DCIT 9(3), MUMBAI V. UPS JETAIR EXPRESS P.LTD, MUMBAI

ITA 1219/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100733 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 15-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR CHAND
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA 1166/MUM/2014 (ASSESSMENT YEAR : 200910) UPS JETAIR EXPRESS PRIVATE LIMITED, PLOT NO6-A, SHYAM NAGAR, OFF. JOGESHWARI VIKHROLI LINK ROAD, MAJAS VILLAGE, JOGESHWARI (EAST), MUMBAI 400 096 PAN: AAACU 4322N ... APPELLANT VS. DY. COMMISSIONER OF INCOME TAX -9(3), AAYKAR BHAVAN, MK ROAD, MUMBAI 20. .... RESPONDENT ITA NO.1219/MUM/2014 (ASSESSMENT YEAR 2009-10) DY. COMMISSIONER OF INCOME TAX -9(3), .... APPELLANT AAYKAR BHAVAN, MK ROAD, MUMBAI 20. VS. UPS JETAIR EXPRESS PRIVATE LIMITED, PLOT NO6-A, SHYAM NAGAR, OFF. JOGESHWARI VIKHROLI LINK ROAD, MAJAS VILLAGE, JOGESHWARI (EAST), MUMBAI 400 096 PAN: AAACU 4322N .... RESPONDENT C.O.NO.66/MUM/2014 (ARISING OUT OF ITA NO.1219/MUM/2014) 2 UPS JETAIR EXPRESS PRIVATE LIMITED UPS JETAIR EXPRESS PRIVATE LIMITED, PLOT NO6-A, SHYAM NAGAR, OFF. JOGESHWARI VIKHROLI LINK ROAD, MAJAS VILLAGE, JOGESHWARI (EAST), MUMBAI 400 096 PAN: AAACU 4322N .... CROSS OBJECTOR VS. DY. COMMISSIONER OF INCOME TAX -9(3), AAYKAR BHAVAN, MK ROAD, MUMBAI 20. .......APPELLANT IN APPEAL ASSESSEE BY : KARISHMA R. PHATARPHEKAR, KEERTHIGA R. SHARMA & HARSH KAPADIA REVENUE BY : SHRI NARENDRA KUMAR CHAND DATE OF HEARING : 17/06/2015 DATE OF PRONOUNCEMENT :28/08/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEALS PREFERRED BY THE ASSESSEE, REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIR ECTED AGAINST THE ORDER OF THE DRP-III, MUMBAI DATED 25/4 /2012, PERTAINING TO THE ASSESSMENT YEAR 2009-10, PASSED UNDER SECTION 144C(5) OF THE INCOME TAX ACT, 1961 ( IN SH ORT THE ACT). 2. THE ASSESSEE BEFORE US IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AS A JOIN T VENTURE ENTITY OF UPS INTERNATIONAL FORWARDING INC., USA AN D JET AIRWAYS 3 UPS JETAIR EXPRESS PRIVATE LIMITED LIMITED, INDIA. THE ASSESSEE IS ENGAGED IN THE ACT IVITY OF INTERNATIONAL INTEGRATED TRANSPORTATION SERVICES, W HICH INVOLVES DELIVERY OF DOCUMENTS, PARCELS AND OTHER ITEMS FROM ONE COUNTRY TO ANOTHER. FOR THE YEAR UNDER CONSIDERATION, IT F ILED A RETURN OF INCOME ON 30/09/2009 DECLARING A LOSS OF RS.16,91,6 4,634/-,WHICH WAS SUBSEQUENTLY REVISED ON 28/3/2011 DECLARING AN INCOME OF RS.10,39,27,730/-. THE RETURN OF INCOME FILED BY T HE ASSESSEE WAS SUBJECT TO SCRUTINY ASSESSMENT, WHEREBY TOTAL I NCOME WAS DETERMINED BY THE ASSESSING OFFICER AT RS.10,68,89, 950/-, WHICH INTER-ALIA, INCLUDED THE DISALLOWANCE OF RS.19,66,2 97/- AND RS.9,95,919/- REPRESENTING PAYMENT MADE TO M/S. UPS WORLDWIDE FORWARDING INC. USA(IN SHORT UPS-WWF) TOWARDS LEG AL SERVICES TO TITUS AND DEPRECIATION ON ASSETS PURCHASED FROM UPS WWF RESPECTIVELY. 3. IN THE APPEAL OF THE ASSESSEE, THE FIRST ISSUE R ELATES TO THE DISALLOWANCE OF RS.19,66,297/- MADE BY THE ASSESSIN G OFFICER BY INVOKING SECTION 40(A)(I) OF THE ACT. IN THIS CON TEXT, BRIEF FACTS ARE THAT THE SAID PAYMENTS WERE CLAIMED TO BE AMOUNT R EIMBURSED TO ITS ASSOCIATED ENTERPRISE, UPS-WWF WITH RESPECT TO THE SUMS PAYABLE TO DT EXIM PVT. LTD. (TITUS) FOR THEIR LEG AL SERVICES 4 UPS JETAIR EXPRESS PRIVATE LIMITED PROVIDED TO THE ASSESSEE. THE STAND OF THE REVENUE IS THAT THE LEGAL SERVICES PROVIDED BY THE VENDOR TO THE ASSESS EE COMPANY WERE FOR USE IN THE CONDUCT OF ITS BUSINESS AND, TH EREFORE, SUCH A PAYMENT WAS IN THE NATURE OF FEES FOR INCLUDED SERV ICES IN TERMS OF ARTICLE 12(4) OF INDO-US TAX TREATY AND, ACCORD INGLY, SUCH SUM WAS CHARGEABLE TO TAX IN INDIA. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON SUCH PAYMENTS MADE TO ITS ASSOCIAT ED ENTERPRISE, UPSWWF USA, THEREFORE, THE SAID AMOUNT WAS DISALLOW ED BY INVOKING SECTION 40(A)(I)) OF THE ACT. THE SAID PO SITION WAS ALSO APPROVED BY THE DISPUTE RESOLUTION PANEL (DRP) IN ITS ORDER PASSED UNDER SECTION 144C(5) OF THE ACT DATED 26/1 1/2013 DISMISSING THE OBJECTION OF THE ASSESSEE. 3.1 IN THIS CONTEXT, THE CLAIM OF THE ASSESSEE WAS THAT THE AMOUNT OF RS.19,66,297/- PAID TO UPS-WWF WAS MERELY A REIMBURSEMENT ON COST TO COST BASIS AND, THEREFORE, IT WAS NOT A PAYMENT IN THE NATURE OF INCOME CHARGEABLE TO TAX U NDER THE ACT, SO AS TO INVITE DEDUCTION OF TAX AT SOURCE. IT WAS ALSO CONTENDED THAT EVEN OTHERWISE THE PAYMENTS WERE NOT IN THE NA TURE OF INCOME TAXABLE IN INDIA UNDER SECTION 9(1)(VII) OF THE ACT AS WELL AS ARTICLE 12(4) OF THE INDO-US TAX TREATY, THEREFORE, THERE WAS NO 5 UPS JETAIR EXPRESS PRIVATE LIMITED WITHHOLDING TAX OBLIGATION ON THE ASSESSEE UNDER SE CTION 195 OF THE ACT, SO AS TO WARRANT A DISALLOWANCE UNDER SECT ION 40(A)(I) OF THE ACT. 3.2 BEFORE US, THE RIVAL COUNSELS HAVE REITERATED THEIR RESPECTIVE CONTENTIONS, WHICH WE HAVE NOTED ABOVE. SO HOWEVER, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT SIM ILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.3311/MUM/2013 FOR A.Y.2008-09, DATED 27/2/2015, AND THE MATTER HAS BEEN REMANDED BACK TO THE FILE OF THE AS SESSING OFFICER FOR A DECISION AFRESH. IT WAS ALSO A COMMO N POINT BETWEEN THE PARTIES THAT IN THIS YEAR TOO, FOLLOWING THE SA ID PRECEDENT THE MATTER BE REMANDED BACK TO THE FILE OF ASSESSING OF FICER FOR A DECISION AFRESH IN ACCORDANCE WITH LAW. 3.3 FOLLOWING THE AFORESAID PRECEDENT, WE REMAND TH E MATTER BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL CO NSIDER THE PLEAS OF THE ASSESSEE AND, THEREAFTER DECIDE THE MATTER A FRESH IN ACCORDANCE WITH LAW AFTER PROVIDING THE ASSESSEE A REASONABLE 6 UPS JETAIR EXPRESS PRIVATE LIMITED OPPORTUNITY OF BEING HEARD. THUS, ON THIS ASPECT A SSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 4. THE SECOND ISSUE RAISED BY THE ASSESSEE IS WITH RESPECT TO A DISALLOWANCE OF DEPRECIATION OF RS.9,95,919/- ON FIXED ASSETS PURCHASED FROM UPS-WWF IN THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR 2008-09. 4.1 IN THIS CONTEXT, THE BRIEF FACTS ARE THAT IN TH E PREVIOUS YEAR RELEVANT TO THE EARLIER ASSESSMENT YEAR 2008-09, AS SESSEE HAD CLAIMED DEPRECIATION ON ASSETS IMPORTED FROM ITS AS SOCIATED ENTERPRISE, UPSWWF OF A VALUE OF RS.42,98,028/-, T HE ASSETS BEING, COMPUTERS, SCANNERS, PRINTERS; ETC. IN ASSE SSMENT YEAR 2008-09 ASSESSING OFFICER DISALLOWED THE CLAIM OF D EPRECIATION PRIMARILY ON THE GROUND THAT ASSESSEE DID NOT FURNI SH ANY EVIDENCE IN THE FORM OF CUSTOMS CLEARANCE CERTIFICA TE, BILL OF ENTRY, ETC. THE SAID DISPUTE TRAVELLED TO THE TRIB UNAL AND VIDE ITS ORDER DATED 27/02/2015(SUPRA), THE TRIBUNAL HAS ALL OWED THE CLAIM OF THE ASSESSEE. 7 UPS JETAIR EXPRESS PRIVATE LIMITED 4.2 IN THIS BACKGROUND, THE CLAIM OF THE LD. REPRES ENTATIVE FOR THE ASSESSEE WAS THAT THE DEPRECIATION OF RS.9,95,9 19/- CLAIMED BY THE ASSESSEE IN THIS YEAR DESERVES TO BE ALLOWED SINCE THE DEPRECIATION ON THE SAME ASSETS IN THE EARLIER ASSE SSMENT YEAR STANDS ALLOWED. THE AFORESAID FACTUAL MATRIX IS NO T ASSAILED BY THE LD. DEPARTMENTAL REPRESENTATIVE AND THE SAME IS ALSO BORNE OUT OF THE ORDER OF THE TRIBUNAL DATED 27/02/2015(S UPRA). AS A CONSEQUENCE, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION OF RS.9 ,95,919/- CLAIMED BY THE ASSESSEE AND ACCORDINGLY ASSESSEE SU CCEEDS ON THIS GROUND. 4.3 IN THE RESULT, APPEAL OF THE ASESSEE STANDS PAR TLY ALLOWED. 5. NOW, WE MAY TAKE UP THE APPEAL OF THE REVENUE, W HEREBY THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED:- 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE HON'BLE DISPUTE RESOLUTION PANEL HA S ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE AD DITION OF RS. 60,72,596/- MADE BY THE ASSESSING OFFICER U/ S. 40(A)(I) OF THE LT. ACT WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE AND RMS WERE IN CONTRACTURAL RELATIONSHIP? 8 UPS JETAIR EXPRESS PRIVATE LIMITED 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DISPUTE RESOLUTION PAN EL HAS ERRED IN HOLDING THAT THE PAYMENT MADE TO RMS AS PROFESSIONAL CHARGES CANNOT BE TAXABLE IN INDIA DUE TO ITS NON-RESIDENT STATUS WITHOUT APPRECIATING THE FACT T HAT RMS WAS APPOINTED AS A COLLECTION VENDOR? 3. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DISPUTE RESOLUTION PANEL HA S ERRED IN HOLDING THE SUBVENTION RECEIPT ARISING FROM TRAN SACTION WITH ASSOCIATED ENTERPRISES WAS OPERATING INCOME DI RECTING THE TPO / AO TO RETAIN TRANSFER PRICING ADJUSTMENT TO THE EXTENT THAT THE QUANTUM OF TRANSFER PRICING ADJUSTM ENT IS IN EXCESS OF THE SUBVENTION INCOME OFFERED TO TAX? 5.1 THE FIRST ISSUE IN THIS APPEAL RELATES TO A DIS ALLOWANCE OF RS.60,72,596/-MADE BY THE ASSESSING OFFICER BY INVO KING SECTION 40(A)(I) OF THE ACT. IN THIS CONTEXT, BRIEF FACTS ARE THAT ASSESSEE HAD MADE PAYMENT TO ITS ASSOCIATED ENTERPRISE UPS-W WF INC. USA AS REIMBURSEMENT FOR ENGAGING RMS,USA FOR DEBT OR COLLECTION SERVICES. THE SERVICES OF RMS, USA WERE AVAILED FOR FOLLOW UP, AND MONTHLY COLLECTION OF DUES FROM THE OVERSEAS DEBTORS OF THE ASSESSEE COMPANY. THE ASSESSEE HAD EXPLAINED BEFORE THE LOWER AUTHORITIES THAT FOR ADMINISTRATIV E CONVENIENCE, INITIALLY PAYMENTS TO RMS, USA WERE MADE BY ASSESSE ES ASSOCIATED ENTERPRISE, USP-WWF, USA; AND THE SAME W ERE THEREAFTER, REIMBURSED TO UPSWWF INC. USA BY THE AS SESSEE AT 9 UPS JETAIR EXPRESS PRIVATE LIMITED COST. AS PER THE ASSESSING OFFICER, ASSESSEE WAS U NDER AN OBLIGATION TO DEDUCT TAX AT SOURCE BECAUSE UPSWWF W AS ONLY A FACILITATOR AND THE LIABILITY TO DEDUCT TAX UNDER S ECTION 195 OF THE ACT WAS ON THE ASSESSEE. 5.2 ON THIS ASPECT, THE PLEA OF THE ASSESSEE WAS TH AT IT WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAXES UNDER SECTION 195 OF THE ACT FROM THE AMOUNTS PAID TO UPS-WWF AS THE SAID PAYMEN TS ARE NOT TAXABLE IN INDIA FOR THE REASON THAT THEY ARE IN TH E NATURE OF MERE REIMBURSEMENT OF ACTUAL COST WITHOUT ANY ELEMENT OF PROFIT AND EVEN OTHERWISE, THE SERVICES RENDERED BY RMS, USA D ID NOT FALL WITHIN THE SCOPE OF FEES FOR INCLUDED SERVICES AS PER ARTICLE 12(4) OF THE INDO-USA TAX TREATY . 5.3 THE ASSESSING OFFICER DISAGREED WITH THE ASSESS EE IN THE DRAFT ASSESSMENT ORDER AND ASSESSEE CARRIED ITS OBJ ECTION BEFORE THE DISPUTE RESOLUTION PANEL(DRP). AS PER DRP, RMS -USA WAS A NON-RESIDENT AND WOULD THUS, BE ENTITLED TO THE B ENEFITS AVAILABLE UNDER THE INDO-USA TAX TREATY. AS PER THE DRP, THE DEBTOR MANAGEMENT SERVICES DO NOT COME WITHIN THE PURVIEW OF FEE FOR 10 UPS JETAIR EXPRESS PRIVATE LIMITED INCLUDED SERVICES IN TERMS OF ARTICLE-12(4) OF THE INDO-USA TAX TREATY AND INSTEAD THE SAME WOULD BE TAXABLE AS BUS INESS PROFITS AND IN THE ABSENCE OF THE RMS-USA HAVING ANY PERMAN ENT ESTABLISHMENT IN INDIA, NO PART OF ITS INCOME EARNE D FROM SERVICES RENDERED OVERSEAS WOULD BE TAXABLE IN INDIA. FOR T HE AFORESAID REASONS, THE DRP UPHELD THE STAND OF THE ASSESSEE T HAT THERE WAS NO LIABILITY ON THE ASSESSEE COMPANY TO WITHHOL D TAXES ON THE PAYMENT MADE TO THE RMS-USA, EVEN IF, IT WAS ROUTED THROUGH ITS ASSOCIATED ENTERPRISE UPSWWF-USA. AS A CONSEQUENCE OF THE AFORESAID DIRECTIONS BY THE DRP, THE ASSESSING OFFI CER DID NOT MAKE THE DISALLOWANCE OF RS.60,72,597/- IN THE FINA L ASSESSMENT ORDER. THE AFORESAID DECISION OF THE DRP IS SOUGHT TO BE CHALLENGED BY THE REVENUE IN ITS APPEAL BEFORE US B Y WAY OF GROUND OF APPEAL NOS.1 & 2 ABOVE. 5.4 AFTER HEARING THE OBJECTIONS OF THE LD. DEPARTM ENTAL REPRESENTATIVE, WHICH ARE PRIMARILY BASED ON THE ST AND OF THE ASSESSING OFFICER IN THE DRAFT ASSESSMENT ORDER, WE FIND THAT THE DECISION OF THE DRP CANNOT BE FAULTED. IT IS ALSO NOTICED THAT THE ASSESSING OFFICER HAS INVOKED SECTION 40(A)(I) OF T HE ACT ON THE BASIS OF HIS STAND FOR EARLIER ASSESSMENT YEAR 2008 -09. THE 11 UPS JETAIR EXPRESS PRIVATE LIMITED TRIBUNAL IN ITS ORDER DATED 27/2/2015 (SUPRA) FOR A SSESSMENT YEAR 2008-09 CONSIDERED SIMILAR TRANSACTION AND HELD THA T THE PAYMENTS MADE TO RMS-USA FOR DEBTOR COLLECTION SERV ICES DID NOT FALL FOR TAXATION IN INDIA AND THUS, THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS, WHICH WERE MADE AS REIMBURSEMENT TO UPSWW F- USA. 5.5 BE THAT AS IT MAY, IN OUR CONSIDERED OPINION TH E FINDING OF THE DRP, WHICH WE HAVE ADVERTED TO IN THE EARLIER P ARAS IS QUITE UNEXCEPTIONAL AND DOES NOT REQUIRE ANY INTERFERENCE FROM OUR SIDE. NO COGENT REASONING OR MATERIAL HAS BEEN BROU GHT OUT BY THE REVENUE TO DEMONSTRATE AS TO IN WHAT MANNER AMOUNT RECEIVED BY RMS-USA, A NON-RESIDENT, FOR DEBTOR MANAGEMENT S ERVICES ABROAD IS LIABLE TO BE TAXABLE IN INDIA. THEREFORE , WE HEREBY AFFIRM THE CONCLUSION OF THE DRP ON THIS ASPECT AND REVENU E FAIL IN ITS GROUND OF APPEAL NOS.1 & 2. 6. THE LAST GROUND OF APPEAL RAISED BY THE REVENUE IS WITH REGARD TO THE DIRECTION OF DRP TO DETERMINE THE QUA NTUM OF 12 UPS JETAIR EXPRESS PRIVATE LIMITED TRANSFER PRICING (TP) ADJUSTMENT WHILE COMPUTING TH E ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INT O BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISE. 6.1 BRIEFLY PUT, THE RELEVANT FACTS AND BACKGROUND GIVING RISE TO THE AFORE-SATED GROUND OF APPEAL CAN BE SUMMARIZED AS FOLLOWS. BEFORE THE TRANSFER PRICING OFFICER, ASSESSEE HAD C LAIMED THAT ON ACCOUNT OF ADVERSE BUSINESS AND ECONOMIC CONDITION IT HAD INCURRED LOSSES, WHICH WERE EXCEPTIONAL IN NATURE. THE ASSESSEE EXPLAINED THAT AFTER PROLONGED NEGOTIATIONS, ITS AS SOCIATED ENTERPRISE, UPSWWF-USA AGREED TO SUPPORT THE ASSESS EE BY PAYING AN AMOUNT OF RS.27,30,92,364/- AS SUBVENTION AMOUNT BASED ON THE PROFIT MARGINS OF THE ASSESSEE COMPANY AND THAT OF ITS COMPARABLE CONCERNS. THE SAID SUBVENTION AMOUN T WAS NEGOTIATED DURING THE FINANCIAL YEAR 2010-11 AND IN THAT PERIOD ASSESSEE RECORDED THE SAME AS PRIOR PERIOD INCOME. HOWEVER, SINCE THE SAID AMOUNT OF INCOME RELATED TO THE ASSE SSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2009-10, I N ITS RETURN OF INCOME FILED FOR THE SAID ASSESSMENT YEAR, ASSESSEE OFFERED THE SAID INCOME AND INCLUDED THE SAME WHILE COMPUTING I TS NET PROFIT MARGIN FOR THE PURPOSES OF CARRYING OUT ITS COMPAR ABILITY ANALYSIS 13 UPS JETAIR EXPRESS PRIVATE LIMITED WITH OTHER COMPARABLE CONCERNS FOR DETERMINING ITS ARM'S LENGTH PRICE. IN OTHER WORDS, THE SUBVENTION INCOME REC EIVED BY THE ASSESSEE WAS CONSIDERED AS A PART OF ITS OPERATING INCOME. THE TRANSFER PRICING OFFICER DIFFERED WITH THE ASSESSEE ON THE TREATMENT OF SUBVENTION INCOME AS A PART OF THE OPE RATING INCOME. THE TRANSFER PRICING OFFICER EXCLUDED SUCH SUBVENTI ON INCOME FROM THE OPERATING PROFIT MARGIN OF THE ASSESSEE A ND ACCORDINGLY, WORKED OUT AN ADJUSTMENT OF RS.34,40,04,846/- WHILE DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSAC TION. BEFORE THE DRP, ASSESSEE OBJECTED TO THE EXCLUSION OF SUBVENTI ON INCOME FROM THE COMPUTATION OF ITS OPERATING PROFIT MARGIN S. THE DRP WHILE ACCEPTING THAT SUCH SUBVENTION INCOME IS NOT IN THE NATURE OF OPERATING INCOME HELD THAT TO THE EXTENT SUCH SUBVENTION INCOME HAD BEEN OFFERED TO TAX, THE LOWER PROFIT AS PER TRANSFER PRICING ANALYSIS HAS BEEN MADE UP. IN OTHER WORDS, AS PER DRP THE PROPOSED TRANSFER PRICING ADJUSTMENT DETERMINED BY THE TRANSFER PRICING OFFICER CAN BE SAID TO HAVE BEEN P ARTLY MET BY THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE TO TH E EXTENT OF SUCH SUBVENTION INCOME. FOLLOWING OPERATIVE PART O F THE ORDER OF THE DRP IS RELEVANT IN THIS TEXT:- THE SUBVENTION INCOME WAS RECEIVED WITH REFERENCE TO THE LOW NET PROFIT OF THE ASSESSEE COMPANY DURING THE P ERIOD 14 UPS JETAIR EXPRESS PRIVATE LIMITED UNDER CONSIDERATION. SUCH SUBVENTION INCOME CHARGE ABLE TO TAX IN THE RETURN OF INCOME FILED AND TAXES ON T HE SAME HAD BEEN PAID THOUGH SUCH SUBVENTION INCOME IS NOT IN THE NATURE OF OPERATING INCOME OF THE ASSESSEE. TO THE EXTENT OF SUCH SUBVENTION INCOME OFFERED TO TAX, THE LOWER PROFIT AS PER THE TRANSFER PRICING ANALYSIS DURING THE PERIOD UNDER CONSIDERATION HAS BEEN MADE UP. THEREFORE, THE ADD ITIONAL INCOME OFFERED TO TAX BY WAY OF SUBVENTION INCOME W OULD BE AVAILABLE TO THE ASSESSEE AS A SET OFF AGAINST THE TP ADJUSTMENT PROPOSED BY THE TPO. IN OTHER WORDS, TH E PROPOSED TP ADJUSTMENT HAD ALREADY BEEN MET BY THE ASSESSEE BY WAY OF OFFER OF ADDITIONAL INCOME TO TH E EXTENT OF SUCH SUBVENTION INCOME. THE DRP HEREBY DIRECTS THE TPO/ASSESSING OFFICER TO ALLOW SUCH SET OFF AND TO RETAIN TP ADJUSTMENT ONLY TO THE EXTENT THE QUANTUM OF THE T P ADJUSTMENT IS IN EXCESS OF THE SUBVENTION INCOME OF FERED TO TAX. IN THE ABOVE BACKGROUND, WE MAY NOW CONSIDER THE GR OUND OF APPEAL RAISED BY THE REVENUE. AT THE OUTSET, ONE M AY OBSERVE THAT THE GROUND RAISED BY THE REVENUE IS QUITE MISC ONCEIVED IN AS MUCH AS IT IS BASED ON A WRONG PERSPECTIVE TO TH E EFFECT THAT THE DRP HAS HELD THE SUBVENTION INCOME TO BE AN OPE RATING INCOME. AS CAN BE SEEN FROM THE DIRECTIONS OF THE DRP, THE SUBVENTION INCOME HAS NOT BEEN HELD TO BE CONSIDERE D AS PART OF THE OPERATING INCOME. THUS, THIS ASPECT OF THE CONT ROVERSY MANIFESTED IN THE GROUND OF REVENUE IS MISCONCEIVED AND LIABLE TO BE DISMISSED. EVEN OTHERWISE, WE FIND THAT THER E IS NO SCOPE FOR ANY INTERVENTION IN THE DIRECTIONS OF THE DRP, WHICH WE HAVE 15 UPS JETAIR EXPRESS PRIVATE LIMITED EXTRACTED ABOVE, AS THE SAME ARE QUITE APT AND THE SAME ARE FACTUALLY BORNE OUT OF THE RECORD. THE ORDER OF THE DRP ON THIS ASPECT IS HEREBY AFFIRMED AND ACCORDINGLY REVENUE F AILS IN ITS GROUND OF APPEAL NO.3 ALSO. 6.2 IN THE RESULT, THE REVENUE FAILS IN ITS APPEAL. 7. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE DRP ON THE ISSUES RAISED IN THE A PPEAL OF THE REVENUE IN GROUNDS OF APPEAL NO. 1 TO 3. SINCE GRO UNDS OF APPEAL RAISED BY THE REVENUE HAVE ALREADY BEEN DISM ISSED, THE CROSS OBJECTION RAISED BY THE ASSESSEE IS RENDERED ACADEMIC AND IS ACCORDINGLY DISMISSED AS INFRUCTUOUS. 8. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, THE APPEAL OF THE REVENUE AND THE CROSS OB JECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2015 SD/- SD/- (AMIT SHUKLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI,DATED :28/08/2015 VM. 16 UPS JETAIR EXPRESS PRIVATE LIMITED COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBA I VM , SR. PS