DCIT RG 9(1)(2), MUMBAI V. ANGLO EASTERN SHIPPING MANAGEMENT (i) P.LTD, MUMBAI

ITA 1500/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1004 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Keywords: Transfer pricing; International transaction; Rule of consistency; Application of stay
• Section: 92

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL KBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./1500/MUM/2016, /ASSESSMENT YEAR: 2011-12 DCIT 9(1)(2), MUMBAI. VS. M/S.ANGLO-EASTERN SHIP MANAGEMENT (INDIA) PVT. LTD., 303, THIRD FLOOR,LEELA BUSINESS PARK, MAROL, ANDHERI KURLA ROAD, ANDHERI (EAST),MUMBAI 400 059. PAN: AAECA6185F ( /APPELLANT ) ( / RESPONDENT ) ./I.T.A./1053/MUM/2017, /ASSESSMENT YEAR: 2012-13 M/S.ANGLO-EASTERN SHIP MANAGEMENT (INDIA) PVT. LTD., VS. DCIT 9(1)(2), MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) C.O NO.59/MUM/2016 (ARISING OUT OF ./I.T.A./1500/MUM/2016, /ASSESSMENT YEAR: 2011-12 ) M/S.ANGLO-EASTERN SHIP MANAGEMENT (INDIA) PVT. LTD., VS. DCIT 9(1)(2), MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) SA .NO.330/MUM/2017,AY.2012-13 (ARISING OUT OF ./I.T.A./1053/MUM/2017, /ASSESSMENT YEAR: 2012-13 ) M/S.ANGLO-EASTERN SHIP MANAGEMENT (INDIA) PVT. LTD., VS. DCIT 9(1)(2), MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SAURABH DESHPANDE - DR ASSESSEE BY: SHRI MADHUR AGRAWAL / DATE OF HEARING: 11/10/2017 / DATE OF PRONOUNCEMENT: 03/01/2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 20.01.2016,OF THE ASSES SING OFFICER (AO) PASSED IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL(DRP),MUM BAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL.IT HAS ALSO FILED A CROSS OBJECTION (CO). TH E AO HAS CHALLENGED THE DIRECTIONS OF THE DRP. WE HAVE ALSO HEARD THE STAY APPLICATION FILED BY TH E ASSESSEE FOR THE AY.2012-13. ASSESSEE- ITA NOS.1500&1053/M/2017 M/S.ANGLO EASTERN SHIP MGM T.(INDIA)PVT. LTD., 2 COMPANY IS ENGAGED IN THE BUSINESS OF SHIP MANAGEME NT SERVICES WHICH INCLUDE CREW MANAGE - MENT,SHIP MANAGEMENT AND OTHER SERVICES LIKE MAINTE NANCE, SUPERVISION, SURVEY AND REPAIR OF VESSELS. IT FILED ITS RETURN OF INCOME ON, 29/11/20 11 DECLARING INCOME OF RS. 2.21 CRORES. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT ASSESS EE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS(IT.S) WITH ITS ASSOCIATED ENTERPRISE(A E).HE MADE A REFERENCE TO THE TRANSFER PRICING OFFICER(TPO) TO DETERMINE THE ARMS LENGTH PRICE(ALP) OF THE IT.S ENTERED INTO BY THE ASSESSEE. AFTER CONSIDERING THE ORDER OF THE TPO HE ISSUED A DRAFT ORDER TO THE ASSESSEE PROPOSING ADJUSTMENT OF RS. 5.77 CRORES. THE ASSESSEE FILED O BJECTIONS BEFORE THE DRP. AS STATED EARLIER, THE AO PASSED THE ORDER U/S.143 (3) R.W.S.144C OF THE A CT. ITA/1053/MUM/2017,AY.2012-13: 2 .EFFECTIVE GROUND OF APPEAL,RAISED BY THE ASSESSEE, IS ABOUT UPWARD ADJUSTMENT OF RS.5.77 CRORES TO THE TOTAL INCOME OF THE ASSESSEE.DURING THE TRAN SFER PRICING (TP) PROCEEDINGS THE TPO FOUND THAT ASSESSEE HAD ENTERED INTO FOLLOWING IT.SN WITH ITS AES : SN. NATURE OF TRANSACTION AMOUNT(RS.) METHOD USED 1. PROVISION OF OTHER SUPPORT SERVICES RELATED TO SHIP MANAGEMENT 21,87,18,982 TNMM 2. PROVISION OF TECHNICAL MANAGEMENT AND RELATED SERVI CES 80,48,057 CUP 3. REIMBURSEMENT OF EXPENSES 16,81,072 AT ACTUALS 22,84,48,111 HE FOUND THAT FOR COMPUTING THE ALP OF THE TRANSACT IONS THE ASSESSEE HAD ADOPTED THE FOLLOWING METHODOLOGY.THE PROFIT LEVEL INDICATOR(PLI)WAS TAKE N AS OPERATING PROFIT/TOTAL COSTOP/TC).THE ASSESSEE HAD IDENTIFIED SIX COMPARABLES FOR BENCHMA RKING ALP. AS PER THE TP STUDY REPORT THREE-YEAR AVERAGES OP/TC OF THE COMPARABLES WAS CO NSIDERED.HE DIRECTED THE ASSESSEE TO PROVIDE UPDATED MARGIN CONSIDERING THE FINANCIALS O F THE COMPARABLES FOR THE YEAR UNDER CONSIDERATION IF SAME WERE AVAILABLE. THE ASSESSEE SUBMITTED THE SAME AND THE AVERAGE OP/TC WORKED OUT (6.71%) ,AS UNDER: S.NO NAME OF THE COMPARABLE COMPANY PLI AS PER TPSR UPDATED PLI (%) 1. ARCADIA SHIPPING LTD. 10.74% 13.42% 2. CENTRAL INVESTIGATION & SECURITY SERVICES LTD. 2 .35% 4.51% 3. KNIGHT WATCH SECURITY LTD. 5.31% 4.70% 4. ORIENT EXPRESS SHIP MGMT. LTD. 5.05% NA 5. TOPS SECURITY LTD. 6.35% 2.71% 6. SECURITY & INTELLIGENCE SERVICES (I) 7.84% 8.76 ITA NOS.1500&1053/M/2017 M/S.ANGLO EASTERN SHIP MGM T.(INDIA)PVT. LTD., 3 ARITHMETIC MEAN (%) 6.28% 6.71% ASSESSEE (%) 10% THE ASSESSEE CLAIMED THAT ITS PROFIT MARGIN (10%) W AS MORE THAN THE PLI OF THE COMPARABLES,THAT THE IT.S WITH ITS AE.S WERE AT ARMS LENGTH.THE TPO DIRECTED THE ASSESSEE TO PROVIDE JUSTIFICATION FOR CONSIDERING THE COMPANIES,ENGAGED IN SECURITY B USINESS,AS COMPARABLES FOR BENCHMARKING THE IT.S. AFTER CONSIDERING THE SUBMISSION OF THE ASSES SEE, THE TPO HELD THAT ASSESSEE WAS PROVIDING CREW MANAGEMENT SERVICES,TECHNICAL MANAGEMENT SERVI CES,ACCOUNTING SERVICES AND OTHER INCIDENTAL AND AUXILIARY SERVICES.HE HELD THAT CREW ON SHIPBOARD INCLUDED HIGHLY QUALIFIED ENGINEERS,PERSONS HOLDING DEGREE IN MANAGEMENT TO T HE UNSKILLED LABOUR, THAT THE FUNCTIONS OF THE ASSESSEE INCLUDED TRAINING THE MANPOWER APART FROM THEIR RECRUITMENT,THAT IT HAD CHOSEN COMPAR- ABLES WHICH WERE INVOLVED IN PROVIDING SECURITY SER VICES AND RECRUITMENT OF UNSKILLED LABOURERS. HE COMPARED THE FUNCTIONAL PROFILE OF THE COMPARABL ES CHOSEN BY THE ASSESSEE AND REJECTED ALL OF THEM. 2.1. REFERRING TO THE ORDER OF THE DRP FOR THE EARLIER A SSESSMENT YEAR, THE TPO HELD THAT HSCC INDIA LTD.WAS A GOOD COMPARABLE FOR DETERMINING THE ALP.THE ASSESSEE OBJECTED TO INCLUSION OF HSCC. HOWEVER, REJECTING THE SAME HE COMPUTED THE A LP OF THE IT.S IN FOLLOWING MANNER: PARTICULARS REFERENCE AMOUNT (RS.) OPERATING REVENUE A 21,85,45,527 OPERATING COST (AS DISCUSSED ABOVE) B 19,86,77,688 OPERATING PROFIT C=A - B 1,98,67,839 OP / OPERATING COST (AS DISCUSSED ABOVE) D=C/B*100 10% ARMS LENG TH MARGIN E 39.08% ARMS LENGTH INCOME F 27,63,20,929/ - ADJUSTMENT G=F - A 5,77,75,402/- THUS,HE RECOMMENDED AN UPWARD ADJUSTMENT OF RS. 5,7 7,75,402/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. BEFORE THE DRP,THE ASSESSEE MADE ELABORATE SUBMISSI ONS.AFTER CONSIDERING THE AVAILABLE MATERIAL,THE DRP HELD THAT THE TPO HAD GIVEN DETAIL ED REASON FOR REJECTION OF COMPARABLES SELECTED BY THE ASSESSEE,THAT HE HAD GIVEN PROPER O PPORTUNITY TO THE ASSESSEE TO OFFER ITS COMMENTS ON THE COMPARABLE SELECTED BY HIM, THAT TH E OBJECTIONS OF THE TPO WERE MAINLY ON THE SELECTION OF FINAL SET OF COMPARABLES FOR WHICH HE HAD GIVEN DETAILED REASONS.WITH REGARD TO ARCADIA SHIPPING LTD (ASL),THE DRP HELD THAT IT WAS PROVIDING SERVICES INCLUDING SHIPPING AGENCY,LINER-OPERATIONS,SHIP-BROKING,SHIP-CHARTERIN G,PROJECT-CARGO/COASTAL-CARGO-MOVEMENTS,OFF -SHORE ACTIVITIES IN OIL AND GAS SECTOR,CHARTERING OF SHIPS LIKE BARGES/VESSELS, TRANSPORTATION OF ITA NOS.1500&1053/M/2017 M/S.ANGLO EASTERN SHIP MGM T.(INDIA)PVT. LTD., 4 OFFSHORE STRUCTURES,THAT THE TPO HAD REJECTED THE C OMPARABLE HOLDING THAT SERVICES RENDERED BY ASL WERE NOT COMPARABLE TO THE SERVICES RENDERED BY THE ASSESSEE,THAT ASL WAS INTO THE SERVICES SAME AS OF THE ASSESSEE,THAT ONLY THE FIELDS OF SER VICES DIFFER, THAT SAME COULD NOT VITIATE THE COMPARABILITY,THAT ALL THE SERVICES WERE SIMILAR AN D WERE RENDERED FOR FEES, THAT IN THE EARLIER AY. ASL WAS CONSIDERED AS A VALID COMPARABLE BY THE THE N DRP. FINALLY,IT HELD THAT ASL WAS A VALID COMPARABLE. WITH REGARD TO SECURITY SERVICES,THE DRP HELD THAT ALL THOSE COMPANIES WOULD PROVIDE SECURITY PERSONNEL AND SECURITY SERVICES,THAT THE MANPOWER P ROVIDED BY THEM WAS LOW-END,THAT SAME COULD NOT BE COMPARED WITH THE SKILL/HIGHLY SKILLED MANPOWER PROVIDED BY THE ASSESSEE, THAT SECURITY AND INTELLIGENCE SERVICES WERE PROVIDING M OST OF THE SERVICES THROUGH DIFFERENT SUBSIDI - ARIES AND JOINT VENTURES, THAT THEY COULD NOT BE TR EATED AS VALID COMPARABLE, THAT THE TPO HAD RIGHTLY REJECTED THEM AS GOOD COMPARABLES.WITH REGA RD TO HSCC, THE DRP HELD THAT IN THE EARLIER ASSESSMENT YEAR HSCC WAS TREATED A VALID COMPARABLE , IT WAS HELD THAT COMPANY WAS INTO SERVICES IS OF THE ASSESSEE. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) CONTENDED THAT WHILE PASSING ORDER FOR THE YEAR 2009-10,THE TPO HA D NOT QUESTIONED THE SELECTION OF ASL AS A VALID COMPARABLE,THAT THE ACTIVITIES OF ASL FOR THE YEAR UNDER APPEAL WERE SAME AS OF THAT YEAR, THAT THE TPO HAD NOT COMPARED THE INDIVIDUAL COMPAR ABLES,THAT HSCC WAS ALSO HAVING OPERATION INCOME,THAT THERE WAS NO JUSTIFICATION FOR SELECTIO N HSCC AS A VALID COMPARABLE,THAT IT WAS A GOVERNMENT UNDERTAKING HAVING ABNORMAL PROFIT,THAT IT WAS NOT ENGAGED IN PROVIDING THE SERVICES THAT THE ASSESSEE WAS RENDERING. HE RELIED UPON THE CASES OF HONDA R & D INDIA PVT. LTD.(ITA.616 OF 2015, DATED 02/08/2016 OF HONBLE D ELHI COURT),THYSSEN KRUPP INDUSTRIES (P.) LTD.( 385 ITR 621) AND GRANITE SERVICES INTERNATION AL P.LTD.(ITA NO.532/DEL/2016-A.Y.2010- 11, DATED 12/09/2017). THE DEPARTMENTAL REPRESENTATIVE(DR) ARGUED THAT ASL WAS NOT A VALID COMPARABLE,THAT THE TURNOVER OF ASL COULD NOT BE COMPARED WITH ASSESSEE ,THAT THERE WAS VAST DIFFERENCE IN FAR ANALYSIS OF BOTH THE ENTITIES,THAT AS PER PAGE 352 OF THE PAPER BOOK ASL WAS ALSO HAVING OPERATIONAL INCOME,THAT ASL HAD EARNED PROJECT INCO ME,THAT ASL WAS DOING MUCH MORE THAN CREW-MANAGEMENT,THAT EACH YEAR WAS A SEPRATE AY.,TH AT RULE OF RES-JUDICATA WERE NOT APPLICABLE TO INCOME TAX PROCEEDINGS,THAT HSCC WAS A GOOD COMP ARABLE,THAT HSCC SHOULD NOT BE EXCLUDED ITA NOS.1500&1053/M/2017 M/S.ANGLO EASTERN SHIP MGM T.(INDIA)PVT. LTD., 5 ONLY BECAUSE IT WAS A GOVT.ENTERPRISE. HE RELIED U PON THE CASES OF VISHAY COMPONENTS INDIA PVT.LTD.(ITA/133/PN/2011, A.Y.2006-07, DATED 25/05/ 2012 & RAMPGREEN SOLUTIONS P.LTD.(377 ITR 533). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PRODUCE THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD SELECTED FINAL SET OF SIX COMPARABLES TO DETERMINE ALP OF THE IT.S ENTERED INTO IT DURING THE YEAR UNDER CONSIDERATION,THAT THE AO HAD REJECTED ALL THE COMPARABLES SELECTED BY THE ASSESSEE,THAT HE HELD THAT HSCC WAS VALID COMPARABL E TO BENCHMARK THE TRANSACTIONS, THAT THE DRP HELD THAT ONE OF THE COMPARABLES SELECTED BY TH E ASSESSEE,I.E.ASL,WAS A VALID COMPARABLE, THAT THE TPO WAS JUSTIFIED IN HOLDING THAT HSCC WAS A GOOD COMPARABLE. 5.1. WE FIND THAT THE ISSUE OF INCLUSION/EXCLUSION OF TW O COMPARABLES I.E.ASL AND HSCC IS KEY TO RESOLVE THE DISPUTE BEFORE US.FIRST.WE WILL TAKE THE MATTER OF ASL.WE FIND THAT THE DRP HAD HELD THAT OVERALL FUNCTIONS OF ASL WERE SIMILAR TO THE ACTIVITIES CARRIED OUT BY THE ASSESSEE,THAT SOME OF THE ACTIVITIES OF COMPARABLE WERE DIFFERENT .WE ARE OF THE OPINION THAT TP PROCEEDINGS- ESPECIALLY SELECTION OF VALID COMPARABLES-ARE NOT M EANT TO PUT THE PROVERBIAL FLY IN PLACE OF A FLY( MAKSHIKA-STHANE-MAKSHIKA ).WHAT HAS TO BE SEEN IS THAT GOODS PURCHASED/SOLD TO/FROM AE.S OR SERVICES RENDERED OR AVAILED TO/FROM THEM ARE AT MA RKET RATE I.E.AT ARMS LENGTH.THE FUNDAMENTAL PRINCIPLE FOR INTRODUCING SECTION 92 OF THE ACT IS THAT THE ENTITIES HAVING CLOSE PROXIMITY SHOULD NOT BE ALLOWED TO MANAGE THEIR AFFAIRS IN A MANNER THAT THEY SHIFT THEIR TAXABLE INCOME FROM INDIA TO OTHER COUNTRY.FOR THAT PURPOSE FAR ANALYSIS HAS TO BE CARRIED OUT AND OVERALL PROFIT RANGE IS TO BE DETERMINED.AS FAR AS SELECTION OF COMPARABLES IS CONCERNED,IT IS SAID THAT AN APPLE SHOULD NOT BE COMPARED WITH CABBAGE.BUT,WHILE COMPARING APPLES EACH AND EVERY MOLECULE OF THE APPLES SHOULD NOT BE COMPARED.THERE IS GOING TO BE SOME DI FFERENCE IN EACH MODEL OF BUSINESS.SO,TWO COMPARABLES CANNOT BE EXPECTED TO BE MIRROR IMAGE O F EACH OTHER.IF THIS BROAD PRINCIPLE ABOUT COMPARABLES IS APPLIED BY THE AO.S AND THE ASSESSEE S MOST OF THE TP LITIGATION WOULD NOT ARISE.IN OTHER WORDS, WHILE DETERMINING THE ALP OF IT.S,WHAT HAS TO BE SEEN IS THE BASIC SIMILARITIES/ DISSIMILARITIES OF TWO COMPARABLES.THE FUNCTIONS PE RFORMED BY THEM, THE ASSETS EMPLOYED AND RISKS TAKEN BY THEM ARE THE CRITERIA IS THAT DETERM INE EXCLUSIVE/INCLUSION OF COMPARABLES. IT IS TRUE THAT SOME OF THE ACTIVITIES OF ASL WERE NOT CARRIED OUT BY THE ASSESSEE. BUT,MOST OF THE ACTIVITIES ARE SIMILAR.THE BOTH ARE IN THE SHIPPING BUSINESS.B OTH PROVIDE SERVICES TO SHIPPING ACTIVITIES.THE ASSESSEE IS AN ENTITY THAT IS PROVIDING VARIOUS SER VICES RELATED WITH SHIPPING BUSINESS.IN THE ITA NOS.1500&1053/M/2017 M/S.ANGLO EASTERN SHIP MGM T.(INDIA)PVT. LTD., 6 EARLIER YEAR,THE TPO HIMSELF HAD HELD THAT ASL WAS A VALID COMPARABLE.HE HAS NOT BROUGHT ANYTHING ON RECORD AS TO HOW THE ACTIVITIES OF THE ASSESSEE FOR THE YEAR UNDER APPEAL WERE DIFFERENT FROM THE ACTIVITIES FOR THE EARLIER YEAR. THERE IS NO DOUBT THAT EACH AY.IS A SEPARATE UNIT AND THAT PRINCIPLES OF RES-JUDICATA ARE NOT APPLICA BLE TO TAX MATTERS.BUT,THERE IS NO DOUBT THAT RULE OF CONSISTENCY IS APPLICABLE TO TAX PROCEEDINGS AND THAT WITHOUT POINTING OUT THE DIFFERENCE IN THE FACTS OF A YEAR WITH THAT OF EARLIER YEAR THE AO C ANNOT SAY THAT DECISION OF EARLIER YEAR IN NOT BINDING ON HIM.TO BE COVERED BY THE UMBRELLA OF RES -JUDICATA,THE AO HAS TO CLEARLY BRING OUT THE DIFFERENCES OF BOTH THE YEARS ON RECORD.BUT,IN THE CASE UNDER CONSIDERATION,THERE IS NOTHING THAT COULD JUSTIFY THE EXCLUSION OF ASL AS A VALID COMPA RABLE.THE TPO HAS TRIED TO DISTINGUISH THE SERVICES RENDERED BY ASL.BUT,IN OUR OPINION THE OVE RALL PERFORMANCE OF BOTH THE COMPANIES ARE SAME.THEREFORE,WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE DRP, AS FAR AS INCLUSION OF ASL COMPARABLE IS CONCERNED. UPHOLDING THE ORDER OF THE DRP, WE HOLD THAT ASL IS A VALID COMPARABLE. 6. WE FIND THAT HSCC IS RENDERING COMPREHENSIVE RANGE OF HIGH-END PROFESSIONAL CONSULTANCY SERVICES IN THE AREAS OF HEALTHCARE IN INDIA AS WEL L AS ABROAD. THE ASSESSEE IS INVOLVED IN VARIOUS SERVICES UNDER THE HEADS PAYROLL ARRANGEMENTS, PENS ION,INSURANCE FOR THE CREW. IT IS TRUE THAT IT ALSO RECRUITS ENGINEERS.BUT,IF WE COMPARE FUNCTIONA LITY OF BOTH THE ENTITIES,IT BECOMES CLEAR THAT THEY ARE NOT IN THE SIMILAR AREAS OF ACTIVITIES. HS CC IS EARNING CONSULTANCY FEE,AS PER FINANCIALS OF THE COMPANY.70% OF THE TOTAL FEE IS RECEIVED BY IT,ON PLACEMENT OF SUPPLY ORDER.BALANCE 30% OF TOTAL FEE IS RECEIVED BY HSCC ON RECEIPT OF SUPP LY/INSTALLATION OF EQUIPMENTS. IT IS ALSO A FACT THAT IT IS THE GOVERNMENT OF INDIA ENTERPRISES AND PROVIDES SERVICES INCLUDING CONCEPTUAL STUDIES AND MANAGEMENT CONSULTANCY,PROJECT-MANAGEMENT,LOGIS TICS AND INSTALLATIONS,PROCUREMENT AND PURCHASES,HEALTHCARE FACILITY DESIGN. THE ANNUAL RE PORT OF THE COMPANY SHOWED THAT DURING THE YEAR 2011-12 IT WAS AWARDED THE WORK OF RENDERING C ONSULTANCY SERVICES FOR DESIGN AND ENGINEERING,PROJECT MANAGEMENT PROCUREMENT OF MEDIC AL EQUIPMENTS, DRUGS AND PHARMACEUTICALS FOR VARIOUS PRESTIGIOUS AND BIG PROJECTS,THAT IT WA S PARTICIPATING EXHIBITIONS ORGANISED BY VARIOUS AGENCIES.WE ALSO FIND THAT HSCC HAD SHOWN ABNORMALL Y HIGH PROFIT MARGIN FOR THE YEAR ENDED ON 31/03/2012 @ 39.08%,THAT IN THE EARLIER YEARS IT HAD SHOWN PROFIT @17.02%. WE ARE OF THE OPINION THAT A GOVERNMENT ENTERPRISE CANNOT BE REJE CTED AS A VALID COMPARABLE JUST BECAUSE IT IS A GOVERNMENT UNDERTAKING.BUT, THE BASIS OF ACCEPTING/ REJECTING IT IS A VALID COMPARABLE SHOULD BE THE FUNCTIONALITY,ESPECIALLY WHEN TNMM IS APPLIED.C ASES RELIED UPON BY THE REPRESENTATIVES DEAL ITA NOS.1500&1053/M/2017 M/S.ANGLO EASTERN SHIP MGM T.(INDIA)PVT. LTD., 7 WITH THE ISSUE OF COMPARISONS OF GOVERNMENT UNDERTA KINGS WITH PRIVATE BUSINESS ENTITIES.BUT,THEY LAY DOWN THE GENERAL PRINCIPLES AND HOLD THAT FAR I S THE DECISIVE FACTOR FOR COMPARING THE VALID COMPARABLES. 6.1. CONSIDERING THE ABOVE,WE HOLD THAT ASL IS A VALID C OMPARABLE AND HSCC IS NOT A GOOD COMPARABLE FOR BENCHMARKING THE IT.S,ENTERED INTO B Y THE ASSESSEE,FOR THE YEAR UNDER CONSIDERATION.IF ASL IS CONSIDERED AS A VALID COMPA RABLE,THE ASSESSEE WILL FALL WITHIN THE SAFE ZONE OF (+/ -)5% OF THE ARITHMETIC MEAN.SO,WE HOLD THAT THERE WAS NO JUSTIFICATION IN MAKING THE UPWARD ADJUSTMENT FOR THE IT.S OF THE ASSESSEE.WE D ECIDE EFFECTIVE GROUND OF APPEAL, IN FAVOUR OF THE ASSESSEE ITA/1500/MUMBAI/2017: 7. THE EFFECTIVE GROUND OF APPEAL,RAISED BY THE AO IS ABOUT HOLDING ASL AS A VALID COMPARABLE FOR THE YEAR UNDER CONSIDERATION.IN THE EARLIER PAR T OF OUR ORDER WE,HAVE DISCUSSED THE ISSUE AT LENGTH.FOLLOWING THE SAME,WE DECIDE EFFECTIVE GROUN D OF APPEAL AGAINST THE AO. CO.NO.59/MUM/2016 8. THE AR STATED THAT IF THE APPEAL FILED BY THE ASSES SEE WAS TO BE ALLOWED THE CO WOULD NOT SURVIVE.WE HAVE ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE,SO, THE CO,FILED BY THE ASSESSEE,IS TREATED AS INFRUCTUOUS. SA.NO.330/MUM/2017,AY.2012-13 9. WE HAVE ALREADY ADJUDICATED THE APPEAL FILED FOR TH E A.Y.2012-13. THEREFORE, IN OUR OPINION, THERE IS NO NEED TO PASS A SEPARATE ORDER FOR THE S TAY APPLICATION FILED BY THE ASSESSEE. WE ALLOW IT FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED BY THE ASSESSEE IS ALLOWED .APPEAL OF THE AO AND THE CO OF THE ASSESSEE STAND DISMISSED.SA FILED BEFORE US IS ALLOWED FOR S TATISTICAL PURPOSES. . ORDER PRONO UNCED IN THE OPEN COURT ON 3 RD JANUARY, 2018. 03 , 2018 SD/- SD/- /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 03.01.2018. S.GANGADHARA RAO, SR.PS./JV, SR.PS ITA NOS.1500&1053/M/2017 M/S.ANGLO EASTERN SHIP MGM T.(INDIA)PVT. LTD., 8 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.