Eaton Industries Pvt. Ltd., Pune V. DCIT Cir.-8, Pune

ITA 1462/PUN/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1885 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 21-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANDEEP GARG
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 1 462 /PN/201 0 / ASSESSMENT YEAR : 20 0 6 - 0 7 EATON INDUSTRIES PVT. LTD., 145, OFF MUMBAI PUNE ROAD, PIMPRI, PUNE 411018 . / APPELLANT PAN: AA ACE6351P VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 8 , PUNE . / RESPONDENT / APPELLANT BY : SHRI VISHAL KALRA / RESPONDENT BY : SHRI SANDEEP GARG , CIT / / / DATE OF HEARING : 1 8 . 0 2 .201 6 / DATE OF PRONOUNCEMENT : 16 . 0 5 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF D CIT , CIRCLE - 8, PUNE , DATED 31 . 12 .20 09 RELATING TO ASSESSMENT YEAR 20 0 6 - 0 7 PASSED UNDER SECTION 1 4 3(3) R.W.S. 14 4C OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. ASSESSING OFFICER ('A O ') PURSUANT TO THE DIRECTIONS OF THE LD. DISPUTE RESOLUTION PANEL ( D RP') ERRED IN REJECTING THE BENCH MARKING ANALYSIS CONDUCTED BY THE APPELLANT IN THE TRANSFER PRICING STUDY AND THEREBY MAKING A TRANSFER PRICING ADJUSTMENT OF R S .1,08,89,061 TO THE INCOME OF THE APPELLANT BY HOLDING THAT THE INTERNATIONAL TRANSACTION OF 'PROVISION O F BUSINESS SUPPORT SERVICES' OF THE APPELLANT DOES NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE INCOME - TAX ACT, 1961 ('THE ACT') . ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 2 2 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. D RP AND THE A O ERRED IN NOT ALLOWING THE USE OF MULTIPLE YEAR DATA AS PRESCRIBED UNDER RULE 10 B (4) OF THE INCOME - TAX RULES, 1962 ('RULES') AND DETERMINING THE ARM'S LENGTH PRICE ON THE BASIS OF FINANCIAL INFORMATION OF THE COMPARABLES FOR THE PREVIOUS YEAR 2005 - 06 WHICH WAS AVAILABLE IN THE PUBLIC DOMAI N ONLY AT THE TIME OF ASSESSMENT PROCEEDINGS AND NOT AT THE TIME WHEN THE APPELLANT CONDUCTED ITS ANALYSIS TO COMPLY WITH THE PROVISIONS OF RULES 10 B (4) AND 10 D (4) OF THE RULES. 3 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. DRP AND AO ER RED IN SELECTING THE SAME SET OF COMPARABLES WHICH WERE SELECTED ON THE BASIS OF MULTIPLE YEAR DATA, WHEN THE NATURE OF BUSINESS (BASED ON SINGLE YEAR DATA I.E. FY 2005 - 06 DATA ALONE) WAS DIFFERENT, ON A WITHOUT PREJUDICE BASIS. FURTHER, THE LD. DRP AND AO ERRED IN REJECTING THE QUALITATIVE ANALYSIS CONDUCTED BY THE APPELLANT USING THE RELEVANT QUALITATIVE DATA AVAILABLE FOR FY 2005 - 06 TO DEMONSTRATE THAT CERTAIN COMPANIES WERE NOT COMPARABLE DURING FY 2005 - 06. 4 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, A ND IN LAW, THE LD. DRP AND AO ERRED IN DISREGARDING THE FRESH SEARCH FOR COMPARABLES USING DATA FOR FY 2005 - 06 ALONE, SUBMITTED BY THE APPELLANT ON A WITHOUT PREJUDICE BASIS, WITHOUT PROVIDING ANY COGENT REASONS FOR REJECTING THE COMPARABLES SO IDENTIFIED IN THE FRESH SEARCH. 5 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. DRP / AO ERRED IN NOT TAKING THE COGNIZANCE OF DIFFERENCES IN THE RISKS ASSUMED BY THE COMPARABLES AND THE RISKS ASSUMED BY THE APPELLANT AND THEREBY NOT GRANTING AN ADJU STMENT FOR THE DIFFERENCE BETWEEN THE LEVEL OF RISK BORNE BY THE COMPARABLES, WHICH ARE ENTREPRENEURS AND THE APPELLANT, WHICH IS A COST PROTECTED ENTITY. 6 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO / DRP 6 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. AO / DRP ERRED IN NOT GRANTING THE BEN EFIT OF +/ - 5% RANGE AS PER THE PROVISO TO SECTION 92C(2) OF THE ACT. 7 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO OUGHT TO HAVE CONSIDERED THE FACT THAT THE APPELLANT PROVIDED ALL THE INFORMATION REQUESTED DURING THE ASSESSMENT PROCE EDINGS AND HAS NOT PROVIDED INACCURATE PARTICULARS OF ITS INCOME. THEREFORE, THE LD. AO HAS ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ON THE PREMISE THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME . TH E APPELLANT PRAYS THAT THE LD. AO BE DIRECTED TO DELETE THE ADJUSTMENT OF RS.1,08,89,061/ - MADE UNDER SECTION 92CA(3) OF THE ACT. 3. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 56,29,319/ - . THE ASSESSEE WAS ENGAGED IN PROVIDING DESIGN ENGINEERING SERVICES AND HAD RESEARCH & DEVELOPMENT CENTRE AT PUNE. THE SAID CENTRE WAS APPROVED UNDER THE SOFTWARE TECHNOLOGY PARKS OF INDIA (STP I) SCHEME. THE ASSESSEE ALSO PROVIDE S SALES AND MARKETING SUPPORT SERVICES FOR PRODUCTS MANUFACTURED BY OTHER G ROUP COMPANIES SOLD IN INDIA, THROUGH ITS NON - STPI ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 3 UNITS. THE ASSESSING OFFICER MADE A REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (TPO) FOR B ENCHMARKING INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. THE TPO NOTED THAT THE ASSESSEE HAD ENTERED INTO DIFFERENT INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES I.E. IN THE FIELD OF PROVIDING ENGINEERING DESIGN AND DEVELOPMENT SER VICES TO THE TUNE OF RS. 60,67,11,083/ - , AGAINST WHICH IT HAD APPLIED CUP METHOD. FURTHER, IT HAD PROVIDED BUSINESS SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISES I.E. EATON CORPORATION, USA TO THE TUNE OF RS.2,66,42,335/ - AND THE METHOD ADOPTED FOR BENCHMA RKING THE INTERNATIONAL TRANSACTION WAS TNMM METHOD. FURTHER, THE ASSESSEE ALSO RECEIVED REIMBURSEMENT OF EXPENSES FROM ITS ASSOCIATE ENTERPRISES TO THE TUNE OF RS. 30,61,936/ - , AGAINST WHICH IT APPLIED CUP METHOD. THE ISSUE ARISING BEFORE US IS ONLY WITH REGARD TO BUSINESS SUPPORT SERVICES PROVIDED BY THE ASSESSEE TO ITS ASSOCIATE ENTERPRISES AND ACCORDINGLY, WE SHALL MAKE REFERENCE TO THE FACTUAL ASPECTS OF SAID TRANSACTION IN ORDER TO ADJUDICATE THE ISSUE RAISED IN THE PRESENT APPEAL. DURING THE COURSE IN ORDER TO ADJUDICATE THE ISSUE RAISED IN THE PRESENT APPEAL. DURING THE COURSE OF TP PROCEEDINGS, THE TPO ASKED THE ASSESSEE TO SUBMIT THE COPY OF AGREEMENT, IF ANY, FOR PROVISION OF SAID SERVICES TO ITS ASSOCIATE ENTERPRISES. THE ASSESSEE FAILED TO FURNISH ANY SUCH AGREEMENT AND THE TPO WAS OF THE VIEW THAT THERE IS NO AGREEMENT B ETWEEN THE TWO. IN RESPECT OF SERVICES RENDERED BY THE ASSESSEE, REFERENCE WAS MADE TO THE TP REPORT AT PAGE 5, WHEREIN THE ASSESSEE HAD STATED THAT THE HIGH SUPPORT SERVICES RENDERED BY IT INCLUDED MARKET RESEARCH ANALYSIS ON THE GROUPS HIGH END MARKETS, ANALYSIS OF FINANCIAL REPORTS, ANALYSIS OF COMPETITIVE INTELLIGENCE DOCUMENTS, FINANCIAL ANALYSIS FOR DECISION ON MERGERS AND ACQUISITIONS, CREATING ACQUISITION PROPOSALS, ETC. THE ASSESSEE WAS REMUNERATED ON THE BASIS OF MARK - UP ON THE COST FOR BUSINESS SUPPORT SERVICES PROVIDED TO EATON CORPORATION, USA. FURTHER, THE ASSESSEE WAS 100% CAPTIVE SERVICE PROVIDER I.E. PROVIDING BUSINESS SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISES ONLY. THE ASSESSEE HAD ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 4 APPLIED TNMM METHOD TAKING OPERATING PROFIT / TOTAL COST AS PROFIT LEVEL INDICATOR (PLI) . THE ASSESSEE HAD FOUND THE COMPARABLES WITH THEIR WEIGHTED MEAN OF PLI OF 12.61% AS AGAINST ASSESSEES MARGINS OF OP/TC BEING 7.39% AND THE CONTENTION OF ASSESSEE WAS THAT IN VIEW OF PROVISO TO SECTION 92C(2) OF THE ACT, THE TRANSACTION RELATING TO BUSINESS SUPPORT SERVICES WERE AT ARM'S LENGTH PRICE. THE ARITHMETIC MEAN OF UPDATED OP/TC OF COMPARABLES BY TAKING THE DATA FOR THE YEAR UNDER CONSIDERATION AS SUBMITTED BY THE ASSESSEE AT ANNEXURE D OF ITS SUBMISSIONS DA TED 01.05.2009 WAS 42.70% . 4. THE TPO WAS OF THE VIEW THAT B ENCHMARKING UNDERTAKEN BY THE ASSESSEE WAS NOT CORRECT AND A SHOW CAUSE NOTICE IN THIS REGARD WAS ISSUED TO THE ASSESSEE. THE ASSESSEE HAD WORKED OUT THE AVERAGE MARGINS OF COMPARABLES BY ADOP TING THE WEIGHTED OPERATING PROFIT / TO TAL COST I.E. USING MULTIPLE YEARS DATA AS THE BASIS FOR COMPUTING AVERAGE MEAN OF MARGINS OF COMPARABLES AT 12.61%. THE ASSESSEE WAS ASKED TO SUBMIT THE DATA FOR FINANCIAL YEAR 2005 - 06 ALONE AND AS PER THE SAID DATA , ARITHMETIC MEAN OF MARGINS OF COMPARABLES WORKED OUT TO 42.70%. THE SAID MARGINS WERE IN RESPECT OF 11 COMPARABLES PICKED UP BY THE ASSESSEE ITSELF IN ITS TP STUDY REPORT. THE TPO WAS OF THE VIEW THAT THREE COMPANIES OUT OF SET OF COMPARABLES PICKED UP BY THE ASSESSEE I.E. INDIA SECURITIES LTD., PIONEER INVESTCORP LTD. AND KINETIC TRUST LTD. HAD TO BE EXCLUDED AND THE REMAINING SET OF EIGHT COMPARABLES WERE TO BE ADOPTED AS SET OF COMPARABLES FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANSACTION S RELATING TO BUSINESS SUPPORT SERVICES. THE ASSESSEE WAS SHOW CAUSED IN THIS REGARD AND IT WAS ALSO POINTED OUT THAT THE ARITHMETIC MEAN OF PLI OF COMPARABLES WORKED OUT TO 49.07%, WHEREAS THE OPERATING PROFIT / TOTAL COST OF THE ASSESSEE COMPANY WAS ONL Y 7.39% AND ADJUSTMENT ON ACCOUNT OF DIFFERENCE OF 41.68% SHOULD BE MADE IN THE HANDS OF ASSESSEE. THE ASSESSEE IN THE FIRST INSTANCE, OBJECTED TO THE ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 5 USE OF SINGLE YEAR DATA IN DETERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. THE ASSESS EE IN THIS REGARD HAS ALSO RAISED GROUND OF APPEAL NO.2 BEFORE US. HOWEVER, DURING THE COURSE OF HEARING, THE SAID GROUND OF APPEAL HAS NOT BEEN PRESSED AND HENCE, WE DO NOT ADJUDICATE THE SETTLED ISSUE THAT FOR BENCHMARKING INTERNATIONAL TRANSACTIONS OF ANY CONCERN, THE SINGLE YEAR DATA IS THE MOST APPROPRIATE DATA TO BE USED FOR WORKING OUT THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY ANY PERSON. 5 . THE S ECOND OBJECTION RAISED BY THE ASSESSEE BEFORE THE TPO WAS THAT THIRD COMPA RABLE WHICH HAS BEEN PROPOSED TO BE REJECTED IN THE SHOW CAUSE NOTICE FOR THE REASONS OF THEIR FAILURE TO PASS ONE OF THE QUANTITATIVE FILTER I.E. FUND BASED INCOME DIVIDED BY TOTAL INCOME BEING GREATER THAN 25%, ACCORDINGLY, IF THE QUANTITATIVE FILTERS HA VE BEEN CONSIDERED TO BE APPROPRIATE, THEN THE QUALITATIVE PARAMETERS BASED ON THE DATA AVAILABLE FOR FINANCIAL YEAR 2005 - 06 FOR THE PURPOSE OF ACCEPTING OR REJECTING THE COMPARABLES SHOULD ALSO HAVE BEEN FOLLOWED, WHERE ESPECIALLY, THE COMPANIES MAY HAVE DIVERSIFIED / EXPANDED INTO OTHER ACTIVITIES / BUSINESS VENTURES. IN THIS REGARD, THE ASSESSEE POINTED OUT THAT THE BUSINESS DESCRIPTION OF FIVE COMPARABLES WHICH WERE (I) AJCON GLOBAL SERVICES LTD., (II) BRESCON CORPORATE ADVISORS LTD., (III) S R E I CAP ITAL MARKETS LTD., (IV) KHANDWALA SECURITIES LTD. AND (V) KEYNOTE CORPORATE SERVICES LTD. IT WAS FURTHER POINTED OUT BY THE ASSESSEE THAT TWO COMPARABLES I.E. INDIA SEC URITIES LTD. AND KINETIC TRUST LTD. HAVE NOT BEEN CONSIDERED BY THE TPO ON ACCOUNT OF S IGNIFICANT LOSSES AND FURTHER, PIONEER INVESTCORP LTD. HAD BEEN REJECTED ON ACCOUNT OF EARNING SIGNIFICANTLY HIGH PROFITS. THE ASSESSEE POINTED OUT THAT OTHER COMPANIES I.E. AJCON GLOBAL SERVICES LTD., BRESCON CORPORATE ADVISORS LTD. AND KHANDWALA SECURIT IES LTD. WERE ALSO EARNING SIGNIFICANTLY HIGH PROFITS, BUT THEY HAD BEEN RETAINED AS COMPARABLES. THE CLAIM OF THE ASSESSEE IN THIS REGARD WAS WHERE THE ASSESSEE WAS COST ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 6 INSULATED UNIT, THEN SUCH AN ENTITY COULD NOT INCUR LOSSES ON ACCOUNT OF BEING IT CO ST PROTECTED AND ALSO ACCORDINGLY, IT COULD NOT EARN HIGH SIGNIFICANT PROFITS , WHICH WERE LINKED TO ENTREPRENEUR RISKS. THE PLEA OF THE ASSESSEE BEFORE THE TPO WAS THAT SIGNIFICANT LOSS MAKERS HAVE BEEN EXCLUDED FOR THE REASON THAT THE COST INSULATED ENTI TY COULD NOT INCUR LOSSES, THEN THE SIGNIFICANT PROFIT EARNERS SHOULD ALSO BE REJECTED ON SIMILAR GROUNDS. WHERE THE LOSS OF 30% FOR KINETIC TRUST LTD. HAD BEEN CONSIDERED TO BE IN THE CATEGORY OF SIGNIFICANT LOSS MAKER, THEN THE PROFIT OF OVER AND ABOVE 30% RETAINED ON COST SHOULD ALSO BE REJECTED AS SIGNIFICANT PROFIT EARNER. IN THIS VIEW ONLY THREE COMPARABLES I.E. IDC (INDIA) LTD., KJMC GLOBAL MARKET (INDIA) LTD. AND SREI CAPITAL MARKET (INDIA) LTD. WOULD REMAIN IN THE SET OF COMPARABLES WITH THE ARIT HMETIC MEAN OF TOTAL COST WORKING OUT TO 15.13%. FURTHER, THE ASSESSEE ASKED FOR BENEFIT OF +/ - 5% AS PROVIDED IN THE PROVISO TO SECTION 92C(2) OF THE ACT. THE TPO FIRST ELABORATELY CONSIDERED THE SUBMISSIONS OF ASSESSEE FOR THE ADOPTION OF MULTIPLE YEAR DATA VIS - - VIS SINGLE YEARS DATA AND HELD THAT ONLY SINGLE YEARS DATA COULD YEAR DATA VIS - - VIS SINGLE YEARS DATA AND HELD THAT ONLY SINGLE YEARS DATA COULD BE USED. 6 . THE TPO NEXT CONSIDERED THE PLEA OF THE ASSESSEE THAT AFTER THE UPDATED MARGINS OF EXISTING COMPARABLES USING DATA FOR FINANCIAL YEAR 2005 - 06 ONLY, WHEN DETAILED E VALUATION ON THE COMPARABILITY WAS UNDERTAKEN WHICH REVEALED ONLY TWO COMPANIES PASS THE QUALITATIVE AND QUANTITATIVE FILTERS, MERELY BECAUSE THE COMPANIES WERE EARLIER PICKED UP FOR DETERMINATION OF TRANSFER PRICE OF INTERNATIONAL TRANSACTION BY IT, SHOUL D NOT BE APPLIED, CONSIDERING THE CURRENT YEARS DATA, WAS REJECTED BY THE TPO. THE ASSESSEES ENDEAVOUR TO UNDERTAKE FRESH SEARCH WAS NOT ACCEPTED BY THE TPO. THE TPO FURTHER CONSIDERED THAT WHERE THERE WAS NO DISCREPANCY OR FAULT WAS NOTICED BY THE ASS ESSEE IN THE QUALITATIVE PARAMETERS, IT ADOPTED IN ITS TRANSFER PRICING REPORT, THEN QUALITATIVE PARAMETERS TO BE ADOPTED FOR BENCHMARKING ANALYSIS ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 7 COULD NOT ITSELF CHANGE WITHOUT THERE BEING CHANGE IN THE FUNCTIONAL PROFILE OF TESTED PARTY. ACCORDINGLY, FRESH SEARCH CONDUCTED BY THE ASSESSEE WAS NOT ACCEPTED. 7 . COMING TO THE SECOND CONTENTION OF ASSESSEE THAT IN CASE THREE COMPARABLES WERE PROPOSED TO BE REJECTED FOR THE REASON OF THEIR FAILURE TO PASS ONE OF QUANTITATIVE FILTER, THEN THE QUALITATIVE PARAMETERS BASED ON THE DATA AVAILABLE FOR FINANCIAL YEAR 2005 - 06 FOR THE PURPOSE OF ACCEPTING OR REJECTING COMPARABLES SHOULD HAVE BEEN FOLLOWED, WHERE THE COMPARABLES HAVE DIVERSIFIED OR EXPANDED INTO OTHER ACTIVITIES / BUSINESS VENTURES IN FINANCIAL YEA R 2005 - 06 WAS TAKEN NOTE OF BY THE TPO. HE FURTHER NOTED THAT THREE COMPANIES WHICH GOT SCREENED OUT WERE IN RELATION TO QUANTITATIVE FILTER APPLIED BY THE ASSESSEE IN ITS TRANSFER PRICING REPORT AND THEY DO NOT QUALIFY THE QUANTITATIVE FILTER. FURTHER, THE ASSESSEE HAD USED THE QUALITATIVE FILTERS OR CRITERIA OF THE COMPANIES ENGAGED IN FINANCIAL ADVISORY, RESEARCH AND CONSULTANCY ACTIVITIES AS COMPARABLES. THE TPO THUS, HELD THAT IN CASE THE COMPANIES SATISFIES THE ABOVE SAID QUALITATIVE PARAMETERS, TH EN THE SAME WOULD BE IN THE FINAL SET OF COMPARABLES AND IT WAS HELD THAT THERE WAS NO MERIT IN THE CONTENTION OF ASSESSEE THAT QUALITATIVE PARAMETERS SHOULD ALSO BE FOLLOWED WHILE SELECTING THE COMPARABLES, WHICH ACTUALLY HAD BEEN FOLLOWED BY THE ASSESSEE IN ITS TRANSFER PRICING REPORT AND WHICH HAS NOT BEEN PROPOSED TO BE DESCRIBED IN THE SHOW CAUSE NOTICE. THEREAFTER, THE TPO CONSIDERED THE OBJECTIONS OF ASSESSEE IN RESPECT OF FIVE COMPARABLES TO BE EXCLUDED AND THE CONTENTION OF ASSESSEE IN THIS REGARD WAS FOUND TO BE NOT ACCEPTABLE BECAUSE THE SAID COMPANIES WERE FUNCTIONALLY SIMILAR. IN RESPECT OF APPLICATION OF QUANTITATIVE FILTER AND EXCLUSION OF THREE CONCERNS AS PROPOSED BY THE TPO, HE HELD THAT THE SAME WERE PROPOSED TO BE EXCLUDED FOR NOT ONLY PASSING THE QUANTITATIVE FILTER BUT ALSO TWO CONCERNS I.E. INDIA SECURITIES LTD. AND KINETIC TRUST LTD. WERE INTO SIGNIFICANT ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 8 LOSSES. AS FAR AS EXCLUSION OF PIONEER INVESTCORP LTD. WAS CONCERNED, THE TPO OBSERVED THAT THE SAID COMPANY FAILED ONE OF THE QU ANTITATIVE FILTERS AS WELL AS HIGHEST MARGIN EARNER OF 151.7 1 % , HENCE, IT FAILED IN TWO FILTERS. AS FAR AS THE COMPANIES AJCON GLOBAL SERVICES LTD., BRESCON CORPORATE ADVI SORS LTD . AND KHANDWALA SECURITIES LTD. WERE CONCERNED, THE TPO OBSERVED THAT THEY D ID NOT FAIL IN ANY OF THE QUANTITATIVE FILTERS OR IN QUALITATIVE PARAMETERS, AS ADOPTED BY THE ASSESSEE IN ITS TP REPORT AND THEREFORE, THERE WAS NO REASON TO EXCLUDE THE SAME FROM FINAL SET OF COMPARABLES. THE CONTENTION OF THE ASSESSEE THAT IT WAS A COS T INSULATED CONCERN AND HENCE, WAS RISK MITIGATED AND WHERE AN ENTITY COULD NOT INCUR LOSSES ON ACCOUNT OF IT BEING COST PROTECTED, THEN THE SAME ENTITY ALSO COULD EARN SIGNIFICANT PROFITS, WAS ALSO CONSIDERED BY THE TPO AND HE OBSERVED THAT THE CONCERN UN DERTOOK THE RISK RELATING TO PRODUCT / SERVICE LIABILITY RISK AND IT WAS REQUIRED TO ADHERE TO QUALITATIVE STANDARDS LAID DOWN BY EATON CORPORATION, USA. FURTHER, IT WAS MAINLY EXPOSED TO MANPOWER RISKS PREVAILING IN MARKET. THUS, IT WAS HELD BY TH E TPO THAT THE ASSESSEE WAS PREVAILING IN MARKET. THUS, IT WAS HELD BY TH E TPO THAT THE ASSESSEE WAS EXPOSED TO LIMITED RISK AND ONLY THE MARKET RISK AND CREDIT RISK WERE THE ONES TO WHICH IT WAS NOT EXPOSED . B UT ONCE IT WAS NOT EXPOSED, WHICH IN NO WAY AFFECTS PROFITS FROM LOW LEVELS AS COMPARED TO THE MARKET AVERAGE OR THE INDUSTRIES AVERAGE PROFITS. WHERE THE ASSE SSEE APART FROM PROVIDING BUSINESS SUPPORT SERVICES WAS ALSO PROVIDING MARKET RESEARCH AND ANALYSIS AND ALSO ENGINEERING SERVICES TO ITS ASSOCIATE ENTERPRISES , T HE ASSESSEE WAS REMUNERATED ON HOURLY BASIS AND WA S EARNING HIGHER MARGINS IN THIS REGARD. THU S, THE CONTENTION OF ASSESSEE THAT THE COMPANIES EARNING PROFITS MORE THAN 30% OF THE COST OF WERE TO BE REJECTED, WAS FOUND TO BE NOT ACCEPTABLE. THE ASSESSEE WAS NOT ALLOWED THE BENEFIT OF +/ - 5% AS PROVIDED IN PROVISO TO SECTION 92C(2) OF THE ACT . THE TPO THUS, ADOPTED FINAL SET OF 7 COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE, WHICH READS AS UNDER: - ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 9 S.NO. NAME OF THE COMPANY OP/TC 1 AJCON GLOBAL SERVICES LTD. 94.85% 2 BRESCON CORPORATE ADVISORS LTD. 119.84 % 3 IDC (INDIA) LTD. 14.49% 4 KJMC GLOBAL MARKET (INDIA) LTD. 17.02% 5 SREI CAPITAL MARKETS LTD. 13.84% 6 CRISIL LTD. 15.15% 7 KHANDWALA SECURITIES LTD. 83.79% MEAN 51.28% 8 . THE ARITHMETIC MEAN OF PLI OF PROPOSED SET OF COMPARABLES WORKED OUT TO 51.28% AS AGAINST PLI OF THE ASSESSEE AT 7.39% AND CONSEQUENTLY THE TPO PROPOSED AN ADJUSTMENT OF RS. 1,08,89,061/ - TO BE MADE TO THE INTERNATIONAL TRANSACTION RELATING TO BUSINESS SUPPORT SERVICES UNDERTAKEN BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. THE ASSESSING OFFICER PROPOSED DRAFT ASSESSMENT ORDER IN THIS REGARD AND THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP), WHO IN TURN, REJECTED ALL THE OBJECTIONS RAISED BY THE ASSESSEE COMPANY AND CONFIRMED THE ADDITION MADE BY T HE TPO / ASSESSING OFFICER. THE ASSESSING OFFICER THUS, PASSED AN ORDER UNDER SECTION ASSESSING OFFICER. THE ASSESSING OFFICER THUS, PASSED AN ORDER UNDER SECTION 143(3) R.W.S. 144C OF THE ACT ON 25.10.2010 AND MADE AN ADDITION OF RS. 1,08,89,061/ - ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSE SSEE WITH ITS ASSOCIATE ENTERPRISES. 9 . THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF ASSESSING OFFICER. 10 . THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSEE IS AGAINST THE SAID ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT OF RS. 1,08, 89,061/ - WHILE PROVIDING BUSINESS SUPPORT SERVICES TO THE ASSOCIATE ENTERPRISES. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS AGAINST REJECTION OF USE OF MULTIPLE YEARS DATA, IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. THE ISSU E IN GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS WITH REGARD TO RETENTION OF FIVE COMPARABLES WHICH WERE QUALITATIVELY NOT SIMILAR AND ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 10 HENCE, NOT TO BE ADOPTED. BY WAY OF GROUND OF APPEAL NO.4, THE ISSUE RAISED IS AGAINST SELECTION OF ONE CONCERN WHIC H WAS SELECTED BY THE ASSESSEE IN A FRESH SEARCH FOR COMPARABLES USING DATA FOR FINANCIAL YEAR 2005 - 06 ALONE. THE CONTENTION OF THE ASSESSEE VIDE GROUND OF APPEAL NO.5 IS AGAINST THE RISK ADJUSTMENT NOT ALLOWED IS NOT TAKING THE COGNIZANCE OF DIFFERENCES IN THE RISKS ASSUMED BY COMPARABLES AND THE RISK ASSUMED BY THE ASSESSEE AND THEREBY NOT GRANTING THE ADJUSTMENT FOR THE SAME. THE GROUND OF APPEAL NO.6 IS NOT PRESSED, HENCE THE SAME IS DISMISSED AS NOT PRESSED AND GROUND OF APPEAL NO.7 IS PREMATURE AND HENCE, THE SAME IS ALSO DISMISSED. 1 1 . THE ONLY ISSUE WHICH REMAINED FOR ADJUDICATION IS THE TRANSFER PRICING ADJUSTMENT MADE BY THE ASSESSING OFFICER AND THE VARIOUS FACETS OF SAID TRANSFER PRICING ADJUSTMENT IN RESPECT OF INTERNATIONAL TRANSACTION OF PR OVISION OF BUSINESS SUPPORT SERVICES. 1 2 . BOTH THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE MADE ELABORATE SUBMISSIONS IN RESPECT OF ISSUE OF DETERMINATION OF FINAL SET OF COMPARABLES I.E. THE CLAIM OF ASSESSEE WAS AGAINST INCLUSION OF FIVE COMPARABLES , WHICH UNDOUBTEDLY, WERE INCLUDED BY THE ASSESSEE IN ITS TP STUDY REPORT. BUT THE CONTENTION OF THE ASSESSEE WAS THAT THE SAID CONCERNS WERE COMPARABLE WHEN MULTIPLE YEARS DATA WAS APPL IED. HOWEVER, IN CASE SINGLE YEAR DATA OR CURRENT YEAR DATA I.E. FINANCIAL YEAR 2005 - 06 IS ADOPTED FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES, THEN THE RESULTS SHOWN BY THE SAID COMPARABLES ARE AT VARIANC E AND DO NOT FULFILL THE QUALITATIVE FILTER TO BE APPLIED. FURTHER, THE CONTENTION OF ASSESSEE BEFORE US WAS THAT WHERE THE ASSESSEE COMPANY WAS COST INSULATED COMPANY AND AS SUCH, COULD NOT INCUR LOSSES ; S IMILARLY, IT COULD NOT EARN VERY HIGH PROFITS AND ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 11 HENCE, ITS RESULTS COULD NOT BE COMPARED WITH THE SAID CONCERNS WHO WERE EARNING HIGH PROFITS. IN THIS REGARD, OBJECTION WAS RAISED TO THE INCLUSION OF FIVE CONCERNS IN THE FINAL SET OF COMPARABLES AND ALSO REJECTION OF CONCERNS WHICH WERE SELECTED BY TH E ASSESSEE IN A FRESH SEARCH CONDUCTED DURING THE COURSE OF TP PROCEEDINGS BY APPLYING THE DATA FOR FINANCIAL YEAR 2005 - 06 ONLY. ANOTHER CLAIM OF THE ASSESSEE BEFORE US WAS FOR PROVIDING RISK ADJUSTMENT TO THE ASSESSEE. 1 3 . THE REVENUE ON THE OTHER HAN D, STRONGLY OBJECTED TO THE SUBMISSIONS MADE BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD AND POINTED OUT THAT THE LIST OF COMPANIES WHICH WERE FINALLY SELECTED AS COMPARABLE WERE THE CONCERNS WHICH WERE PICKED UP BY THE ASSESSE E IN ITS TP STUDY REPORT. THE ASSESSEE HAD SELECTED THE SAID COMPANIES AS COMPARABLES, WHICH IN TURN, HAVE BEEN ADOPTED BY THE TPO IN ITS TP ORDER FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. THE ONLY DISTINCTION WAS THE DA TA FOR WHICH YEAR TO BE APPLIED . T HE ASSESSEE IN ITS TP STUDY REPORT HAD APPLIED THE DATA OF EARLIER YEARS, WHEREAS DURING THE COURSE OF TP PROCEEDINGS, THE TPO ADOPTED THE DATA FOR RELEVANT ASSESSMENT YEAR, WHICH WAS A PPL IED FOR WORKING OUT COMPARABLE PLI OF THE ASSESSEE WITH THE PLI OF ITS COMPARABLES. THE ASSESSEE BEFORE US HAS NOT PRESSED GROUND OF APPEAL RAISED BY IT WITH REGARD TO APPLICATION OF MULTIPLE YEAR DATA. IN OTHER WORDS, THE ASSESSEE HAS ACCEPTED THE ORDER OF TPO TO THE EXTENT THAT ONLY CURRENT YEARS DATA OF THE COMPARABLES I.E. FOR FINANCIAL YEAR 2005 - 06 IS TO BE APPLIED FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. 1 4 . NOW, THE QUESTION WHICH HAS BEEN RAISED BEFORE US IS WITH REGARD TO DETERMINATION OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 12 THE ASSESSEE . THE ELABORATE SUBMISSIONS IN THIS REGARD HAVE BEEN MADE BY BOTH AUTHORIZED REPRESENTATIVES AND WE SHALL REFER TO THE SAME WH ILE ADJUDICATING THE ISSUE OF ADDITION / INCLUSION OR RETENTION OF THE COMPANIES IN THE FINAL SET OF COMPARABLES. 1 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE US IS A COMPANY WHICH IS PROVIDING VARIOUS SERVICES INCL UDING BUSINESS SUPPORT SERVICES AND RESEARCH AND DEVELOPMENT AND ENGINEERING SERVICES TO ITS ASSOCIATE ENTERPRISE EATON CORPORATION, USA. THE ASSESSEE HAD SEPARATELY SHOWN THE INTERNATIONAL TRANSACTION S IN DIFFERENT FIELDS WITH ITS ASSOCIATE ENTERPRISES. THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE US IS IN RELATION TO THE PROVISION OF BUSINESS SUPPORT SERVICES, WHICH HAS BEEN PROVIDED BY THE ASSESSEE TO ITS ASSOCIATE ENTERPRISES. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WITH REGARD TO BENCHMARKI NG THE INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE . THE ASSESSEE IN ITS TP STUDY REPORT HAD APPLIED THE TNMM METHOD AND HAD TAKEN OPERATING PROFIT / TOTAL COST AS PROFIT LEVEL INDICATOR (PLI), WHICH WORKED OUT TO 7.61% FOR THE YEAR UNDER CONSIDER ATION. THE ASSESSEE HAD SELECTED 11 COMPANIES AS ITS COMPARABLES AND HAD USED MULTIPLE YEAR DATA FOR BENCHMARKING ITS TRANSACTIONS AND AS PER THE ASSESSEE, THE ARITHMETIC MEAN OF PLI OF COMPARABLES WORKED OUT TO 12.61% AS AGAINST ASSESSEES PLI AT 7.39% A ND THE SAME WAS FOUND TO BE AT ARM'S LENGTH PRICE AS THE SAME WAS WITHIN PARAMETERS PROVIDED IN THE PROVISO TO SECTION 92C(2) OF THE ACT. HOWEVER, THE TPO REJECTED THE ANALYSIS IN THE TP STUDY REPORT ON THE GROUND THAT THE DATA FOR THE CURRENT YEAR I.E. F INANCIAL YEAR 2005 - 06 NEEDS TO BE APPLIED TO BENCHMARK THE INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE. IN THIS REGARD, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE, WHO IN TURN, FURNISHED THE DATA FOR THE FINANCIAL Y E AR 2005 - 06 IN RESPECT OF ITS COMPARABLES, DURING THE COURSE OF TP PROCEEDINGS. ALL THESE FIGURES WERE PICKED UP BY THE ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 13 TPO AND WERE APPLIED AND THREE CONCERNS WERE PROPOSED TO BE EXCLUDED SINCE THEY DID NOT QUALITY THE QUALITATIVE FILTER AND ALSO WHERE TWO OF THE CONCERNS WERE LOSS MAKING AND THIRD CONCERN WAS ON ACCOUNT OF EARNING SIGNIFICANTLY HIGHER PROFITS . THE ASSESSEE OBJECTED TO THE SAME AND POINTED OUT THAT IF SUCH QUANTITATIVE FILTER IS TO BE APPLIED TO THE SET OF COMPARABLES, THEN QUALITATIVE FILTERS ALSO SHOULD BE APPLIED IN SELECTING THE FINAL SET OF COMPARABLES. THE ASSESSEE IN THIS REGARD PROPOSED THAT WHERE IT WAS A CAPTIVE SERVICE PROVIDER, THEN IT COULD NOT EARN LOSSES AND SIMILARLY IT COULD NOT EARN HIGHER PROFITS, SO THE CONCERNS WHICH WERE EARNING HIGH PROFITS AS PER THE FINAL LIST OF COMPARABLES, APPLYING THE DATA FOR CURRENT YEAR, THE SAME SHOULD BE REJECTED. THE ASSESSEE STRESSED THAT THE FOLLOWING CONCERNS SHOULD BE REJECTED: - (I) AJCON GLOBAL SERVICES LTD., (II) BRESCON CORPORATE ADVISORS LTD., (III) S R E I CAPITAL MARKETS LTD., (IV) KHANDWALA SECURITIES LTD. AND (V) KEYNOTE CORPORATE SERVICES LTD. 1 6 . THE TPO DID NOT ACCEPT THE PLEA OF ASSESSEE AND THE ASSESSEE IS IN 1 6 . THE TPO DID NOT ACCEPT THE PLEA OF ASSESSEE AND THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN CASE THE SAID CONCERNS ARE EXCLUDED FROM THE FINAL SET OF COMPARABLES, THEN THE PLI OF REMAINING CONCERNS WOULD BE WITHIN +/ - 5% MARGINS. IT MAY BE POINTED OUT HERE THAT THE ASSESSEE HAD INITIALLY APPLIED THE MARGINS OF 11 COMPARABLES AND THE DATA SUBMITTED BY THE ASSESSEE FOR CURRENT YEAR WAS APPLIED IN ORDER TO WORK OUT THE PLI OF SAID 11 COMPARABLES FOR THE CURRENT YEAR. HOWEVER, THREE CONCERNS WERE REJECTED BY THE TPO B ECAUSE OF QUALITATIVE FILTER AND BECAUSE OF LOSS MAKING AND THE THIRD C ONCERN I.E. PIONEER INVESTCORP LTD. BECAUSE OF IT EARNING SIGNIFICANTLY HIGHER PROFITS. 1 7 . NOW, WE PROCEED TO CONSIDER EACH OF THE CONCERNS WHICH AS PER THE ASSESSEE, MERITS TO BE EXCLUDED BEING FUNCTIONALLY NOT COMPARABLE WHEN THE DATA FOR FINANCIAL Y EAR 2005 - 06 IS APPLIED. ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 14 1 8 . THE FIRST SUCH CONCERN IS AJCON GLOBAL SERVICES LTD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT IT HAD MADE ELABORATE SUBMISSIONS BOTH BEFORE THE TPO AND DRP TO POINT OUT THAT IN THE YEAR UNDER CONSIDERATION, THERE WAS 300% RAISE IN INCOME FROM STOCK MARKET OPERATIONS AND 400% INCOME FROM SECURITY TRADING AND AS SUCH, SAID CONCERN WAS NOT COMPARABLE . IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE TRIBUNAL WHILE DECIDING THE APPEAL OF ASSESSEE RELATING TO ASSESSMENT YEAR 2007 - 08 IN ITA NO. 1622/PN/2011, ORDER DATED 28.02.2013 HAD ALSO HELD THE SAID CONCERN TO BE NOT FUNCTIONALLY COMPARABLE. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORI ZED REPRESENTATIVE FOR THE ASSESSEE THAT THE FUNCTIONAL PROFILE OF ASSESSEE WAS SAME AS IN ASSESSMENT YEAR 2007 - 08. HOWEVER, THE ACTIVITIES CARRIED ON BY THE COMPARABLE COMPANY IN THIS YEAR HAD INCREASED SUBSTANTIALLY AND WERE IN DIFFERENT FIELDS. HE ADM ITTED THAT IN THE TP REPORT, THE SAID CONCERN WAS PICKED UP AS COMPARABLE BECAUSE OF DATA FOR THE EARLIER TWO YEARS. HOWEVER, IT WAS POINTED OUT THAT THE SAID CONCERN WAS NOT FUNCTIONALLY SIMILAR WITH THE DATA OF INSTANT YEAR . 1 9 . ON PERUSAL OF RECORD AND THE ORDER OF TPO, WE FIND THAT THE ASSESSEE HAD PICKED UP AJCON GLOBAL SERVICES LTD. AS COMPARABLE WHILE BENCHMARKING ITS INTERNATIONAL TRANSACTIONS IN THE TP STUDY REPORT. THE ASSESSEE HAD RELIED ON THE DATA FOR THE PRECEDING TWO YEAR, WHICH IS AN AD MITTED FACT. HOWEVER, DURING THE COURSE OF TP PROCEEDINGS, THE TPO ASKED TO THE ASSESSEE TO COMPILE THE DATA ON THE BASIS OF CURRENT YEARS FINANCIALS OF THE COMPARABLES . THE PERUSAL OF ORDER OF TPO ITSELF WOULD REFLECT THAT IN THE TP STUDY REPORT, THE P LI OF AJCON GLOBAL SERVICES LTD. WAS 49.09%. HOWEVER, IF THE DATA FOR THE FINANCIAL YEAR 2005 - 06 WAS TAKEN INTO ACCOUNT, THE SAME HAD INCREASED TO ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 15 94.85%. THE ASSESSEE STRESSED BEFORE THE TPO / ASSESSING OFFICER AND DRP AND EVEN BEFORE US THAT IN CASE TH E FINANCIAL DATA FOR FINANCIAL YEAR 2005 - 06 IS TO BE ADOPTED, THEN IN CASE THERE IS ANY QUANTITATIVE OR QUALITATIVE DIFFERENCE, THEN THE SAME SHOULD BE CONSIDERED AND THE LIST OF COMPARABLES SHOULD ACCORDINGLY BE DRAWN. FIRST OF ALL, WE HOLD THAT IN VIEW OF THE PROVISIONS OF RULE 10B (4) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) , WE DO NOT FIND ANY FAULT WITH THE STAND OF TPO IN DETERMINING THE PLI OF COMPARABLE COMPANIES ON THE BASIS OF DATA FOR FINANCIAL YEAR 2006 - 07, WHICH CORRESPONDS TO THE A SSESSMENT YEAR UNDER CONSIDERATION, IN WHICH THE IMPUGNED INTERNATIONAL TRANSACTION HAS BEEN CARRIED OUT. THOUGH THE ASSESSEE BY WAY OF GROUND OF APPEAL NO.2 HAS RAISED THE ISSUE AGAINST SUCH REJECTION OF EARLIER YEARS DATA AND ADOPTION OF DATA FOR THE CU RRENT YEAR, BUT THE SAID GROUND OF APPEAL HAS BEEN WITHDRAWN BY THE ASSESSEE. SIMILARLY, WE FIND THAT THE TRIBUNAL WHILE DECIDING THE APPEAL OF ASSESSEE IN ASSESSMENT YEAR 2007 - 08, VIDE ORDER DATED 28.02.2013 IN PARA 7 HAD CONSIDERED THE SAID ISSUE AND HA D HELD THAT THERE 28.02.2013 IN PARA 7 HAD CONSIDERED THE SAID ISSUE AND HA D HELD THAT THERE WAS JUSTIFICATION IN USING SINGLE YEARS DATA FOR THE YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAD BEEN UNDERTAKEN IN ORDER TO DETERMINE THE TRANSFER PRICING IN RESPECT OF INTERNATIONAL TRANSACTION IN QUESTION. HOWEVER, THE USE OF MUL TIPLE YEAR S DATA ON ONE HAND AND SINGLE YEARS DATA ON THE OTHER HAND HA D SHOWN DIFFERENCES IN THE AVERAGE PLI OF THE CONCERN S WHICH W ERE INITIALLY PICKED UP AS COMPARABLE BY THE ASSESSEE IN ITS TP STUDY REPORT. THE TRIBUNAL IN ASSESSMENT YEAR 2007 - 08 VI DE PARA NOTED THE SAID DIFFERENCE AND OBSERVED THE SAME AND ALSO NOTED THE PROVISO TO RULE 10B(4) OF THE RULES AND HELD AS UNDER: - 8. OSTENSIBLY, THE ISSUE OF MULTIPLE YEARS DATA ON ONE HAND AND THE USE OF SINGLE YEAR DATA ON THE OTHER HAND IN THE PRESEN T CASE SHOWS DIFFERENCE IN AVERAGE PLI OF THE FOUR COMPARABLE CASES. SO HOWEVER, THE SAME DOES NOT MEET WITH THE REQUIREMENTS OF INVOKING THE PROVISO TO RULE 10B(4). PERTINENTLY, THE PROVISO CAN BE INVOKED IN A SITUATION WHERE DATA REVEALS FACTS WHICH C OULD HAVE AN INFLUENCE ON THE DETERMINATION OF TRANSFER PRICES IN RELATION TO THE TRANSACTIONS BEING COMPARED. THE VARIATION IN PLI BY ITSELF IS NOT A FACT TO JUSTIFY INVOKING OF THE SAID PROVISO, RATHER WHAT IS REQUIRED IS TO SHOW THAT THE ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 16 DATA REVEALS CERTAIN FACTS WHICH COULD POSSIBLY HAVE AN INFLUENCE ON DETERMINATION OF THE TRANSFER PRICE. QUITE CLEARLY, THE ASSESSEE HAS NOT DEMONSTRATED ANY QUALITATIVE PECULIARITIES IN THE DATA WHICH REVEAL FACTS THAT ARE POTENT TO JUSTIFY INVOKING OF THE PROVISO T O RULE 10B(4) OF THE RULES IN THE PRESENT CASE. WE THEREFORE, FIND THAT IN THE PRESENT CASE, THE TPO MADE NO MISTAKE IN CONSIDERING SINGLE YEARS DATA PERTAINING TO F.Y. 2006 - 07 TO ARRIVE AT PLI OF THE COMPARABLE CASES IN ORDER TO DETERMINE THE TRANSFER P RICE OF THE IMPUGNED INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. THUS, ON THIS ASPECT, THE ASSESSEE HAS TO FAIL. 20 . AS PER PROVISO TO RULE 10B(4) OF THE RULES, ONUS IS UPON THE ASSESSEE TO PROVE THE QUALITATIVE PECULIARITIES IN THE DATA TO JUSTIFY IN I NVOKING OF SAID PROVISO. THE ASSESSEE BEFORE US HAS S TRESSED THAT EACH CONCERNS RESULTS ITSELF WOULD SHOW THAT IN CASE DATA FOR THE CURRENT YEAR IS APPLIED, THEN THE SAME ARE NOT COMPARABLE. 2 1 . IN RESPECT OF, AJCON GLOBAL SERVICES LTD., THE ASSESSEE POI NTED OUT THAT THERE WAS PHENOMENAL INCREASE IN INCOME OF THE SAID CONCERN IN THE FIELD OF STOCK MARKET OPERATIONS AND SECURITY TRADING AND THE ACTIVITIES CARRIED ON BY THE SAID CONCERN WERE AT VARIANCE WITH THE ACTIVITIES OF ASSESSEE WHO WAS ENG AGED IN BUS INESS SUPPORT SERVICES ONLY. THE TRIBUNAL HAD CONSIDERED THE PROFILE OF SAID CONCERN IN ASSESSMENT YEAR 2007 - 08 VIDE PARA 5.5 , WHICH READ AS UNDER 5.5 AJCON GLOBAL SERVICES LTD (IN SHORT AJCON) A COMPARATIVE ANALYSIS IN THIS REGARD HAS BEEN PLACED A T PAGE 91 OF THE PAPER BOOK. THE SAID CONCERN HAS BEEN SELECTED BY THE TPO ON THE GROUND THAT IT IS RENDERING ADVISORY SERVICES AND IS THEREFORE, COMPARABLE TO THE BUSINESS SUPPORT SERVICES UNIT OF THE ASSESSEE. WE FIND THAT THE SAID CONCERN IS ENGAGED IN ACTIVITIES WHICH ARE NOT PERFORMED BY THE BUSINESS SUPPORT SERVICES UNIT OF THE ASSESSEE, FOR INSTANCE, STOCK MARKET OPERATIONS AND SECURITIES TRADING. IT IS ALSO EVIDENT FROM THE ASSERTION OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT STOCK MARKET OP ERATIONS OF THE SAID CONCERN FORM MORE THAN 60% OF THE TOTAL INCOME OF SUCH CONCERN. QUITE CLEARLY, THE ACTIVITIES OF THE BUSINESS SUPPORT SERVICES UNIT OF THE ASSESSEE DO NOT ENTAIL ANY STOCK MARKET OPERATIONS OR SECURITIES TRADING OR MANAGING OF INTERNE T BROKING PORTALS, ETC., WHICH ARE BEING CARRIED OUT BY THE SAID CONCERN. THEREFORE, WE FIND ENOUGH JUSTIFICATION FOR THE ASSESSEE TO CANVASS THAT THE AFORESAID CONCERN IS FUNCTIONALLY NOT COMPARABLE WITH THE ACTIVITIES UNDERTAKEN BY THE BUSINESS SUPPORT SERVICES UNIT OF THE ASSESSEE. 2 2 . ADMITTEDLY, THE FUNCTIONAL PROFILE OF THE SAID CONCERN WA S SAME AS IN THE INSTANT ASSESSMENT YEAR ALSO AND WHERE THE CONCERN WA S ENGAGED IN STOCK ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 17 MARKET OPERATIONS AND SECURITY TRADING, THE ACTIVITIES OF SAID CONCERN WE RE AT VARIANCE WITH THE ACTIVITIES OF ASSESSEE WHO WA S ENGAGED IN PROVIDING BUSINESS SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISES, WHICH ADMITTEDLY DO NOT ENTAIL ANY STOCK MARKET OPERATIONS OR SECURITY TRADING, ETC. THEREFORE, THE SAID CONCERN WA S NOT FU NCTIONALLY COMPARABLE TO THE ASSESSEE AND HENCE, IS TO BE EXCLUDED FROM FINAL LIST OF COMPARABLES. 2 3 . NOW, COMING TO THE SECOND CONCERN I.E. BRESCON CORPORATE ADVISORS LTD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID CONCERN WA S NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AS IT WAS ENGAGED IN T HE AREA OF FINANCIAL RESTRUCTURING RECAPITALIZATION. HE FURTHER STATED THAT SIMILAR POINT OF FUNCTIONAL DISSIMILARITY WAS RAISED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN A SSESSMENT YEAR 2007 - 08 AND THE PLEA OF ASSESSEE WAS ACCEPTED IN THIS REGARD. THE RELEVANT FINDINGS OF TRIBUNAL VIDE PARA 5.1 READ AS UNDER: - 5.1 BRESCON CORPORATE ADVISORS LTD. (IN SHORT BRESCON): THE CLAIM OF THE TPO IS THAT AS PER THE DIRECTORS REPORT OF THE SAID COMPANY FOR F.Y. 2006 - 07, IT SHOWS THAT IT IS ENGAGED IN THE AREA OF FINANCIAL RESTRUCTURING RECAPITALIZATION, ETC. AND IN THAT REGARD, THE ACTIVITIES OF THE SAID COMPANY ARE COMPARABLE TO THAT OF THE ASSESSEE - COMPANY. THE POINT MADE OU T BY THE ASSESSEE IS THAT BY WAY OF BUSINESS SUPPORT SERVICES TO ITS AE, THE ASSESSEE HAS PROVIDED SERVICES IN THE NATURE OF RESEARCH AND ANALYSIS OF FINANCIAL REPORTS, ANALYSIS OF COMPETITIVE INTELLIGENCE DOCUMENTS, FINANCIAL ANALYSIS FOR DECISIONS ON MER GERS AND ACQUISITIONS, CREATING ACQUISITION PROPOSALS, ETC. WHEREAS BRESCON IS IN THE BUSINESS OF HANDLING ASSIGNMENTS OF FINANCIAL RESTRUCTURING, PRIVATE EQUITY PLACEMENTS AND DEBT SYNDICATION, ETC. WE HAVE PERUSED THE SUBMISSION PUT - FORTH BY THE ASSESSE E TO THE DRP WHICH ARE PLACED IN THE PAPER - BOOK AT PAGES 59 TO 121, PARTICULARLY AT PAGE 87 WHERE THE ACTIVITIES OF BRESCON AND ASSESSEES BUSINESS SUPPORT SERVICES UNIT HAVE BEEN ILLUSTRATED. WE FIND THAT THE ASSESSEE IS RENDERING CAPTIVE SERVICE TO ITS AE AND IS BEING REMUNERATED ON A COST PLUS MARK - UP BASIS. IT IS ALSO NOTICEABLE THAT THE ASSESSEE IS RENDERING SERVICES WHICH WOULD ENABLE THE AE TO TAKE DECISIONS, WHEREAS BRESCON IS ENGAGED IN RENDERING SERVICES OF PRIVATE EQUITY PLACEMENT AND DEBT SYND ICATION, WHICH ARE THE ACTIVITIES YIELDING FEES, BASED ON THE SUCCESS RATE IN THE FINANCIAL MARKET. NOTABLY, BRESCONS ACTIVITIES ARE IN THE CAPITAL MARKET, AND IS THEREFORE, SENSITIVE TO CAPITAL MARKET MOVEMENTS WHEREAS THE ASSESSEE IS A CAPTIVE SERVICES PROVIDER, BEING REMUNERATED ON COST PLUS BASIS AND IS THEREFORE, QUITE INSULATED FROM THE VOLATILITY OF CAPITAL MARKETS. IT IS ALSO PERTINENT TO OBSERVE THAT THE ASSESSEE IS CARRYING OUT ONLY ANALYTICAL EXERCISES AS MANDATED BY ITS AE AND THE DECISION MAKING THEREFROM VESTS WITH THE AE ALONE. IN THE CASE OF BRESCON, IT IS ACTIVELY ENGAGED IN MARKET OPERATIONS FOR AND ON BEHALF OF ITS CLIENTS. THEREFORE, IN OUR CONSIDERED ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 18 OPINION, THE SAID COMPANY CANNOT BE SAID TO BE FUNCTIONALLY COMPARABLE WITH THE BUSINESS SUPPORT SERVICES UNIT OF THE ASSESSEE. 2 4 . ADMITTEDLY, THE ASSESSEE IS PROVIDING BUSINESS SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISES AND IS CAPTIVE SERVICE PROVIDER AS NOTED BY US IN THE PARAS HEREINABOVE. WHEREAS, THE CONCERN BRESCON CORPORA TE ADVISORS LTD. WAS ENGAGED IN RENDERING SERVICES OF PRIVATE EQUITY PLACEMENT AND DEBT SYNDICATION, WHICH IN TURN, WE RE BASED ON THE SUCCESS RATE IN THE FINANCIAL MARKE T AND WE RE NOT FUNCTIONALLY COMPARABLE WITH THE BUSINESS SUPPORT SERVICES CARRIED ON BY THE ASSESSEE . H ENCE, THE SAID CONCERN IS TO BE EXCLUDED FROM FINAL LIST OF COMPARABLES. 2 5 . THE NEXT CONCERN WHICH THE ASSESSEE WANTS TO BE EXCLUD E D FROM THE FINAL SET OF COMPARABLES IS KJMC GLOBAL MARKET (INDIA) LTD. , WHICH WAS A LEADING INVESTMENT BAN KER AND THE SERVICES PROVIDED BY IT ARE NOT IN LINE OF BUSINESS SUPPORT SERVICES PROVIDED BY THE ASSESSEE. 2 6 . WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08 FOUND THE SAID CONCERN KJMC GLOBAL MARKET (INDIA) LTD. TO BE NOT F UNCTIONALLY COMPARABLE OBSERVING AS UNDER: - 5.2 K J M C GLOBAL MARKET (INDIA) LTD. (IN SHORT KJMC): THE SAID COMPANY IS SAID TO BE A CATEGORY 1 MERCHANT BANKER REGISTERED WITH THE SEBI AND IS A LEADING INVESTMENT BANKER. THE SAID CONCERN IS INVOL VED IN PROJECT AND FINANCIAL ADVISORY SERVICES AND FUNDING SOLUTIONS FOR VARIOUS CORPORATE AND INDUSTRIAL HOUSES FOR THEIR LARGE DEVELOPMENT PROJECT. BECAUSE IT IS ENGAGED IN PROJECT AND FINANCIAL ADVISORY SERVICES, THE TPO HAS CONSIDERED THE SAME AS A CO MPARABLE CASE. THE RELEVANT ANALYSIS OF THE CONCERN IS PLACED AT PAGE 88 OF THE PAPER BOOK. IT IS EVIDENT THAT THE SAID CONCERN IS A MERCHANT BANKER AND DEALING IN CAPITAL MARKETS. ON THE CONTRARY, ASSESSEES BUSINESS SUPPORT SERVICE UNIT IS PROVIDING MERE SUPPORT SERVICES TO ITS AE IN THE FORM OF ANALYTICAL REPORTS, ETC. AND IS NOT INVOLVED IN ANY INVESTMENT OR MARKET RELATED ACTIVITY WHICH IS PURELY THE DOMAIN OF THE AE. QUITE CLEARLY, THERE IS SIGNIFICANT DIFFERENCE IN THE FUNCTIONAL PROFILE AS WELL AS RISKS INVOLVED OF THE SAID CONCERN AND THE ASSESSEE AND IN OUR VIEW, THE ASSESSEE HAS RIGHTLY CANVASSED THAT THE SAID CONCERN IS ALSO NOT COMPARABLE WITH THE BUSINESS SUPPORT SERVICE UNIT OF THE ASSESSEE. ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 19 2 7 . SINCE THE FUNCTIONAL ANALYSIS OF SAID CONC ERN WA S SAME IN ASSESSMENT YEAR 2007 - 08 AND FOLLOWIN G THE SAME LINE OF REASONING AS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08, WE HOLD THAT KJMC GLOBAL MARKET (INDIA) LTD. IS TO BE EXCLUDED FROM FINAL SET OF COMPARABLES. 2 8 . NOW, COMING TO THE NEXT OBJECTION OF ASSESSEE I.E. WITH REGARD TO EXCLUSION OF SREI CAPITAL MARKETS LTD. 2 9 . BOTH BEFORE THE AUTHORITIES BELOW I.E. ASSESSING OFFICER / TPO AND DRP, THE ASSESSEE HAD STRESSED THAT THE SAID CONCERN WAS ENGAGED IN FULL SCA LE BANKING ADVISOR AND PROJECT MANAGEMENT CONSULTING, WHICH WAS AT VARIANCE WITH THE BUSINESS SUPPORT SERVICES PROVIDED BY THE ASSESSEE. THE TRIBUNAL IN ASSESSMENT Y EAR 2007 - 08 NOTED THAT THE CORE BUSINESS OF THE SAID CONCERN WAS THAT OF MERCHANT BANKING WHEREAS CONSULTANCY ACCOUNTED FOR ONLY 0.27% OF THE TOTAL INCOME. THE RELEVANT FINDINGS OF THE TRIBUNAL VIDE PARA 5.3 ARE AS UNDER: - 5.3 SREI CAPITAL MARKETS LTD (IN SHORT SREI): ON THIS ASPECT, IT IS SOUGHT TO BE MADE OUT THAT IT IS A COMPANY ENGAG ED IN FULL - SCALE INVESTMENT BANKING, ADVISORY AND PROJECT MANAGEMENT CONSULTING RANGING FROM MANAGING EQUITY AND DEBT OFFERINGS, PRIVATE EQUITY AND INSTITUTIONAL PLACEMENTS, DEBT SYNDICATION DIS - INVESTMENT RELATED SERVICES, ETC. THE INCOME THEREIN CONSISTS OF CONSULTANCY FEE, LEAD MANAGERS FEE, UNDERWRITING FEES AND BROKERAGE FEE. AT THE TIME OF HEARING, ASSESSEE HAS POINTED OUT THAT THE ACTIVITIES OF THE SAID CONCERN WERE ALSO SUBJECT MATTER OF CONSIDERATION BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF CARLYLE INDIA ADVISORS PVT. LTD. VS. ACIT IN ITA NO. 7901/MUM/2011 PERTAINING TO A.Y. 2007 - 08 VIDE ORDER DATED 4 - 12 - 2012, AND IT WAS OBSERVED THAT THE CORE BUSINESS OF THE SAID CONCERN WAS THAT OF MERCHANT BANKING WHEREAS CONSULTANCY ACCOUNTED FOR O NLY 0.27% OF THE TOTAL INCOME. IN THIS BACKGROUND, WE FIND THAT THE ASSESSEE HAS CANVASSED EVEN BEFORE THE LOWER AUTHORITIES THAT THE ACTIVITIES OF THE SAID CONCERN ARE DIFFERENT INASMUCH AS IT IS DIRECTLY ENGAGED IN MERCHANT BANKING SERVICES. IN OUR C ONSIDERED OPINION, THE ACTIVITIES OF THE SAID CONCERN ARE QUALITATIVELY DIFFERENT FROM THE BUSINESS SUPPORT SERVICE UNIT OF THE ASSESSEE, INASMUCH AS THE SAID CONCERN IS IN THE MAIN LINE OF MERCHANT BANKING ACTIVITIES ENTAILING RAISING OF FUNDS THROUGH DEB T OFFERINGS, DEBT SYNDICATION ETC. THE ACTIVITIES OF BUSINESS SUPPORT SERVICES OF THE ASSESSEE ARE QUITE DIFFERENT. THEREFORE, IN OUR VIEW THE ASSESSEE IS JUSTIFIED IN CLAIMING TO EXCLUDE THE SAID CONCERN FROM THE SAID COMPARABLE CASE. ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 20 30 . FOLLOWING THE SAME PARITY OF REASONING AND SINCE THE FINANCIAL PROFILE OF SREI CAPITAL MARKETS LTD. IS SIMILAR IN THE INSTANT ASSESSMENT YEAR AS IN ASSESSMENT YEAR 2007 - 08, WE HOLD THAT WHERE THE ACTIVITIES OF SAID CONCERN ARE FUNCTIONALLY DISSIMILAR, THE SAID CONCERN IS TO BE EXCLUDED FROM FINAL SET OF COMPARABLES. 3 1 . THE NEXT CONCERN WHICH THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS RAISED OBJECTION AND NEEDS TO BE EXCLUDED IS KHANDWALA SECURITIES LTD. THE SAID CONCERN WAS ALSO ENGAGED IN PROVIDING M ERCHANT BANKING ACTIVITIES AS AGAINST BUSINESS SUPPORT SERVICES UNIT OF ASSESSEE, WAS FOUND TO BE NOT COMPARABLE BY THE TRIBUNAL IN ASSESSMENT YEAR 2007 - 08. THE RELEVANT FINDINGS OF THE TRIBUNAL VIDE PARA 5.4 ARE AS UNDER: - 5.4 KHANDWALA SECURITIES LTD. (IN SHORT KHANDWALA) THE SAID CONCERN IS ENGAGED IN RENDERING OF BROKERAGE ACTIVITIES AND IT HAS ALSO BEEN SO NOTED BY THE TRIBUNAL IN THE CASE OF CARLYLE INDIA ADVISORS PVT. LTD (SUPRA). ON PAGE 90 OF THE PAPER BOOK IS PLACED A DETAILED ENUMERATION OF THE ACTIVITIES OF THE SAID CONCERN AS WELL AS THAT OF THE ASSESSEE. IT IS EVIDENT THAT ACTIVITIES OF THE SAID CONCERN AS WELL AS THAT OF THE ASSESSEE. IT IS EVIDENT THAT THE SAID CONCERN ALSO IS ENGAGED IN PROVIDING MERCHANT BANKING ACTIVITIES AND AN EXTRACT OF THE DIRECTORS REPORT PLACED AT PAGE 90 OF THE PAPER BOOK SHOWS THAT THE SAID CONCERN IS A SEBI RECOGNISED CATEGORY I MERCHANT BANKER OFFERING COMPOSITE SOLUTIONS TO ITS CLIENTS IN TERMS OF PUBLIC OFFERINGS, PRIVATE PLACEMENTS, ETC., APART FROM RENDERING BROKING ACTIVITIES. FACTUALLY, IT CAN BE DEDUCED THAT THE SAID CONCERN IS CARRYING ON ACTIVITIES WHICH ARE QUALITATIVELY DIFFERENT THAN THAT OF THE BUSINESS SUPPORT SERVICES UNIT OF THE ASSESSEE AND IS THEREFORE NOT A COMPARABLE CONCERN. 3 2 . FURTHER, THE TRIBUNAL VIDE PARA 6 AFTER CONSIDERING FIVE CONCERNS, OBSERVED AS UNDER: - 6. THE TPO IN HIS ORDER HAS NOT APPRECIATED THE AFORESAID OBJECTIONS OF THE ASSESSEE WITH REGARD TO THE FUNCTIONAL DIFFERENCES OF THE FIVE COMPANIES SELECTED BY HIM. IN PARA 5 OF THE SHOW CAUSE NOTICE DATED 9 - 9 - 2010 ISSUED BY THE TPO IT IS STATED THAT T HE AFORESAID FIVE COMPANIES CAN BE CONSIDERED AS COMPARABLES BY APPLYING THE SAME QUANTITATIVE AND QUALITATIVE FILTERS ADOPTED BY THE ASSESSEE IN THE TRANSFER PRICING STUDY. SO HOWEVER, FROM THE DISCUSSION IN THE ORDER OF THE TPO, IT IS EVIDENT THAT THE A SSESSEE POINTED OUT QUALITATIVE DIFFERENCE IN THE FUNCTIONS CARRIED OUT BY SUCH COMPANIES, BUT THE TPO HAS NOT DEALT WITH THOSE OBJECTIONS ON THE BASIS OF ANY COGENT REASONING, AND INSTEAD HE HAS ADOPTED THE FIVE COMPANIES AS COMPARABLES BY MERELY OBSERVIN G THAT THEY ARE IN THE FIELD OF ADVISORY SERVICES. IN FACT, WE FIND THAT EVEN BEFORE THE DRP THE ASSESSEE ASSERTED AS IS REVEALED FROM PAGE 86 OF THE PAPER BOOK, THAT THE AFORESAID FIVE COMPANIES WERE REJECTED BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY ON THE GROUND THAT THEY ARE NOT FUNCTIONALLY COMPARABLE TO THE ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 21 BUSINESS SUPPORT SERVICE UNIT OF THE ASSESSEE. THE ASSERTIONS OF THE ASSESSEE ARE BASED ON A DETAILED QUALITATIVE ANALYSIS OF SUCH COMPANIES, AND IS SUPPORTED BY THE INFORMATION AVAILABLE IN PUBLIC DOMAIN. THE OBJECTIONS OF THE ASSESSEE HAVE BEEN MERELY BRUSHED ASIDE ON THE BASIS OF GENERALIZED OBSERVATIONS AND NOT WITH REFERENCE TO SPECIFIC INFIRMITIES IN EACH OF THE CASE BROUGHT OUT BY THE ASSESSEE. IN THE FINAL ANALYSIS THEREFORE, WE FIN D WEIGHT IN THE POSITION CANVASSED BY THE ASSESSEE THAT THE ABOVE FIVE COMPANIES CHOSEN BY THE TPO ARE FUNCTIONALLY INCOMPARABLE AND ARE THEREFORE, REQUIRED TO BE EXCLUDED FOR THE PURPOSE OF BENCH - MARKING INTERNATIONAL TRANSACTIONS RELATING TO THE PROVISIO NS OF BUSINESS SUPPORT SERVICE. ON THIS ASPECT, ASSESSEE HAS TO SUCCEED. 3 3 . THE CONCERN KHANDWALA SECURITIES LTD. IS THUS, FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE AS IT WA S ENGAGED IN THE BUSINESS OF MERCHANT BANKING, WHEREAS THE ASSESSEE WHICH WA S ONLY PROVIDING BUSINESS SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISES AND 100% CAPTIVE SERVICE PROVIDER. ACCORDINGLY, THE MARGINS OF KHANDWALA SECURITIES LTD. ARE TO BE EXCLUDED IN THE FINAL SET FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF THE ASSES SEE. THE TRIBUNAL VIDE PARA 6 HELD THAT ALL THE ABOVE SAID FIVE CONCERNS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. ACCORDINGLY, WE HOLD THAT THE INTERNATIONAL TRANSACTION OF THE ASSESSEE IS TO BE BENCHMARKED AFTER EXCLUDING THE ABOVE SAID FIVE CO NCERNS. IN THIS REGARD, WE WOULD ALSO LIKE TO REFER TO THE RATIO LAID DOWN BY THE CHANDIGARH SPECIAL BENCH OF TRIBUNAL IN DCIT VS. QUARK SYSTEMS (P) LTD. REPORTED IN 132 TTJ 1, WHEREIN IT HAS BEEN HELD THAT EVEN IF THE ASSESSEE IN ITS TP STUDY REPORT HAS ADMITTED CERTAIN CONCERNS AS COMPARABLE ON THE BASIS OF MULTIPLE YEARS DATA, HOWEVER, WHEN THE BASIS FOR SELECTION OF COMPARABLES IS VARIED, THEN EVEN THE CONCERNS WHICH HAVE BEEN INITIALLY SELECTED BY THE ASSESSEE CAN BE REJECTED IN THE FINAL ANALYSIS. T HE SAID PROPOSITION LAID DOWN BY THE CHANDIGARH SPECIAL BENCH OF TRIBUNAL HAS ALSO BEEN APPROVED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. QUARK SYSTEMS INDIA (P) LTD. (2011) 244 CTR (P&H) 542. SIMILAR RATIO HAS ALSO BEEN LAID DOWN BY MUMBAI B ENCH OF TRIBUNAL IN TATA POWER SOLAR SYSTEMS LTD. VS. DCIT (2014) 41 TAXMANN.COM 340 (MUMBAI - TRIB) . ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 22 3 4 . NOW, COMING TO THE NEXT STAND OF ASSESSEE I.E. WITH REGARD TO INCLUSION OF TWO CONCERNS BY WAY OF FRESH SEARCH CARRIED ON BY THE ASSESSEE. 3 5 . THE LEA RNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT DURING THE COURSE OF TP PROCEEDINGS, THE ASSESSEE POINTED OUT THAT AGR IMA CONSULT ANCY LTD. SHOULD BE INCLUDED THOUGH ITS PLI FOR THE YEAR UNDER CONSIDERATION WAS NEGATIVE I.E. ( - )7.76%. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT ONLY IN THIS YEAR, THE SAID CONCERN WAS SHOWING NEGATIVE MARGINS AND THERE WAS NO PERSISTENT LOSS MAKING CONCER N. HOWEVER, THE SAID CONCERN WAS FUNCTIONALLY SIMILAR. WE FIND NO MERIT IN THE SAID CLAIM OF ASSESSEE IN THIS REGARD SINCE THE ASSESSEE WA S CAPTIVE SERVICE PROVIDER AND HA D TIME AND AGAIN ARGUED BEFORE THE AUTHORITIES BELOW THAT THE MARGINS OF LOSS MAKING CONCERN WE RE NOT COMPARABLE , WH EN ARGUING ITS APPEAL WITH REGARD TO EXCLUSI ON OF OTHER THREE CONCERNS . S INCE THE CONCERN AGRI MA CONSULTANCY LTD. FOR THE YEAR UNDER CONSIDERATION , WAS LOSS MAKING, THEN MARGINS OF SAID CONCERN WE RE NOT T O BE TAKEN FOR BENCHMARKING INTERNATIONAL TRANSACTIONS FOR THE YEAR UNDER CONSIDERATION . WE FI ND NO MERIT IN THE CLAIM OF ASSESSEE AND THE SAME IS REJECTED. ACCORDINGLY, THE ASSESSING OFFICER / TPO IS DIRECTED TO DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE BY COMPARING ITS PLI WITH THE ARITHMETIC MEAN M ARGINS OF BALANCE COMPARABLES SELECTED BY THE TPO. 3 6 . ANOTHER ISSUE RAISED BY THE ASSESSEE IS VIS - - VIS RISK ADJUSTMENT TO BE ALLOWED IN THE HANDS OF ASSESSEE. THE ASSESSEE IS AGGRIEVED BY THE ORDERS OF AUTHORITIES BELOW IN NOT RECOGNIZING THE DIFFERENC ES IN RISK PROFILE OF ASSESSEE AND ITS COMPARABLES AND THUS, NOT ALLOWING ADJUSTMENT FOR SUCH DIFFERENCE WHILE BENCHMARKING ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT SIMILAR P LEA WAS ITA NO. 1 462 /PN/20 1 0 EATON INDUSTRIES PVT. LTD. 23 RAISED BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2007 - 08 AND THE TRIBUNAL VIDE PARAS 15 TO 17 OF THE ORDER HAD ADJUDICATED THE ISSUE AND SENT BACK THE MATTER TO THE FILE OF ASSESSING OFFICER. 3 7 . SINCE IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN ASSE SSEES OWN CASE IN ASSESSMENT YEAR 2007 - 08 AND FOLLOWING THE SAME PARITY OF REASONING, WE DEEM IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE WHILE DECIDING THE ISSUE I N LINE WITH DIRECTIONS OF TRIBUNAL IN ASSESSMENT YEAR 2007 - 08 . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 3 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MA Y , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 16 TH MA Y , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DIT (INTL. TAXATION), PUNE ; 4. THE DRP, PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE