE OF THIS COMP ANY INDICATES THAT IT IS A GOVERNMENT OF INDIA UNDERTAKING AND IS ENGAGED IN P ROJECT MANAGEMENT CONSULTANCY AND TURNKEY PROJECT FOR ENHANCEMENT OF POST PRODUCT ION FACILITIES. IT OPERATES AS A MULTI-DISCIPLINARY ORGANIZATION IN THE FIELDS OF TR ANSPORTATION, INFRASTRUCTURE AND RELATED TECHNOLOGIES. THE OPERATIONS OF THIS COMPANY ARE D IVERSIFIED IN THE FIELD OF RAIL INFRASTRUCTURE, BUILDING AND AIRPORT TRANSPORTATION AND ECONOMICS, TECHNICAL SERVICES, ITA NO.1127/DEL/2015 11 TRANSPORT INFRASTRUCTURE, URBAN INFRASTRUCTURE, QUA LITY ASSURANCE AND TRAINING. IN OUR CONSIDERED OPINION, THIS COMPANY IS FUNCTIONALLY DI SSIMILAR AND, HENCE, CANNOT BE CONSIDERED AS A GOOD COMPARABLE. IN ADDITION, AS M ENTIONED ELSEWHERE, BEING A GOVERNMENT COMPANY, IS NOT IN THE SAME PLATFORM AS THE APPELLANT COMPANY. WE DIRECT FOR THE EXCLUSION OF THIS COMPANY. (V) KITCO LTD . 22. THIS COMPANY IS ALSO A GOVERNMENT COMPANY AND H AS THE SUPPORT AND BACKING OF THE GOVERNMENT. AS PER THE WEBSITE OF THIS COMP ANY, THE TECHNICAL SERVICES INCLUDE SERVICES LIKE ASSET VALUATION, ENERGY AUDITS, REVIV AL STUDIES, ETC. SOME OF THE OTHER FIELDS WHERE KITCO IS A PERMANENT PLAYER ARE ENERGY STUDIES, SKILL CERTIFICATION AND PLACEMENT SERVICES. THIS COMPANY IS A MULTI-FUNCTI ONAL, MULTI-DISCIPLINARY ORGANIZATION OFFERING WIDE RANGE OF SERVICES TO THE INDUSTRIAL AND INFRASTRUCTURE SECTOR AND TO A WIDE SPECTRUM OF CLIENTELE. IN OUR CONSIDE RED OPINION, A COMPANY ENGAGED IN UNDERTAKING ASSET VALUATION, ENERGY AUDITS, REVIVAL STUDIES, ETC., AND MARKET ASSESSMENT STUDIES CANNOT BE TAKEN AS COMPARABLE TO ASSESSEE W HICH IS ENGAGED AS A BUSINESS SUPPORT AND CONSULTING SERVICE PROVIDER TO ITS AES WHO ASSUMES MINIMAL RISK AS IT IS COMPENSATED ON A COST PLUS BASIS. CONSIDERING THE FUNCTIONS OF THIS COMPANY IN THE LIGHT OF THE FACT THAT IT IS A GOVERNMENT COMPANY, WE DIRECT THE A.O./TPO TO EXCLUDE THIS COMPANY FROM THE FINAL SET OF COMPARABLES. 23. TO SUM UP, WE DIRECT THE A.O./TPO TO EXCLUDE AL L THE FIVE COMPANIES MENTIONED HEREINABOVE AT PARA 9. ITA NO.1127/DEL/2015 12 24. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 3 0.10.2018. SD/- SD/- (SUCHITRA KAMBLE) (N.K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT ME MFBER DATED: 30 TH OCTOBER, 2018 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI