Adidas Technical Services Pvt. Ltd., Delhi V. DCIT, New Delhi

ITA 1233/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6788 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 23-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA ANAND
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 92C; 143(3); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 2 , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH , JUDICIAL MEMBER ITA NO. 1233 /DEL/201 5 AY: 20 10 - 11 ADIDAS TECHNICAL SERVICES P.LTD. VS. DCIT, CIRCLE 1(2) OFFICE NO.6, 2 ND FLOOR NEW DELHI SECTOR B, POCKET 7, PLOT NO.11 VASANT KUNJ DELHI 110 070 PAN: AAACR 0240 C (APPELLANT) (RESPONDENT) APPELLANT BY : SH. DEEPAK CHOPRA, SH.HARPREET AJMANI, SMT.ANANYA KAPOOR, ADVS. RESPONDENT BY : SMT.ANUPAMA ANAND, CIT, D.R. ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE FINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S 143(3) R.W.S.144C OF THE INCOME TAX ACT, 1961 (THE ACT) DATED 27.1.2015. 2. FACTS IN BRIEF: - THE ASSESSEE S PROFILE IS BROUGHT OUT IN PA RA 2 OF THE TRANSFER PRICING OFFICER (TPO) S ORDER WHICH IS EXTRACTED FOR READY REFERENCE. 2. TAXPAYER S PROFILE A TSPL, A WHOLLY OWNED SUBSIDIARY OF ADIDAS SOURCING LTD. ( ASL ) IS ENGAGED IN RENDERING SUPPORT SERVICES TO ASL WHICH IN TURN RENDERS SO URCING SERVICES TO ADIDAS GROUP COMPANIES FOR INTERNATIONAL PREMIUM RANGE OF FOOTWEAR AND APPARELS (FOR THE PURPOSE OF THIS SUBMISSION ASL AND THE OTHER ADIDAS GROUP COMPANIES ARE BEING COLLECTIVELY REFERRED TO AS ASSOCIATED ENTERPRISES OR ( 'AES'). ACCORDI NGLY, THE ASSESSEE'S ROLE IS LIMITED TO SUPPORTING ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 2 ITS AES I.E, PROVIDING VARIOUS SUPPORT SERVICES TOWARDS FACILITATING THE COMMUNICATION BETWEEN THE MANUFACTURERS IN I NDIA AND THE AES AND MONITORING THE QUALITY OF GOODS MANUFACTURED BY THEM BASED ON THE S PECIFICATIONS PROVIDED BY THE AES. THUS, THE AES SET THE BROAD STRATEGIES AND GUIDELINES, WHILE ADIDAS TECHNICAL SERVICES PRIVATE LIMITED ( ATSPL ) PROVIDES EXECUTION SUPPORT. FUNCTIONAL PERFORMED. THE FUNCTIONS PERFORMED BY ATSPL AND ITS AE IN RELATION TO THE INTERNATIONAL TRANSACTION PERTAINING TO THE PROVISION OF SUPPORT SERVICE BY ATSPL TO ITS AE ARE SUMMARIZED BELOW. * CONCEPTUALIZATION OF ENTREPRENEURIAL SERVICES ASL IS RESPONSIBLE FOR DETERMINING THE SCOPE OF WORK TO BE PERFORMED BY ATSPL. AND IT PROVIDES THE RELEVANT DETAILS PERTAI NI NG TO THE TYPE OF PRODUCTS TO BE MANUFACTURED, QUALIFY DETAILS, QUANTITY ETC. SO THAT ATSPL CAN COORDINATE WITH THE LOCAL CONTRACT MANUFACTURERS. PARTICIPA TION BY ATSPL IN THIS PROCESS IS LIMITED TO THE PROCESS OF COORDINATING WITH THE LOCAL MANUFACTURES. * BUSINESS DEVELOPMENT/COORDINATION AND LIAISONING. A TSPL ASSISTS THE IDENTIFICATION OF THE FOOTWEAR MANUFACTURE FOR ITS AE, WHICH IS SUBJECT TO ASL'S REVIEW. IT HELPS TO ENSURE THAT OTHER REQUIREMENT SUCH AS QUALITY, PRODUCTS REQUIREMENT, ETC, ARE SATISFIED. IT UPDATE THE SUPPLIER WITH NECESSARY PRODUCT DETAILS AND ITS RESPONSIBLE FOR COORDINATION FOR LOCAL SUPPLIER TO ENSURE SMOOTH AND EFFICIENT EXECUT ION OF THE TRANSACTION. ATSPL IS INVOLVED IN PRICE COORDINATION WITH LOCAL SUPPLIER REGARDING THE COSTING ASPECT AND INTIMATE THE COSTING DETAILS OF THE MANUFACTURES TO ITS AE FOR REVIEW. SERVICES RENDERED BY ATSPL ARE RECOMMENDATORY IN NATURE AND AE/ CUS TOMER OF AE DIRECTLY ENTER INTO A AGREEMENT WITH THE CONTRACT MANUFACTURER FOR THE REQUIRED SUPPLIERS. * QUALITY CONTROL AS PER THE AGREEMENT BETWEEN ATSPL AND ITS AE, ATSPL I S RESPONSIBLE FOR PROVIDING QUALITY CONTROL SERVICE TO IT AE. WITH REGARD TO EXPECTED SERVICES, ATSPL MONITORS THE OPERATIONS TO ENSURE THAT QUALITY OF GOOD PRODUCED BY LOCAL CONTACT MANUFACTURES IS AN ACCORDANCE WITH THE INTERNATIONAL STANDARDS OF THE ADIDAS GROUP. IN THIS RELATION, THE AE HAVE IMPLEMENT VARIOUS QUALITY CONTROL ME CHANISM. ATSPL IS RESPONSIBLE FOR MONITORING THE QUALITY OF PRODUCTS MANUFACTURED BY LOCAL SUPPLIERS. HOWEVER, FOR THE FINAL PRODUCTS MANUFACTURED BY LOCAL MANUFACTURES, THE CONTRACT MANUFACTURER IS RESPONSIBLE FOR ENSURING THAT THE PRODUCT MEETS REQUIRED QUALITY STANDARDS. * HUMAN RESOURCE ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 3 ATSPL IS RESPONSIBLE FOR THE DAY TO DAY MANAGEMENT AND MAINTENANCE OF TEAM OF SUITABLY QUALIFIED PERSONNEL SO AS TO ENSURE THE PROPER FULFILLMENT OF ITS OBLIGATION UNDER THE AGREEMENT WITH AE. 2.1. THE PROVISION OF SUPPORT SERVICES WAS BENCH MARKED BY USING THE TNMM AS THE MAM. THE PLI WAS TAKEN AS A PERCENTAGE OF OPERATING PROFIT TO OPERATING EXPENSES I.E. % OF O.P./O.C. 2.2. THE TPO CAME TO THE FOLLOWING CONCLUSIONS. ( I ) THE SERVICES PROVIDED BY THE TAX PAYER OF THE A.E. ARE IN THE NATURE OF MARKET SUPPORT SERVICES, MANAGERIAL SERVICES AND EVEN TECHNICAL SUPPORT , IN CASE OF AFTER SALES SUPPORT. THE TPO, BASED ON THE QUALIFICATION OF THE MAJORITY OF THE EMPLOYEES, HA S CLASSIFIED THE COMPANIES IN TO V ARIOUS CATEGORIES. HE HELD THAT THE TAX PAYER IS NOT A ROUTINE SERVICE PROVIDER AND HENCE THE CONTENTION OF THE ASSESSEE THAT COMPARABLE COMPANIES WHICH ARE PROVIDING HIGH END SERVICES SHOULD NOT BE SELECTED IS NOT CORRECT . HE HELD THAT THE ASSESSEE IS RENDERING HIGH END SERVICES OF VARIED NATURE AND THAT THIS CAN BE CONCLUDED BY S EEING THE EMPLOYEES PROFILE, SALARY STRUCTURE ETC. HE ALSO HELD THAT, PROVISION FOR HIGH END SERVICE OR LOW END SERVICE CANNOT BE A CRITERIA BY A COMPARABLE COMPANY FOR AC CEPTANCE OR REJECTION OF A COMPARABLE, ESPECIALLY WHEN THE TAX PAYER AND THE COMPARABLES HAVE SIMILAR EMPLOYEE PROFILE BECAUSE , TNMM IS ACCEPTED AS THE MOST APPROPRIATE METHOD (MAM) WHERE THE STANDARD OF COMPARABILITY ARE RELATIVELY RELAXED AND ONLY BRO AD SIMILARITY OF FUNCTIONS ARE REQUIRED. ( II ) AFT E R CONSIDERING ALL THE CONTENTIONS OF THE ASSESSEE AND DEALING WITH THE SAME, THE TPO REJECTED SOME OF THE COMPARABLE COMPANIES SELECTED BY THE ASSESSEE COMPANY AND INCLUDED CERTAIN OTHER COMPARABLE COMPANIE S. HE PROPOSED AN ADJUSTMENT U/S 92CA OF RS.2,63,83,909/ - . THE ASSESSEE CARRIED THE MATTER BEFORE THE DRP. T HE DRP REJECTED SOME OF THE COMPARABLES SELECTED BY THE ASSESSEE COMPANY AND INCLUDED CERTAIN COMPARABLES. CONSEQUENT TO THE ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 4 ORDER OF THE DRP THE A.O. MADE A TRANSFER PRICING ADJUSTMENT OF RS.2,18,26,570/ - . 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE US. 4. T HE GROUNDS OF APPEAL READ AS FOLLOWS. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DY.CIT, CIRCLE 1(2), NEW DELHI ( AO ) HAS ERRED IN PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT AFTER CONSIDERING THE ADJUSTMENTS PROPOSED BY THE DDIT, TRANS F ER PRICING, NEW DELHI ( TPO ) IN HIS ORDER PASSED U/S 92CA(3) OF THE ACT AND SUBSEQUENTL Y CONFIRMED BY THE HON BLE DISPUTE RESOLUTION PANEL ( DRP ). EACH OF THE GROUND IS REFERRED TO SEPARATELY, WHICH MAY KINDLY BE CONSIDERED INDEPENDENT OF EACH OTHER AND WITHOUT PREJUDICE TO EACH OTHER. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, 1. THE LEARNED AO / TPO/DRP HAVE ERRED IN MAKING AN ADDITION OF INR 2,18,26,570 TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF ADJUSTMENT IN THE ARM'S LENGTH PRICE ('ALP') OF THE INTERNATIONAL TRANSACTIONS RELATED TO BUSINESS SUPPORT SERVICES ENTERED INTO BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISES ('AES'). 2. THE LEARNED AO / TPO / DRP HAVE ERRED IN CLASSIFYING THE FUNCTIONS OF THE ASSESSEE AS PROVIDING HIGH VALUE SERVICES AND ACCORDINGLY SELECTING COMPARABLES IN SAME GENRE. 3. THE LEARNED AO/TPO/DRP HAVE ERRED BY NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME TAX RULES, 1962 ('THE RULES'). 4 . THE LEARNED AO / TPO / DRP HAVE ERRED IN MAKING AN ADJUSTMENT UNDER SECTION 92CA(3) OF THE ACT WITHOUT RETURNING A FINDING ABOUT EXISTENCE OF ANY OF THE CIRCUMSTANCES SPECIFIED IN CLAUSES (A) TO (D) OF SUB - SECTION (3) OF SECTION 92C OF THE ACT. 5 . THE LEARNED AO / TPO/DRP HAVE ERRED IN REJECTING CERTAIN COMPARABLE COMPANIES (MA FOI MANAGEM ENT CONSULTANTS LTD AND MA FOI GLOBAL SERVICES) IDENTIFIED BY THE APPELLANT FOR HAVING DIFFERENT ACCOUNTING YEAR (I.E. HAVING ACCOUNTING YEAR OTHER THAN MARCH 31 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PERIOD OTHER THAN 12 MONTHS). 6. THE LEAR NED A O /TPO /DRP HAVE ERRED IN : A. U SING SINGLE YEAR DATA INSTEAD OF MULTIPLE YEAR DATA ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 5 B. DETERMINING THE ARM'S LENGTH MARGINS / PRICES USING DATA PERTAINING ONLY TO FY 2009 - 10 WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING ('TP') DOCUMENTATION REQUIREMENTS. 7. THE LEARNED AO/TPO/DRP HAVE ERRED IN REJECTING FOLLOWING COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT USING EMPLOYEE COST GREATER THAN 25 PERCENT OF THE TOTAL COST AS A COMPARABILITY CRITERION: ASIAN BUSINESS EXHIBITION & CONFERENCES LTD. TIMES INNOVATIVE MEDIA LTD CONCEPT PUBLIC RELATIONS LTD IMPRESARIO EVENT MANAGEMENT INDIA LTD 8. THE LEARNED AO/TPO/DRP HAVE ERRED IN SELECTING FOLLOWING COMPANIES ( WHICH ARE EARNING SUPER NORMAL PROFITS) AS COMPARABLE TO THE APPELLANT: ' APITCO LTD. GLOBAL PROCUREMENT CONSULTANTS LTD. TSR DARASHAW LTD 9 . THE LEARNED AO / TPO / DRP HAVE ERRED IN REJECTING MA FOI GLOBAL SERVICES ON THE BASIS OF ERRONEOUS APPL ICATION OF NEGATIVE NET WORTH FILTER. 10. THE LEARNED AO/ T PO /DRP HAVE ERRED IN REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT USING 'TURNOVER LESS THAN INR 1 CRORES' AS A COMPARABILITY CRITERION. 11. THE LEARNED AO/TPO/DRP HAVE ERRED IN REJECTIN G FRESH SEARCH CONDUCTED BY THE APPELLANT. 12. THE LEARNED AO / TPO /DRP HAVE ERRED IN REJECTING CERTAIN COMPANIES WHICH COMPARABLE TO THE APPELLANT AND ADDING CERTAIN FUNCTIONALLY DISSIMILAR COMPANIES TO THE FINAL SET OF COMPARABLE COMPANIES. 1 3. THE LEARN E D AO/TPO/DRP HAVE ERRED BY NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT. FOR DIFFERENCES IN THE RISK PROFILE OF THE APPELLANT VIS - A - VIS THE COMPARABLE COMPANIES. 1 4. THE LEARNED AO/TPO/DRP HAVE ERRED IN NOT APPLYING THE PROVISO TO SECTION 92C(2) OF THE ACT CORRECTLY AND HAS FAILED TO ALLOW THE BENEFIT OF DOWNWARD V ARIATION OF 5 PERCENT IN THE DETERMINING ARM'S LENGTH PRICE SO COMPUTED. 15 . T HE LEARNED AO ERRED IN HOLDING THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF EACH ITEM OF DISALLOWANCE/ ADDITIONS AND IN INITIATING PENALTY P ROCEEDINGS UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT. ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 6 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON THE SAID GROUNDS OF APPEAL AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LD.COUNSEL FOR THE ASSESSEE MR. DEEPAK CHOPRA S UBMITTED THAT GROUND NOS. 1, 13, 14 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDIC ATION, AND THAT GROUND NO.15 IS PREMATURE. HE FURTHER STATED THAT G ROUND NOS. 3, 4, 5, 6, 7, 8, 9 AND 10 ARE NOT TO BE PRESSED. HENCE GROUND NOS. 1, 13 AND 14 DO NOT REQUIRE SPECIFIC ADJUDICATION AND HENCE THEY ARE DISMISSD AS SUCH. GROUND NOS. 3, 4, 5 , 6, 7, 8, 9, 10 AND 15 ARE DISMISSED AS NOT PRESSED . 5.1. AN ADDITIONAL GROUND IN THE FORM OF GROUND NO.2 .1 HAS BEEN RAISED . IT READS AS FOLLOWS. 2.1. THE LD.AO/TPO/DRP HAVE ERRED ON FACTS AND IN LAW IN TREATING FOREIGN EXCHANGE LOSS/GAIN AS NON - O PERATING. THIS ADDITIONAL GROUND IS ADMITTED. 5.2. MR.DEEPAK CHOPRA SUBMITTED THAT THE REVENUE AUTHORITIES HAVE NOT CORRECTLY APPRECIATED THE FUNCTIONAL PROFILE OF THE COMPANY. HE ARGUE D THAT THE ASSESSEE COMPANY IS NOT ITES COMPANY AND THAT IT IS A NORMAL SERVICE PROVIDER AND THAT THE PROFILE OF THE COMPANY IS GIVEN IN THE TRANSFER PRICING STUDY WHICH IS PLACED AT PAGE NO.231 ONWARDS , SPECIFICALLY AT PAGE 233 AND 236. ON A QUERY FROM THE BENCH , HE SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH ITS PARENT COMPANY ADIDAS SOURCING LTD. (ASL). PURSUANT TO TH IS AGREEMENT , THE ASSESSEE IS ENGAGED IN PRO VISION OF SUPPORT SERVICES TO ASL. HE SUBMITTED THAT ATSPL IS ENGAGED IN PROVISION OF SUPPORT SERVICES TO ASL IN CONNECTION WITH SOURCING SERVICES TO ITS ADIDAS GROUP ENTITIES. HE POINTED OUT THAT THE ACTUAL MANUFACTURING IS DONE BY , THIRD PARTY CONTRACT MANUFACTURERS, WH O ARE LOCATED AT DIFFERENT LOCATIONS ACROSS THE C OUNTRY. THE ASSESSEE REGULARLY INSPECTS THE MANUFACTURING PROCESS, FROM THE MATERIAL PROCUREMENT STAGE ONWARDS TO THE FINAL ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 7 PACKAGING STAGE AND PROVIDES ADVISORY SERVICES IN RESPECT TO MANUFACTURING OF PRODUCTS. 5.3. ON A QUERY FROM THE BENCH HE SUBMITTED THAT THE BASIC ISSUE IN DISPUTE IS ADOPTION OF C ERTAIN COMPARABLES BY THE A.O. WHICH AS PER THE ASSESSEE IS NOT CORRECT. HE FILED A CHAR T GIVING DETAILS OF THE COMPANIES TAKEN AS COMPARABLES AND MADE DETAILED ARGUMENTS O N EACH ONE OF THESE COMP ARABLES. WE WOULD BE ADVERTING TO THE SAME DURING THE COURSE OF THIS ORDER AS AND WHEN NECESSARY. FURTHER HE MADE SUBMISSIONS CHALLENGING THE TREATMENT OF FOREIGN EXCHANGE LOSS/PROFIT AS NON OPERATING. HE RELIED ON CERTAIN CASE LAWS AND SUBMITTED THAT FOREIGN EXCHANGE GAIN/LOSS SHOULD BE TREATED AS AN OPERATING PROFIT/LOSS. 6. THE LD. CIT, D.R. SMT. ANUPAMA ANAND, ON THE OTHER HAND OPPOSED THE CONTENTIONS OF THE ASSESSEE. SHE RELIED ON THE ORDER OF THE DRP AND SUBMITTED THAT THE DRP HAD CAREFULLY CONSIDE RED EACH AND EVERY ARGUMENT BEING MADE BY THE ASSESSEE WITH RESPECT TO THE COMPARABLES. SHE RELIED ON THE ORDER OF THE DRP AND SUBMITTED THAT THE SAME SHOULD BE UPHELD. SHE ALSO OPPOSED THE CONTENTIONS OF THE ASSESSEE THAT THE FOREIGN EXCHANGE LOSS / PROF IT , IN QUESTION IS TO BE TREATED AS AN OPERATIONAL LOSS. 7. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF MATERIAL ON RECORD, ORDERS OF LOWER AU T HORITIES, CASE LAWS CITED, WE HOLD AS FOLLOWS. 8 . ON THE FUNCTIONAL PROFILE OF THE ASSESSEE, WE HOLD AS FOLLOWS. 8.1 . THE ASSESSEE ADIDAS TECHNICAL SERVICES PVT. LTD. (HEREINAFTER REFERRED TO AS A TSPL ) PROVIDES BUYING AGENCY SERVICES, TO ITS PARENT COMPANY A DIDAS SOURCING LTD. (HEREINAFTER REFERRED TO AS A SL). THESE SERVICES ARE GOVERNED BY AN AGREEMENT DT. 1 ST DAY OF OCTOBER, 2006. THE DESCRIPTION OF THE SERVICES IS GIVEN IN CLAUSE I OF THE AGREEMENT . THIS IS EXTRACTED FOR READY REFERENCE. ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 8 CLAUSE I: A RRANGE FOR THE MANUFACTURE OF PRO DUCTS DESIRED BY THE PURCHASERS; IDENTIFY NEW MANUFACTURERS AND PROVIDE THE PURCHASERS WITH SUFFICIENT INFORMATION REGARDING SUCH MANUFACTURERS TO ENABLE IT TO DECIDE WHETHER TO UTILISE SUCH MANUFACTURERS; ACT AS A GENERAL CONSULTANT TO THE PURCHASERS ON ALL MATTERS CONCERNING THE MANUFACTURE AND PURCHASE OF THE PRODUCTS; KEEP THE PURCHASERS INFORMED OF SOURCES OF SUPPLY REQUIRED BY PURCHASERS, IN A PARTICULAR COUNTRY, AND GENERAL CONDITIONS APPEARING LIKELY TO AFFECT THE FUTURE PRICE OR CONDITION OF SUCH PRODUCTS OR LIKELY TO INTERFERE WITH THE PROMPT SUPPLY THEREOF TO THE PURCHASERS; PROVIDE QUALITY CONTROL SERVICES, WHICH SHALL INCLUDE RANDOMLY CHECKING AND INSPECTING SHIPMENTS TO VERIFY THAT THE QUALITY AND QUANTITY 'O F THE PRODUCTS SHIPPED CORRESPONDS TO THE REQUIREMENTS OF THE CONTRACTS BETWEEN THE PURCHASERS AND THE MANUFACTURERS; PROVIDE TECHNICAL SERVICES WITH RESPECT TO THE PRODUCTS AND, IN THIS CONNECTION, AID THE MANUFACTURERS OF PRODUCTS IN CORRECTING ANY MAN UFACTURING PROBLEMS THAT ADVERSELY AFFECT THE QUALITY OF PRODUCTS MANUFACTURED FOR THE PURCHASER BY PROVIDING APPROPRIATE TECHNICAL ADVICE; PROVIDE GUIDANCE T O THE RELEVANT MANUFACTURERS TO ACQUIRE THE NECESSARY RAW MATERIALS TO PRODUCE THE PRODUCTS; OBTA IN OFFERS, , QUOTATIONS AND SAMPLES OF PRODUCTS, AS MAY BE APPROPRIATE, AND SUBMIT THE SAME TO THE PURCHASERS PURSUANT TO THEIR WRITTEN INSTRUCTIONS, AND INFORM THE PURCHASERS OF THE FAILURE OF ANY SAMPLES TO CONFORM TO THEIR STANDARDS OF QUALITY; RANDOML Y INSPECT THE RELEVANT FACTORY CONDITIONS AND THE PRODU CTS UNDER ORDER AND VERIFY AND EXECUTE PRODUCTION CERTIFICATES AND OTHER FACTORY DOCUMENTATION REQUIRED FOR CLEARANCE; MONITOR AND SUPPORT ALL ARRANGEMENTS FOR OVERSEAS SHIPMENT O F THE PRODUCTS; RE SPECT THE INSTRUCTIONS PROVIDED BY THE PURCHASERS ON THE CARRIER TO BE CHOSEN AND THE OTHER SHIPPING PARTICULARS AS SPECIFIED BY THE PURCHASERS; ADVISE THE PURCHASERS OF THE PARTICULARS OF ANY INDIVIDUAL SHIPMENT, SUCH AS PORT OF DISPATCH, NAME OF THE V ESSEL OR AIRCRAFT ON WHICH MERCHANDISE IS SHIPPED, THE ENTRY PORT IN THE COUNTRY OF DESTINATION AND THE EXPECTED DATE OF ARRI VAL; PROCURE THAT ALL NECESSARY SHIPPING DOCUMENTS BE COLLATED IN THE COUNTRY OF EXPORT AND BE FORWARDED TO THE PURCHASERS OR ITS DESIGNATED AGENT. FURNISH THE PURCHASERS WITH FURTHER INFORMATION WITH RESPECT TO THE SHIPMENT OF THE PRODUCTS AS IT MAY REQUIRE UPON THE RECEIPT OF A REQUEST FOR SUCH ADDITIONAL INFORMATION FROM THE PURCHASERS; AND OBSERVE ALL REASONABLE DIRECTIONS AN D INSTRUCTIONS GIVEN TO IT BY ASL IN RELATION TO THE PURCHASE AND MANUFACTURE OF THE PRODUCTS AND, IN THE ABSENCE OF ANY SUCH DIRECTIONS OR INSTRUCTIONS, ACT IN SUCH MANNER AS IT REASONABLY CONSIDERS TO BE MOST BENEFICIAL TO ASL'S INTERESTS; ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 9 ESTABLISH FOR CLOSE ANY BRANCHES WITHIN INDIA UPON THE PRIOR APPROVAL OF ASL AND TO PROVIDE REASONABLY ACCURATE ESTIMATES ON THE COST OF FURNISHINGS, FIXED AND MOVABLE ASSETS AND RENOVATION; RTSPL SHALL IN PERFORMING THE - ABOVE SERVICE ON BEHALF OF ASL BE ACTING AS AN AGENT ON ACCOUNT OF ASL AND IN SO FAR AS PRACTICABLE EXPLICITLY REPRESENT THEMSELVES AS THE AGENT OF ASL, HOWEVER, IT IS SPECIFICALLY ACKNOWLEDGED THAT FAILURE TO EXPLICITLY REPRESENT THEMSELVES AS AGENT OF ASL SHALL NOT DIMINISH THE AGENCY CAPACITY OF REEBOK TECHNICAL SERVICES PRIVATE LIMITED ( RTSPL ). 8.2. A PERUSAL OF T HESE FUNCTIONS OF THE ASSESSEE AS MANDATED BY THIS AGREEMENT ON 1 ST DAY OF OCTOBER, 2006 DEMONSTRATES THAT THE AS SESSEE IS NOT A NORMAL SERVICE PROVIDER NOR A ITES COMPANY. THE ASSESSEE REQUIRES SKILL, CAPABILITY AS WELL AS EXPERTISE IN A PARTICULAR FILED OF PROCUREMENT AND MANUFACTURING FOR PERFORMING THE FUNCTIONS REFERRED ABOVE. THE ASSESSEE IS REQUIRED TO PER FORM FUNCTIONS INCLUDING, QUALITY CONTROL SERVICES, PROVIDING TECHNICAL SERVICES WITH RESPECT TO THE PRODUCTS AND AID THE MANUFACTURERS OF THE PRODUCTS, PROVIDE GUIDANCE TO THE MANUFACTURERS WITH RESPECT TO ACQUISITION OF RAW MATERIAL, RANDOMLY INSPECT RELEVANT FACTORY CONDITIONS ETC. IN OTHER WORDS THE ASSESSEE IS OFFERING A COMPREHENSIVE RANGE OF PROCUREMENT RELATED ADVISORY SERVICES INCLUDING QUALITY CONTROL ETC. ON THIS FACTUAL POSITION WE NOW CONSIDER EACH OF THE COMPARABLES THAT ARE IN DISPUTE. 8. 3 . WE FIRST TAKE UP THE CASE OF A PITCO LTD. (A) APITCO LTD.: - APITCO LTD. IS A PUBLIC SECTOR UNDERTAKING PROVIDING VARIOUS SUPPORT SERVICES FOR THE DEVELOPMENT OF TOURISM INDUSTRY. LATER THE FUNCTIONAL PROFILE OF THE COMPANY HAD UNDERGONE A CHANGE, AND IT IS NOW ENGAGED IN PROVIDING TECHNICAL CONSULTANCY RELATING TO ASSET RECONSTRUCTION COMPANIES, MANAGEMENT SERVICES, MICRO ENTERPRISE DEVELOPMENT, SKILL DEVELOPMENT ETC. THIS IS A GOVERNMENT COMPANY. THE FACT THAT ITS OPERATIONS ARE MAINLY BASED ON THE POLICY REQUIREMENTS OF THE GOVERNMENT AND THE FACT THAT IT IS A PREFE RRED COMPANY OF THE GOVERNMENT OF INDIA FOR ENTRUSTMENT OF WORKS, CANNOT BE IGNORED . BE IT AS IT MAY, IN OUR CONSIDERED OPINION, THE FUNCTIONAL PROFILE OF THIS COMPANY IS DIFFERENT FROM THAT OF THE ASSESSEE COMPANY AND HENCE THE SAME SHOULD BE EXCLUDED FR OM TH E LIST OF ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 10 COMPARABLE COMPANIES WHILE COMPUTING THE ALP. (B) GLOBAL PROCUREMENT CONSULTANTS LTD.: - THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FUNCTIONAL PROFILE OF THE COMPANY IS DIFFERENT AND THAT GLOBAL PROCUREMENT CONSULTANTS LTD. IS MEREL Y RENDERING SERVICES TO GOVERNMENT BODIES AND INTERNATIONAL ORGANISATIONS. IT WAS FURTHER SUBMITTED THAT IT IS ENGAGED IN PROVIDING VARIED SERVICES IN CONSULTANCY SEGMENT WHICH ARE AS FOLLOWS. ( A ) BID SUPPORT SERVICES; ( B ) PERFORMANCE REVIEW; ( C ) VALUATION ASSIGNMENTS; ( D ) FINANCIAL ADVISORY SERVICES AND OTHER ASSIGNMENTS. IT WAS FURTHER ARGUED THAT NO SEGMENTAL DETAILS ARE AVAILABLE AND HENCE IT CANNOT BE TAKEN AS A COMPARABLE. THE LD.D.R. SUBMITTED THAT THIS COMPARABLE COMPANY AS A CLIENT S REPRESENTATIVE IN TAKING ON THE TOTAL RESPONSIBILITY OF PROCUREMENT BY PROVIDING THE COMPREHENSIVE RANGE OF PROCUREMENT RELATED ADVISORY SERVICES AT INTER - ALLIED ACTIVITIES FOR PROJECTS IN INDIA AND ABROAD AND HENCE IS FUNCTIONAL COMPARABLE. THE ITAT DELHI I - 2 BENCH IN THE CASE OF INTERNATIONAL SOS SERVICES LTD. VS. DCIT IN ITA 1631/DEL/2014 ORDER DT. 8.12.2015, AT PARA 4 HAS HELD AS FOLLOWS. 4. GLOBAL PROCUREMENT CONSULTANT LIMITED : 12.6 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS AN 100% GOVERNMENT OWNED COMP ANY AS IT IS PROMOTED BY EXIM BANK. HE VEHEMENTLY CONTENDED THAT FUNCTIONALLY, THIS COMPANY IS NOT A COMPARABLE, AS IT WORKS WITH IN THE FIELD OF POWER, WATER RESOURCES, TRANSPORTATION INDUSTRY SUCH AS ECONOMIC, TEXTILE, MINING, CEMENT, LEATHER, HEALTH ED UCATION, ENVIRONMENT, INFOTECH ETC. THE PITH AND SUBSTANCE OF THE SUBMISSION ARE THAT THE AREAS IN WHICH THIS COMPANY PROVIDES SUPPORT SERVICES IS TOTALLY DIFFERENT FROM THE TYPE OF SUPPORT SERVICES PROVIDED BY THE ASSESSEE. HE PLACED RELIANCE ON THE DEC ISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 11 PVT. LIMITED VS. CIT, ITA NO. 102/2015 JUDGMENT DATED 10/08/2015 FOR THE PROPOSITION THAT FUNCTIONALLY DISSIMILAR COMPANIES CANNOT BE TAKEN AS COMPARABLES. HE POINTED OUT THAT DECISI ON OF THE SPL. BENCH OF THE TRIBUNAL IN THE CASE OF GLOBAL INDIA PVT. LIMITED HAS BEEN OVERRULED BY THE HON BLE DELHI HIGH COURT IN ITA NO. 7466/M/11 JUDGMENT DATED 07/03/2004. 12.7 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, POINTED OUT THAT GL OBAL PROCUREMENT LIMITED IS NOT A 100% GOVERNMENT OF INDIA OWNED COMPANY AND THAT IT IS BEING PROMOTED BY EXPORT IMPORT BANK OF INDIA, AS A PRIVATE SECTOR COMPANY IN PARTNERSHIP WITH LEADING CORPORATE GROUPS LIKE MECON, ICCI, TCE CONSULTING ENGINEERS LTD. ETC. SHE SUBMITTED THAT THE FUNCTIONAL PROFILE IS THAT OF SPECIALIZED SUPPORT SERVICES, WHICH REQUIRED HIGH PROFILE SKILL AND TIMELY DELIVERY OF QUALITY SERVICES, WHICH IS COMPARABLE WITH THE FUNCTIONAL PROFILE OF THE ASSESSEE. 12.8 ON A CAREFUL CONSIDE RATION OF THESE ARGUMENTS, WE ARE OF THE CONSIDERED OPINION THAT THIS COMPANY SHOULD BE TAKEN AS A COMPARABLE FOR THE FOLLOWING REASONS: A ) THIS IS NOT A 100% GOVERNMENT OWNED COMPANY AS CLAIMED BY THE ASSESSEE. UNDER THE HEAD CORPORATE SYNERGY IT IS STATE D THAT THIS COMPANY IS CO - PROMOTED BY THE EXPORT IMPORT BANK OF INDIA AS PRIVATE SECTOR COMPANY ALONG WITH A NUMBER OF OTHER PRIVATE COMPANIES. B ) THE FUNCTIONAL PROFILE OF THIS COMPANY IS RENDERING OF HIGHLY SPECIALIZED PROCUREMENT SUPPORT SERVICES. THE QUA LITY OF SERVICE, THE SKILLS ARE COMPARABLE WITH THE QUALITY AND SKILL OF SUPPORT SERVICES PROVIDED BY THE ASSESSEE, THOUGH IN FUNCTIONALLY DIFFERENT AREAS. AS THE LD. COUNSEL FOR THE ASSESSEE HAS ACCEPTED BEFORE US THAT COMPARABLE COMPANIES RENDERING SERV ICES IN THE SAME FIELD AS THAT OF THE ASSESSEE COMPANY CANNOT BE FOUND, COMPANIES RENDERING SUPPORT SERVICES IN OTHER FIELDS HAVE TO BE TAKEN AS COMPARABLES. C ) WE HAVE ALSO PERUSED THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAMPGREE N SOLUTIONS PVT. LTD.(SUPRA). THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE IS BASED ON THE PROPOSITIONS LAID DOWN IN THIS CASE LAW. IF ON SUCH AN ARGUMENT, THE COMPARABLE GLOBAL PROCUREMENT CONSULTING LIMITED IS EXCLUDED, THEN ALL THE OTHER ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 12 COMPARABLES C ITED BY THE ASSESSEE AS WELL AS THE LD.TPO HAVE TO BE EXCLUDED ON THE SAME PRINCIPLE. THIS WILL LEAVE US WITH NO OTHER COMPARABLE. THE ASSESSEE CANNOT ADVANCE CONTRADICTORY ARGUMENTS. AS IT HAS BEEN ACCEPTED BY BOTH THE PARTIES BEFORE US THAT, COMPANIES HAVING A BROAD FUNCTIONAL PROFILE OF RENDERING SKILLED PROFESSIONAL SUPPORT SERVICES, SHOULD BE TAKEN AS COMPARABLE COMPANIES, THE PROPOSITION LAID DOWN IN RAMPGREEN SOLUTIONS PVT. LTD.(SUPRA), CANNOT BE APPLIED TO THE FACTS OF THE CASE ON HAND. IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT GLOBAL PROCUREMENT CONSULTING LIMITED HAS RIGHTLY BE TAKEN AS THE COMPARABLE BY THE TPO. HENCE WE DISMISS THIS ARGUMENT OF THE ASSESSEE. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE AGREE WITH THE LD.TPO THAT THIS COMPANY HAS TO BE TAKEN AS FUNCTIONALLY COMPARABLE. BUT THIS COMPANY IS ALSO UNDERTAKING MANY OTHER ACTIVITIES SUCH AS VALUATION ETC. THE ISSUE FOR CONSIDERATION WOULD BE AS TO WH ETHER SEGMENTAL DATA IS AVAILABLE. IF SUCH DATA IS AVAILABLE THEN THE COMPANY HAS TO BE TAKEN AS A COMPARABLE. AS THE ARGUMENT OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT THERE ARE NO SEGMENTAL RESULTS AVAILABLE, THIS COMPANY IS DIRECTED TO BE EXCLUDED AS A COMPARABLE. (C) QUIPPO VALUERS AND AUCTIONEERS PRIVATE LIMITED : - (QVAPL) THE LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THIS COMPARABLE NEEDS TO BE REJECTED FOR THE REASON THAT THE FUNCTIONAL PROFILE IS DIFFERENT FROM THE ASSESSEE COMPANY AS THE COMPANY IS ENGAGED IN PROVIDING ASSET MANAGEMENT SERVICES AS AN AUCTIONEER AND VALUER FOR CONSTRUCTION EQUIPMENT, EARTH MOVING MACHINERIES, COMMERCIAL VEHICLES AND OTHER ASSETS. IT WAS FURTHER SUBMITTED THAT THE ANNUAL REPORT OF THE COMPARABLE IS NOT AVAILABLE IN THE PUBLIC DOMAIN FOR QUANTITATIVE ANALYSIS. THE LD.D.R. SUBMITS THAT THIS COMPANY IS FUNCTIONALLY COMPARABLE AS IT IS PROVIDING LARGE GAMUT OF SERVICES INCLUDING ALLIED BUSINESS SERVICES TO ITS CLIENTS. HE FURTHER SUBMITTED THAT THE COMPANY ALSO QUALI FIES THE QUANTITATIVE FILTERS. ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 13 ON PERUSAL OF RIVAL CONTENTIONS, WE FIND THAT THE FUNCTIONAL PROFILE OF THE COMPANY QUIPPO VALUERS AND AUCTIONEERS P.LTD. IS NOT SIMILAR TO THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY. WHEN A COMPANY IS PROVIDING ASSET MANAGEMENT SERVICES AS AN AUCTIONEER AND IS ALSO UNDERTAKING VALUATION OF CONSTRUCTION EQUIPMENT, EARTH MOVING MACHINERIES ETC. A ND WHEN SEGMENTAL DATA IS NOT AVAILABLE, THIS COMPANY HAS TO BE, IN OUR OPINION, EXCLUDED FROM THE LIST OF COMPARABLE S. (D) TSR DARASHAW LTD. : - THE TPO INCLUDED THIS COMPANY ON THE GROUND THAT THE COMPANY IS PROVIDING BUSINESS OUT SOURCING SERVICES TO CLIENTS IN INDIA. THESE SERVICES ARE PROVIDED TO LOCAL CLIENTS AND NOT THE FOREIGN CLIENTS AND HENCE THEY ARE NOT SIMILAR TO ITES SERVICES. THE TPO OBSERVED THAT ITES COMPANIES HAVE THE ADVANTAGE OF LOCATION SAVINGS, WHILE THE BUSINESS SERVICE COMPANIES DO NOT HAVE ADVANTAGE. SINCE IN THIS CASE THE SERVICES ARE PREDOMINANTLY PROVIDED IN INDIA , THE COMPANY IS A CORRECT COMPARABLE. HE ALSO HELD THAT THE ASSESSEE HAD NOT GONE INTO THE VERTICALS OR HIGH END OR LOW END DISTINCTIONS WHILE SELECTING THE COMPARABLES AND HAS SELECTED COMPANIES OPERATING IN VARIOUS VERTICALS. THE TPO HAS ALSO SELECTED COMPARABLES WHICH ARE BROADLY ENGAGED IN THE FIELD OF MARKETING SUPPORT SERVICES WHICH HAS SIMILAR TO THE SERVICES PROVIDED BY THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT THE COMPANY IS NOT FUNCTIONALLY COMPARABLE. I T IS CONTENDED THAT THERE CAN BE NO COMPARISON BETWEEN A SPECIFIC PAY ROLL SERVICE RENDERED AND MARKETING SUPPORT SERVICE PROVIDED. IT WAS CONTENDED THAT TSR DARASHAW LTD. IS A BROKING AND INVESTMENT BANKING HOUSE AND AS 57.4% OF ITS INCOME IS FROM THE SHARE REGISTRY SERVICES SEGMENT AND HENCE NOT A COMPARABLE. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS. I . MICROSOFT CORPORATION P.LTD. VS. DCIT IN ITA NO.5766/DEL/2011; II . PRE MIER EXPLORATION SERVICES P.LTD. VS. ITO IN ITA NO.4935/DEL/2011. ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 14 IN OUR CONSIDERED OPI NION TSR DARASHAW LTD. CANNOT BE TAKEN AS A COMPARABLE AS 57.4% OF ITS INCOME IS FROM SHARE REGISTRY SERVICES SEGMENT. THIS SHOWS THE FUNCTIONAL PROFILE OF THE ASSESSEE IS DIFFERENT. IN THE CASE OF MISCROSOFT CORPORATION LTD. (SUPRA) AT PARA 18 THE TRIBU NAL HAS HELD AS FOLLOWS. COMING TO THE MERITS OF COMPARABILITY, WE FIND THAT THIS COMPANY HAS THREE SEGMENTS, WHICH INTER ALIA INCLUDE: PAY ROLL AND TRUST FUND ACTIVITY (PAY ROLL) . IT IS THIS SEGMENT WHICH HAS BEEN CONSIDERED BY THE ASSESSEE AS COMPARA BLE. THIS COMPANY ON AN OVERVIEW IS A BROKING AND INVESTMENT BANKING HOUSE. ITS OTHER SEGMENTS ARE : REGISTRAR AND TRANSFER AGENT ACTIVITY (R&D) AND RECORDS MANAGEMENT ACTIVITY (RECORDS) . THE SEGMENT OF PAY ROLL WAS CONSIDERED BY THE ASSESSEE AS C OMPARABLE IN ITS TP STUDY REPORT AND THE SAME IS NOW ASSAILED. UNDER THE PAY ROLL SEGMENT, THIS COMPANY UNDERTAKES PAY ROLL AND EMPLOYEE TRUST FUND ADMINISTRATION AND MANAGEMENT. WHEN WE COMPARE THE NATURE OF PAY ROLL ACTIVITY UNDERTAKEN BY THIS COMPAN Y WITH THE MARKETING SUPPORT SERVICES RENDERED BY THE ASSESSEE TO ITS AES, WE FIND THAT BOTH ARE WAY APART FROM EACH OTHER. THERE CAN BE NO LOGICAL COMPARISON BETWEEN A SPECIFIC PAY ROLL SERVICES RENDERED BY A COMPANY TO ITS CLIENTS WITH THE MARKETING SUP PORT SERVICES RENDERED BY THE ASSESSEE TO ITS AES. THIS COMPANY IS, THEREFORE, DIRECTED TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CASE, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPARABLE. 8.4. THE ASSESSE E HAS NOT ARGUED FOR THE EXCLUSION OR INCLUSION OF ANY OTHER COMPARABLE. 9 . ON THE ISSUE OF TREATING FOREIGN EXCHANGE LOSS/GAIN AS NON - OPERATIVE BY THE A.O., THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TPO/DRP ERRED IN ON APPRECIATING THE FUNCTIONAL PROFILE OF THE ASSESSEE CORRECTLY, LEADING TO A CONCLUSION THAT THE FOREIGN EXCHANGE LOSS/GAIN IS NON OPERATING LOSS/GAIN . HE SUBMITTED THAT SPECIFIC OBJECTION WAS RAISED B EFORE THE DRP . ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 15 HE SUBMITTED THAT THE DRP DIRECTED THE AO/TPO TO RECOMPUTED THE MARGINS OF THE COMPARABLES, IN ACCORDANCE WITH SAFE HARBOUR RULE, WITHOUT APPRECIATING THAT SAFE HARBOUR RULES ARE APPLICABLE FROM THE A.Y. 2013 - 14. THE LD.COUNSEL FO R THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS AND ARGUED THAT FOREIGN EXCHANGE LOSS/PROFIT SHOULD BE TREATED AS AN OPERATING LOSS. HE RELIED ON THE FOLLOWING CASE LAWS. 1 . WESTFALIA SEPARATOR INDIA P.LTD. VS. ACIT ITA 4446/07 2 . ACIT VS. PRAKASH I SHAH (2008) 115 ITD 167 (MUM) (SB) 3 . IPASS INDIA PVT.LTD. VS. ITO ITA NO. 1292/BANG/2014 9.1 . THE LD.D.R. RELIED ON THE ORDER OF THE DRP AND SUBMITTED THAT THE SAME BE UPHELD. 10 . ON CONSIDERATION OF RIVAL CONTENTIONS, WE HOLD AS FOLLOWS. THIS IS NOT A NEW OR AD DITIONAL GROUND. IT IS AN ASPECT OF A GROUND ALREADY TAKEN BY THE ASSESSEE. 10.1 . ON OBSERVING THE FUNCTIONAL PROFILE OF THE ASSESSEE, WE ARE INCLINED TO AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT THE FOREIGN EXCHANGE LOSS/PROFIT IS AN OPERATING LOSS , IF THE TRANSACTION ON WHICH IT AROSE IS CONNECTED WITH THE CORE BUSINESS/SERVICES BEING RENDERED BY THE ASSESSEE. THIS ASPECT NEEDS EXAMINATION. THUS WE DEEM IT APPROPRIATE TO SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR DENOVO ADJUDICATION IN ACCORD ANCE WITH LAW. THE AO SHALL KEEP IN MIND THE PROPOSITIONS LAID DOWN BY THE TRIBUNAL IN THE ABOVE REFERRED CASES AND ACCORDINGLY DISPOSE OF TH IS ISSUE DE NOVO. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN C OURT ON 15 TH FEBRUARY , 2016 . SD/ - SD/ - ( KULDIP SINGH ) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 15 TH FEBRUARY, 2016 MANGA ITA 1233/DEL/2015 A.Y. 2010 - 11 ADIDAS TECHNICAL SERVICES LTD., DELHI 16 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR