GTS e-SERVICES P.LTD, MUMBAI V. ITO 15(1)(4), MUMBAI

ITA 1231/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9585 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 22-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K AGARWAL CIT LD
• Assessee Lawyers: NILESH PATEL LD
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 143(3); 115JB

Judgement Text

ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1231/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) GTS E - SERVICES PRIVATE LTD. 103, A-WING KENSINTON HIRANANDANI BUSINESS PARK HIRANANDANI BUILDER SEZ POWAI, MUMBAI-400 076. / VS. INCOME TAX OFFICER - 15( 1 )(4) ROOM NO.15B, GROUND FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ./ ./PAN/GIR NO. AACCG-8662-R ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ASSESSEE BY : SHRI NILESH PATEL- LD. AR REVENUE BY : SHRI V.K. AGARWAL ADDL. CIT-LD. DR / DATE OF HEARING : 26/06/2019 / DATE OF PRONOUNCEMENT : 03/07/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEA R [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE FINAL ASSE SSMENT ORDER DATED 27/01/2017 PASSED BY LD. INCOME TAX OFFICER-15(1)(4 ), MUMBAI [AO] U/S. 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT P URSUANT TO THE ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 2 DIRECTIONS OF DISPUTE RESOLUTION PANEL-I, MUMBAI, [ IN SHORT REFERRED TO AS DRP] U/S 144C(5) DATED 24/11/2016. 1.2 THE LD. AUTHORISED REPRESENTATIVE [AR] FOR THE ASSESSEE, SHRI NILESH PATEL, AT THE OUTSET SUBMITTED THAT GROUND N O.1 IS NOT BEING PRESSED WHEREAS GROUND NOS. 2.1, 5 & 6 ARE GENERAL GROUNDS WHICH WOULD NOT REQUIRE ANY ADJUDICATION. THE REMAINING G ROUNDS AS AGITATED BEFORE US, READ AS UNDER: - 2. TRANSFER PRICING ADJUSTMENT ON ITES SERVICES REN DERED TO THE AE 2.1. GENERAL GROUND COMPUTATION OF ARM'S LENGTH PRICE UNDER TNMM 2.2. THE LEARNED AO/TPO BASED ON THE DIRECTIONS OF DRP ERRED IN ADOPTING AN INAPPROPRIATE SET OF COMPARABLES FOR APPLYING TNMM. 2.3. THE LEARNED AO/TPO BASED ON THE DIRECTIONS OF DRP ERRED IN INCLUDING FOUR COMPANIES - ACCENTIA TECHNOLOGIES LTD, UNIVERSAL PRINT SYSTEMS LTD, BNR UDYOG LTD, AND EXCEL INFOWAYS LTD. - AS COMPARABLES FOR APPLICATION OF TNMM. 2.4. THE LEARNED AO/TPO/DRP ERRED IN NOT GRANTING W ORKING CAPITAL ADJUSTMENT. 3. PLUS/MINUS 5% TOLERANCE LIMIT 3.1. THE LEARNED AO/TPO ERRED IN NOT ALLOWING ADJUS TMENT FOR THE PLUS/MINUS 5 % TOLERANCE LIMIT. 4. ADDING TRANSFER PRICING ADJUSTMENT TO THE BOOK P ROFIT U/S 115JB 4.1. IN COMPUTING THE TOTAL INCOME, THE LEARNED AO HAS ERRED IN ADDING TRANSFER PRICING ADJUSTMENT TO THE BOOK PROFIT U/S 115JB FOR PURPOSE S OF MAT (THIS GROUND IS WITHOUT PREJUDICE TO THE GROUNDS RAISED ABOVE.). 2.1 THE RELEVANT FACTS ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE IS STATED TO BE ENGAGED IN THE BUSINESS OF PROVIDIN G IT ENABLED SERVICES (ITES) TO GRIFFIN GROUP ENTITIES IN FINANC E/ACCOUNTS RELATED SERVICES SUCH AS INVOICING, REFUNDS PROCESSING AND OTHER SERVICES SUCH AS TICKETING, RESERVATIONS ETC. 2.2 THE INTERNATIONAL TRANSACTIONS AS CARRIED OUT B Y THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES (AE) AND AS REPORTED IN FORM NO.3CEB WERE REFERRED U/S.92CA (1) FOR DETERMINATION OF ARMS LE NGTH PRICE [ALP] TO LD. TRANSFER PRICING OFFICER-2(2)(1), MUMBAI [TPO]. ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 3 2.3 IT TRANSPIRED THAT THE ASSESSEE PROVIDED BACK O FFICE SUPPORT SERVICES IN THE NATURE OF IT ENABLED SERVICES AND O PERATED IN SINGLE SEGMENT I.E. TRAVEL SUPPORT SERVICES. THESE SERVICE S WERE RENDERED TO SEVERAL CONSTITUENTS OF GRIFFIN GROUP WHICH WERE MA INLY ENGAGED IN TRAVEL / TRAVEL RELATED BUSINESS WORLDWIDE OVER A L ARGE GEOGRAPHICAL SPREAD. THE ASSESSEE EARNED REVENUE OF RS.16.95 CRO RES BY RENDERING THESE SERVICES. IN ITS TP STUDY REPORT, THE ASSESSE E CLASSIFIED ITSELF AS BACK OFFICE SUPPORT PROVIDER AND BENCHMARKED THE TR ANSACTION USING TRANSACTIONAL NET MARGIN METHOD [TNMM] AS THE MOST APPROPRIATE METHOD. THE PROFIT LEVEL INDICATOR [PLI] WAS TAKEN AS OPERATING PROFIT / OPERATING COST. THE ASSESSEE COMPUTED ITS OWN PLI A T 13.78% AS AGAINST MEAN MARGIN OF 9.39% REFLECTED BY 7 COMPARA BLE ENTITIES AND THE SAME BEING WITHIN TOLERANCE RANGE OF + 5%, NO TRANSFER PRICING [TP] ADJUSTMENT WAS PROPOSED BY THE ASSESSEE. 2.4 HOWEVER, THE ASSESSEES METHODOLOGY WAS NOT TER MED AS RELIABLE AND CORRECT IN VIEW OF THE FACT THAT THE ASSESSEE U SED 3 YEARS DATA AND DID NOT APPLY ANY EXPORT FILTER. THEREFORE, APPLYIN G VARIOUS FILTERS, THE LD. TPO UNDERTOOK A FRESH SEARCH, AS A RESULT OF WHICH 5 COMPARABLES OUT OF 7 COMPARABLES AS SELECTED BY THE ASSESSEE GOT REJEC TED WHEREAS 6 NEW COMPARABLE WERE IDENTIFIED. THE MEAN PLI OF THESE 8 ENTITIES WORKED OUT TO BE 22.63%. APPLYING THE SAME TO ASSESSEES FINAN CIAL DATA, ALP OF THE STATED TRANSACTIONS WAS WORKED OUT TO BE RS.18. 27 CRORES AS AGAINST RS.16.95 CRORES REFLECTED BY THE ASSESSEE. ACCORDIN GLY, TP ADJUSTMENT OF RS.1.31 CRORES WAS PROPOSED BY LD. TPO IN ITS OR DER U/S 92CA (3) DATED 29/01/2016. INCORPORATING THE SAID ADJUSTMENT , DRAFT ASSESSMENT ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 4 ORDER WAS PASSED ON 29/02/2016 WHICH WAS SUBJECTED TO OBJECTIONS BEFORE LD. DRP. 2.5 THE FINAL LIST OF COMPARABLE ENTITIES AS SELECT ED BY LD. TPO WAS AS FOLLOWS: - 3. ALTHOUGH THE ASSESSEE, INTER-ALIA, CONTESTED THE SELECTION OF COMPARABLE AS MADE BY LD. TPO, THE SAME COULD NOT F IND FAVOR WITH LD. DRP EXCEPT THE PLEA OF THE ASSESSEE TO INCLUDE AN E NTITY NAMELY ACROPETAL TECHNOLOGIES LTD. IN THE FINAL LIST OF CO MPARABLE. THE INCLUSION OF THIS ENTITY REDUCED THE MEAN PLI TO 21.33% WHICH REDUCED THE TP ADDITIONS TO RS.1.12 CRORES IN THE FINAL ASSESSMENT ORDER DATED 27/01/2017. THE INCOME OF THE ASSESSEE WAS FINALLY COMPUTED AS RS.131.69 LACS AS AGAINST RETURNED INCOME OF RS.19. 17 LACS FILED BY THE ASSESSEE ON 29/11/2012. THE AFORESAID TP ADJUSTMENT WAS ALSO ADDED BACK WHILE COMPUTING BOOK PROFIT U/S. 115JB. AGGRIE VED AS AFORESAID, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4.1 THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE (AR), SHRI NILESH PATEL, DREW OUR ATTENTION TO THE FUNCTIONAL PROFILE OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE WAS CAPTIVE SUPPORT SER VICE PROVIDER AND BEARS MINIMAL RISK, DO NOT DEPLOY ANY INTANGIBLE AS SETS AND EMPLOYS NO. NAME OF ENTITY PLI ( %) 1. ACCENTIA TECHNOLOGIES LTD. 11.75 2. UNIVERSAL PRINT SYSTEM (SEGMENT)(BPO) 52.46 3. INFORMED TECHNOLOGIES INDIA LTD. 6.08 4. JINDAL INTELLICOM LTD. -0.05 5. MICROGENETIC SYSTEMS LTD 19.61 6. BNR UDYOG LTD. (SEG.)(MEDICAL TRANSCRIPTION) 41. 58 7. EXCEL INFOWAYS LTD. (SEG) (IT/BPO) 29.79 8. E4E HEALTHCARE SERVICES PVT. LTD. 19.85 AVERAGE PLI 22.63% ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 5 ORDINARY NON-PROFESSIONAL GRADUATES. THE NATURE OF SERVICES BEING PROVIDED BY THE ASSESSEE WERE OF A SUPPORTIVE NATUR E ONLY AND ARE NOT PART OF THE CORE BUSINESS OF THE GRIFFIN GROUP. MER ELY BECAUSE THE FUNCTIONAL PROFILE OF THE COMPARABLE ENTITY FALLS U NDER THE CATEGORY OF ITES SERVICES, THE SAME WOULD NOT MAKE THESE ENTITI ES COMPARABLE TO ASSESSEE AS HELD BY MUMBAI TRIBUNAL (SPECIAL BENCH) IN MAERSK GLOBAL CENTERS (INDIA) PVT. LTD. V/S ACIT [2014 43 TAXMANN .COM 100], HONBLE BOMBAY HIGH COURT IN CIT V/S APTARA TECHNOLOGY PVT. LTD. [2018 92 TAXMANN.COM 240] & HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS PVT. LTD. V/S CIT [2015 60 TAX MANN.COM 355]. 4.2 IN THE ABOVE BACKGROUND, LD. AR ARGUED FOR EXCL USION OF 4 ENTITIES NAMELY (I) ACCENTIA TECHNOLOGIES LTD. (II) UNIVERSA L PRINT SYSTEMS LTD. (III) BNR UDYOG LTD. (IV) EXCEL INFOWAYS LTD. BY SU BMITTING THAT THESE ENTITIES WERE FUNCTIONALLY NOT COMPARABLE TO LOW-EN D ITES SERVICES BEING PROVIDED BY THE ASSESSEE. TO SUPPORT THE SAME, RELI ANCE HAS BEEN PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS FOR SAME ASSESSMENT YEARS, THE COPIES OF WHICH HAS BEEN PLACED ON RECORD. THE LD. DR SUBMITTED THAT FINAL SET OF COMPARABLE ENTITIES WOULD NOT REQ UIRE ANY INTERFERENCE. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUDING JUDICIAL PRON OUNCEMENTS AS CITED BEFORE US. SINCE THE ARGUMENTS HAVE BEEN RAISED ONL Y WITH RESPECT TO SELECTION OF COMPARABLE, HENCEFORTH, WE SHALL BE ST RAIGHTWAY DEALING WITH THE SAME. OUR ADJUDICATION IN RESPECT OF THESE COMP ARABLE ENTITIES WOULD BE AS FOLLOWS: - (I) ACCENTIA TECHNOLOGIES LTD. ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 6 THE LD. AR HAS OBJECTED TO INCLUSION OF THIS ENTITY ON THE GROUND THAT THIS ENTITY WAS FUNCTIONALLY NOT COMPARABLE TO THE ASSES SEE SINCE IT WAS ENGAGED IN PROVIDING MEDICAL TRANSCRIPTION SERVICES , MEDICAL CODING, MEDICAL BILLING ETC. WHICH WERE MORE IN THE NATURE OF KNOWLEDGE PROCESS OUTSOURCING [KPO] SERVICES AS AGAINST ASSESSEES LO W-END SUPPORT SERVICES WHICH WERE IN THE NATURE OF BUSINESS PROCE SS OUTSOURCING [BPO] SERVICES. WE FIND THAT LD. DRP HAS UPHELD THE INCLUSION OF THIS ENTITY ON THE GROUND THAT FOR BENCHMARKING UNDER TN MM, ONLY BROAD FUNCTIONAL COMPARABILITY WAS REQUIRED. HOWEVER, TH E UNDISPUTED POSITION THAT EMERGES IS THAT THE ASSESSEE IS A LOW RISK CAP TIVE SERVICE PROVIDER AND MAINLY ENGAGED IN PROVIDING LOW-END SUPPORT SER VICES. THESE SERVICES, IN OUR OPINION, COULD NOT BE COMPARED WIT H SERVICES WHICH ARE IN THE NATURE OF MEDICAL TRANSCRIPTION SERVICES, ME DICAL CODING, MEDICAL BILLING ETC. SINCE THESE ARE SERVICES OF SPECIALIZE D KIND. THIS IS FURTHER FORTIFIED BY THE FACT THAT THE ASSESSEE HAD ENGAGED ORDINARY NON- PROFESSIONAL GRADUATES. THE TRIBUNAL IN THE DECISIO N OF MAERSK GLOBAL CENTERS (INDIA) PVT. LTD. V/S ACIT [ITA NO. 1082/MU M/2015 ORDER DATED 29/07/2016] DIRECTED FOR EXCLUSION OF THIS ENTITY FOR AY 2010-1 1 IN CASE OF ASSESSEE ENGAGED IN PROVIDING SIMILAR KIND OF ITES SERVICES PRIMARILY ON THE GROUND THAT LD. DRP FOR AY 2011-12 AND LD. TPO FOR AY 2012-13 REJECTED THIS ENTITY ON FUNCTIONAL DISSIMIL ARITY. KEEPING IN VIEW THE ABOVE FACTORS, WE DIRECT FOR EXCLUSION OF THIS ENTITY. (II) UNIVERSAL PRINT SOLUTIONS LTD. THE LD. AR DISPUTED THE INCLUSION OF THIS ENTITY ON SIMILAR GROUND OF FUNCTIONAL DISSIMILARITY BY DRAWING OUR ATTENTION T O THE FACT THAT THIS ENTITY WAS AN INTEGRATED PRINT SOLUTION PROVIDER AND OPERA TES IN THE SEGMENT OF ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 7 REPRO, LABEL PRINTING, OFFSET PRINTING AND PRE-PRES S BPO. THE LD. TPO PICKED UP THE PRE-PRESS BPO SEGMENT FOR THE PURPOSE OF COMPARISON. IN THIS SEGMENT, THE ENTITY PROVIDES SERVICES IN THE N ATURE OF SCANNING, LAYOUTS, TRAPPING, HAND-OUTLINED CLIPPING PATH AND IMAGE MASKING & MAGAZINE / CATALOGUE PUBLISHING. ANOTHER POINT TO W HICH OUR ATTENTION IS DRAWN IS THE FACT THAT THIS ENTITY HAS UNALLOCATED EXPENSES OF RS.89.67 LACS WHICH WOULD DISTORT THE SEGMENTAL PROFITS AND THEREFORE, THE SEGMENTAL RESULTS WOULD NOT BE RELIABLE. UPON PERUSAL, WE FIND THAT BANGALORE TRIBUNAL IN TH E CASE OF XLHEALTH CORPORATION INDIA (P.) LTD. VS. ACIT [2018 91 TAXMA NN.COM 310] FOR VERY SAME AY 2012-13 DIRECTED FOR EXCLUSION OF THIS ENTITY IN CASE OF ASSESSEE HAVING SIMILAR FUNCTIONAL PROFILE ON THE G ROUND THAT AN ENTITY WHICH IS ENGAGED IN THE BUSINESS OF PRINTING COULD BE, BY NO STRUCTURE OF IMAGINATION, BE CONSIDERED AS COMPARABLE ENTITY. SE CONDLY, AS RIGHTLY POINTED OUT BY LD. AR, THE SEGMENTAL RESULTS OF THE SAID ENTITY WOULD NOT BE RELIABLE IN VIEW OF THE FACT THAT IT HAS UNALLOC ATED EXPENDITURE OF RS.89.67 LACS WHICH WOULD SURELY DISTORT THE SEGMEN TAL RESULTS. KEEPING IN VIEW THE SAID FACTORS, WE DIRECT FOR EXCLUSION O F THIS ENTITY. (III) BNR UDYOG LTD. SIMILAR ARGUMENTS OF FUNCTIONAL DISSIMILARITY HAVE BEEN RAISED FOR THIS ENTITY BY DRAWING OUR ATTENTION TO THE FACT THAT TH IS ENTITY WAS ENGAGED IN MEDICAL TRANSCRIPTION, MEDICAL CODING AND MEDICAL B ILLING ETC. AS OBSERVED BY US IN THE CASE OF ACCENTIA TECHNOLOGIES LTD., THE LOW-END SUPPORT SERVICES, IN OUR OPINION, COULD NOT BE COMP ARED WITH SERVICES IN THE NATURE OF MEDICAL TRANSCRIPTION SERVICES, MEDIC AL CODING, MEDICAL BILLING ETC. WHICH ARE SERVICES OF SPECIALIZED KIND . THIS IS FURTHER FORTIFIED ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 8 BY THE FACT THIS TRIBUNAL IN MAERSK GLOBAL CENTERS (INDIA) PVT. LTD. V/S ACIT [ITA NO. 1082/MUM/2015 ORDER DATED 29/07/2016] HAS OBSERVED THAT THIS ENTITY HAS BEEN EXCLUDED BY LD. DRP ON FU NCTIONAL DISSIMILARITY. FURTHER, DELHI TRIBUNAL IN BT E-SERV (INDIA) (P) LTD. VS. ITO [2019 101 TAXMANN.COM 275 AY 2012-13] IN CASE OF ASSESSEE HAVING SIMILAR FUNCTIONAL PROFILE DIRECTED FOR EXCLUSION FOR AFORE SAID ENTITY ON THE GROUND THAT MEDICAL TRANSCRIPTION WOULD NOT BE, AT ALL, FU NCTIONALLY SIMILAR TO BPO SERVICE PROVIDER. KEEPING IN VIEW THE SAID FACTORS, WE DIRECT FOR EXCLUSION OF THIS ENTITY. (IV) EXCEL INFOWAYS LTD. THE LD. AR HAS SUBMITTED THAT THIS ENTITY IS ENGAGE D IN RENDERING OF VOICE-BASED SERVICES, CUSTOMER SERVICES WHICH INCLU DE OUTBOUND SALES, MARKETING, VOICE AND EMAIL RESPONSE, REAL TIME CHAT , KNOWLEDGE MANAGEMENT AND OTHER VALUE-ADDED SERVICES WHICH COU LD NOT BE COMPARED WITH ASSESSEES LOW-END BPO SUPPORT SERVIC ES. ANOTHER DIFFERENTIATING FACT IS THAT THE RATIO OF EMPLOYEE COST OF THIS ENTITY IS ONLY 12.97% AS AGAINST ASSESSEES 59.20%. FURTHER, THE S EGMENTAL RESULTS OF THE SAID ENTITY WOULD NOT BE RELIABLE AS FOUND IN V ARIOUS DECISIONS OF THE TRIBUNAL. UPON CAREFUL CONSIDERATION, WE FIND THAT DELHI TRIBUNAL IN THE CASE OF BAXTER INDIA PVT. LTD. VS. ACIT [ITA NO.6158/DEL./2 016 AY 2012-13 24/08/2017] HAS HELD THAT SEGMENTAL RESULTS OF THIS ENTITY ARE NOT RELIABLE AND THEREFORE, THIS ENTITY IS NOT SUIT ABLE FOR COMPARISON. FOLLOWING THE SAID DECISION, SIMILAR VIEW HAS BEEN EXPRESSED IN BT E- SERV (INDIA) (P) LTD. VS. ITO [2019 101 TAXMANN.COM 275 19/06/2018]. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT FOR EXCL USION OF THIS ENTITY. IN THE RESULT, GROUND NO.2.2 & 2.3 STANDS ALLOWED. ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 9 6. BY WAY OF GROUND NO. 2.4, THE ASSESSEE SEEK WORK ING CAPITAL ADJUSTMENT FROM PLI OF COMPARABLE ENTITY IN TERMS O F RULE 10B(3). THE LD. DRP HAS DENIED THE SAME BY OBSERVING THAT NO WO RKING CAPITAL ADJUSTMENT WAS MADE BY THE ASSESSEE IN ITS TP STUDY REPORT AND SECONDLY, IT WAS OBSERVED THAT FEES FOR SERVICES IS NOT IMPACTED IN THE SAME MANNER BY CREDIT PERIOD OFFERED OR RECEIVED AS IS THE CASE WITH SALE OF GOODS. ALTHOUGH LD. AR HAS PLEADED FOR THIS ADJUSTMENT ON THE STRENGTH OF CERTAIN JUDICIAL PRONOUNCEMENTS, HOWEVE R, NO CONVINCING CASE HAS BEEN MADE OUT BEFORE US SO AS TO JUSTIFY T HE GRANT OF AFORESAID ADJUSTMENT. THEREFORE, WE ARE NOT INCLINED TO INTER FERE IN THE ORDER OF LOWER AUTHORITIES, IN THIS REGARD. THIS GROUND STAN DS DISMISSED. 7. IN GROUND NO. 3.1, THE ASSESSEE IS SEEKING BENEF IT OF TOLERANCE RANGE OF + 5%. IN THIS REGARD, IT WOULD SUFFICE TO DIRECT LD. TPO / LD. AO TO GRANT THE APPLICABLE BENEFITS / CONCESSIONS AS P ER LAW. THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 8.1 IN GROUND NO. 4.1, THE ASSESSEE IS AGGRIEVED BY THE FACT THAT IMPUGNED TP ADJUSTMENT HAS ALSO BEEN ADDED BACK WHI LE COMPUTING BOOK PROFITS U/S 115JB. WE FIND THAT THIS GROUND WA S NOT RAISED BY THE ASSESSEE BEFORE LD. DRP. THE ASSESSEE SEEKS ADJUDIC ATION OF THE SAME BY RELYING UPON THE DECISION OF HONBLE SUPREME COU RT IN NTPC V/S CIT [229 ITR 383] IN VIEW OF THE FACT THAT THIS IS PURELY A LEGAL GRO UND. IT HAS BEEN SUBMITTED THAT THIS ISSUE STOOD COVERED IN ASS ESSEES FAVOR BY THE DECISION OF THIS TRIBUNAL RENDERED IN OWENS CORNING (INDIA) PVT. LTD. V/S DCIT [ITA NO. 8522/MUM/2011] & CASH EDGE (INDIA) PVT. LTD. V/S ITO [ITA NO.64/DEL/2015] COUPLED WITH THE DECISIONS OF HONBLE SUPREME COURT RENDERED IN APOLLO TYRES 255 ITR 273, MALAYALAM ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 10 MANORAMA 300 ITR 152 & HCL COMNET SYSTEMS AND SERVI CES LTD. 305 ITR 409. 8.2 AFTER CAREFUL PERUSAL OF CITED JUDICIAL DECISIO NS, WE CONCUR WITH THE SUBMISSIONS MADE BY LD. AR. THE RELEVANT OBSERVATIO NS OF CO-ORIDNATE BENCH OF MUMBAI TRIBUNAL IN OWENS CORNING (INDIA) PVT. LTD. V/S DCIT [SUPRA], FOR EASE OF REFERENCE, COULD BE EXTRACTED IN THE FO LLOWING MANNER: - 4.1. THE ADDITIONAL GROUND BEING PURELY LEGAL AND N OT REQUIRING ANY INVESTIGATION OF FRESH FACTS, THE SAME WAS ADMITTED IN VIEW OF THE J UDGMENT OF HONBLE SUPREME COURT IN THE CASE OF NTPC 229 ITR 383. IT IS NOTED THAT SECTION 115JB IS SELF- CONTAINED CODE. ONLY THOSE ADJUSTMENTS ARE PERMISSI BLE TO THE BOOK PROFIT AS HAVE BEEN PRESCRIBED U/S 115JB. THE ADJUSTMENT/ADDITIONS MADE UNDER THE TRANSFER PRICING REGULATIONS ARE GOVERNED BY ALTOGETHER DIFF ERENT SETS OF PROVISION AS CONTAINED IN CHAPTER X OF THE ACT. THERE IS NO SUCH PROVISION UNDER THE LAW THAT PERMITS THE AO TO MAKE ADJUSTMENT ON ACCOUNT OF TRA NSFER PRICING ADDITION TO THE AMOUNT OF PROFIT SHOWN BY THE ASSESSEE IN ITS PROFI T AND LOSS ACCOUNT, FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB. THE LAW IN THIS REGARD IS CLEAR. REFERENCE IS MADE TO THE JUDGMENT OF HONBLE SUPREM E COURT IN THE CASE OF APOLLO TYRES LTD. VS CIT 255 ITR 273. IT IS NOTED FROM THE PERUSAL OF THE ASSESSMENT ORDER THAT THE AO HAS SIMPLY MADE ADDITION BY AN AMOUNT O F RS.1,30,72,762/- TO THE AMOUNT OF NET PROFIT AS PER PROFIT AND LOSS ACCOUNT FOR THE PURPOSE OF COMPUTATION OF INCOME U/S 115JB WITHOUT EVEN MENTIONING THAT UNDER WHAT PROVISIONS THIS ADDITION WAS BEING MADE. SUCH AN APPROACH IS HIGHLY UNFAIR A ND BRINGS UNDUE AND AVOIDABLE HARDSHIP TO THE TAX PAYERS AND WE RECOMMEND THAT S UCH A CASUAL APPROACH SHOULD BE AVOIDED BY THE REVENUE OFFICERS, AS IT MAY TARNI SH IMAGE OF THE INCOME TAX DEPARTMENT, WHICH MAY IN TURN DISCOURAGE VOLUNTARIL Y COMPLIANCE BY THE TAXPAYERS. THUS, WE DELETE THE ADDITION MADE BY THE AO. AS A R ESULT, ADDITIONAL GROUND FILED BY THE ASSESSEE IS ALLOWED. SIMILAR IS THE DECISION OF CO-ORDINATE BENCH OF DEL HI TRIBUNAL IN CASH EDGE (INDIA) PVT. LTD. V/S ITO [SUPRA], WHEREIN THE ISSUE HAS BEEN CONCLUDED IN THE FOLLOWING MANNER: - ADDITION OF TRANSFER PRICING ADJUSTMENT TO MAT 33. THE FINAL ISSUE FOR CONSIDERATION IS CHALLENGE RAISED BY THE ASSESSEE TO THE ACTION OF THE AO IN ADDING BACK TRANSFER PRICING AD JUSTMENT OF RS.1,18,93,468/- TO INCOME ASSESSED UNDER SECTION 115JB (MAT). 34. IN THIS REGARD, THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE AO HAS ADDED THE TRANSFER PRICING ADJUSTMENT OF RS.1,18,93 ,468/- TO THE BOOK PROFITS OF THE ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 11 ASSESSEE UNDER SECTION 115JB OF THE ACT WITHOUT APP RECIATING THAT BOOK PROFITS OF THE COMPANY CANNOT BE ADJUSTED EXCEPT AS PROVIDED I N EXPLANATION 1 SECTION 115JB(2) OF THE ACT AND THAT TRANSFER PRICING ADJUS TMENT IS NOT ONE OF THE ADJUSTMENTS CONTEMPLATED UNDER THAT EXPLANATION. HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS TO CONTEND THAT EXCEPT FOR ADJU STMENTS PROVIDED IN EXPLANATION 1 SECTION 115JB(2) OF THE ACT, NO OTHER ADJUSTMENT CA N BE MADE TO BOOK PROFITS UNDER SECTION 115JB OF THE ACT :- I. APOLLO TYRES: 255 ITR 273(SC) II. MALAYALAM MANORMA: 300 ITR 251(SC), III. HCL COMNET SYSTEMS AND SERVICES LTD., 305 ITR 409 (SC) AND IV. DCIT V. BISLERI SALES LTD.: 151 TTJ 285 (MUM)(I TAT) 35. THE LD. SR. DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE AO ON THE STRENGTH OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L IN THE CASE OF RAIN COMMODITIES V. DCIT: (2010) 40 SOT 265. 36. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IT IS SETTLED LAW THAT EXCEPT FOR ADJUSTMENTS PROVIDED IN EXPLANATION 1 SECTION 115JB(2) OF THE ACT, NO OTHER ADJUSTMENT CAN BE MAD E TO BOOK PROFITS UNDER SECTION 115JB OF THE ACT. WE FIND THAT THAT TRANSFER PRICIN G ADJUSTMENT IS NOT ONE OF THE ADJUSTMENTS CONTEMPLATED UNDER EXPLANATION 1 SECTIO N 115JB(2) OF THE ACT AND, THEREFORE, COULD NOT HAVE BEEN ADDED BACK TO THE BO OK PROFITS UNDER SECTION 115JB. 37. THE CASE-LAW RELIED UPON BY THE LD. SR. DR I.E. DECISION OF THE SPECIAL BENCH IN THE CASE OF THE TRIBUNAL IN RAIN COMMODITIES (SUPRA ) DOES NOT ALSO ADVANCE THE CASE OF THE REVENUE. IN THAT CASE THE SPECIAL BENCH WAS CONSIDERING WHETHER THE AO CAN ALTER THE NET PROFITS DECLARED BY AN ASSESSE E. THE SPECIAL BENCH HAS, FOLLOWING THE DECISION THE APEX COURT IN APOLLO TYR ES AND HCL COMNET (SUPRA), INTER ALIA, HELD THAT THE AO CANNOT TRAVEL BEYOND THE NET PROFITS DECLARED BY THE ASSESSEE UNLESS (A) IT IS DISCOVERED THAT PROFIT AND LOSS AC COUNT IS NOT DRAWN UP IN ACCORDANCE WITH PART II AND PART III OF SCHEDULE VI OF THE COM PANIES ACT, OR (B) THE INCORRECT ACCOUNTING POLICIES, ACCOUNTING STANDARDS HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS AND THE METHOD/RATE OF DEPRECIATION HAS BE EN INCORRECTLY ADOPTED FOR PREPARATION OF PROFIT AND LOSS ACCOUNT. 38. IN THE PRESENT CASE THERE IS NO ALLEGATION IS T HE ASSESSMENT ORDER MUCH LESS ANY FINDING THAT EITHER THAT PROFIT AND LOSS ACCOUNT HA S NOT BEEN DRAWN UP IN ACCORDANCE WITH PART II AND PART III OF SCHEDULE VI OF THE COM PANIES ACT, OR THAT ANY INCORRECT ACCOUNTING POLICIES, ACCOUNTING STANDARDS HAS BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS OR THAT THE METHOD/RATE OF DEPRECIATION HA S BEEN INCORRECTLY ADOPTED FOR PREPARATION OF PROFIT AND LOSS ACCOUNT. 39. IN VIEW OF AFORESAID, WE HOLD THAT THE AO ERRED IN ADDING BACK THE TRANSFER PRICING ADJUSTMENT OF THE BOOK PROFITS UNDER SECTIO N 115JB OF THE ACT. ACCORDINGLY, THIS GROUND OF THE APPEAL RAISED BY THE ASSESSEE IS ALLOWED AND THE AO IS DIRECTED TO EXCLUDE THE TRANSFER PRICING ADJUSTMENT, IF SUCH ADJUSTMENT SURVIVES, FROM THE BOOK PROFITS COMPUTED UNDER SECTION 115JB OF THE AC T. ITA NO.1231/MUM/2017 GTS E-SERVICES PRIVATE LIMITED ASSESSMENT YEAR :2012-13 12 RESPECTFULLY FOLLOWING THE SAME, WE DIRECT LOWER AU THORITIES TO EXCLUDE TRANSFER PRICING ADJUSTMENT, IF ANY, WHILE COMPUTIN G BOOK PROFITS U/S 115JB. ACCORDINGLY, THIS GROUND STANDS ALLOWED. 9. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JULY, 2019. SD/- SD/- (PAWAN SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03/07/2019 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. + , '%- , - , / DR, ITAT, MUMBAI 6. , ./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.