M/s. International SOS Services India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1631/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97979 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 07-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MITALI MADHUSMITA
• Keywords: Related party transaction; Transfer pricing; International transaction; Difference of opinion
• Section: 143(3); 234B

Judgement Text

1 ITA NO. 16 31/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:I-2 NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 1631/DE L/2014 (ASSESSMENT YEAR-2009- 10) INTERNATIONAL SOS SERVICES INDIA P. LTD., 605-606, 6 TH FLOOR, COPIA CORPORATE, JASOLA DISTRICT CENTRE, NEW DELHI. AAACI7600O VS DCIT, CIRCLE 11(1), NEW DELHI. APPELLANT BY SHRI AJAY VOHRA, SR. ADV. SHRI NEERAJ JAIN, ADV. RESPONDENT BY SMT. MITALI MADHUSMITA, CIT-DR ORDER PER J.SUDHAKAR. REDDY, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE AO PASSED U/S 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961 DATED 28/01/2015 FOR THE A.Y. 2009-10. 2. THE FACTS IN BRIEF ARE AS UNDER. 2.1. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30. 09.2009 DECLARING TOTAL INCOME OF RS. 2,00,60,075/-. SINCE THE ASSESS EE HAD UNDERTAKEN INTERNATIONAL TRANSACTIONS WITH ITS ASSO CIATED DATE OF HEARING 07/10/2015 DATE OF PRONOUNCEMENT 08/12/2015 2 ITA NO. 16 31/DEL/2014 ENTERPRISES, A REFERENCE WAS MADE BY THE ASSESSING OFFICER (AO) TO THE TRANSFER PRICING OFFICER, NEW DELHI, UNDER SECT ION 92CA(1). 2.2. THE BRIEF FACTS AS RECORDED BY THELD.AO ARE AS UNDER; THE ASSESSEE IS A WHOLLY OWNED INDIAN SUBSIDIARY OF INTERNATIONAL SOS SINGAPORE, BEING THE AE AND PRIMARILY ACTS AS A SUPPORT CENTER TO INTERNATIONAL SOS SINGAPORE LOCATION. THE ASSESS EE PROVIDES EMERGENCY ASSISTANCE AND SUPPORT SERVICES TO ITS ME MBERS/CLIENTS OF THE AE. SOS INDIA ALLOWS AES MEMBERS/CLIENTS TO ACCESS ITS SERVICES THROUGH THE SOS SINGAPORE ALARM CENTRE. T HIS ENABLES CLIENTS OF AE TO ACCESS STRONG MEDICAL NETWORK OF D OCTORS, HOSPITALS, CLINICS, AND SERVICE PROVIDERS ACROSS INDIA. THE A SSESSEE PROVIDES EMERGENCY ASSISTANCE AND SUPPORT SERVICES TO CLIENT S WHO ARE REGISTERED WITH THE AE OUTSIDE INDIA AND WHO ARE EL IGIBLE TO AVAIL THE SERVICES OF THE GROUP WORLDWIDE INCLUDING INDIA. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE, INTERALIA, HAS ENTERED INTO THE INTERNATIONAL TRANSACTION TO PROVI DE EMERGENCY ASSISTANCE SUPPORT SERVICES AMOUNTING TO RS.23,77,4 6,801/- WITH ITS AE. 2.3. IN TP DOCUMENTATION, FOR THE PURPOSE OF BENCHM ARKING THE INTERNATIONAL TRANSACTION, THE APPELLANT APPLIED TN M METHOD AS THE MOST APPROPRIATE METHOD, CONSIDERING ITSELF TO BE T HE TESTED PARTY AND THE OPERATING PROFIT/OPERATING COST(OP/OC%) AS THE PROFIT LEVEL INDICATOR(PIL). 2.4. THE ASSESSEE SELECTED THE FOLLOWING 12 COMPAR ABLES WHOSE AVERAGE MARGIN WAS 7.10% AS AGAINST THAT OF ASSESSE ES AT 7.66%. 3 ITA NO. 16 31/DEL/2014 S.NO. COMPANY NAME 1. A2Z MAINTENANCE & ENGINEERING SERVICES PVT.LTD. 2. ACCESS INDIA ADVISORS LTD. 3. BESANT RAJ INTERNATIONAL LTD. 4. CAPITAL TRUST LTD. 5. CYBER MEDIA EVENTS LTD. 6. DL F SERVICES LTD. 7. EDUCATIONAL CONSULTANTS (I) LID. 8. I C R A MANAGEMENT CONSULTING SERVICES LTD. 9. IDC (I) LTD. 10. INDIA TOURISM DEVELOPMENT CORPORATION LTD. 11. IN HOUSE PRODUCTION LTD. 12. TIMES INNOVATIVE MEDIA LTD. SINCE THE ASSESSEES MARGIN WAS MORE THAN THE AVERA GE OF COMPARABLES THE ASSESSEE CONCLUDED THAT THEIR INTER NATIONAL TRANSACTION WAS AT ARMS LENGTH. 2.5. THE LD.TPO, HOWEVER, DID NOT AGREE FULLY WITH THE ASSESSEES TP STUDY. HE USED CERTAIN FILTERS, AND REJECTED 10 CO MPARABLES FROM THE ASSESSEES SET, AND SELECTED 5 NEW COMPARABLES. EXCEPT FOR ACCESS INDIA ADVISORS LTD. AND IDC(I) LTD., ALL THE OTHER COMPARABLE COMPANIES SELECTED BY THE ASSESSEE WERE REJECTED. F IVE FRESH COMPARABLE SELECTED BY TPO ARE AS UNDER: 4 ITA NO. 16 31/DEL/2014 S.NO. COMPANY NAME 1. APITCO LTD. 2. GLOBAL PROCUREMENT CONSULTANT LTD. 3. KCCA BUSINESS SERVICES PVT. LTD. 4. KILLICK AGENCIES & MARKETING LTD. 5. OERIENT ENGINEERING & COMMERCIAL CO.LTD. 2.6. THUS, THE LD.TPO, IN ALL, SELECTED 7 COMPARABLE (2 FROM ASSESSEES SET AND 5 NEW COMPARABLE), WHOSE AVERAGE MARGIN WAS 27.63% AS AGA INST THAT OF ASSESSEE AT 7.66%. THEY ARE; S.NO. COMPANY NAME 1. ACCESS INDIA ADVISORS LTD 2. IDC (I) LTD. 3. APITCO LTD. 4. GLOBAL PROCUREMENT CONSULTANT LTD. 5. KCC A BUSINESS SERVICES PVT. LTD. 6. KILLICK AGENCIES & MARKETING LTD. 7. OERIENT ENGINEERING & COMMERCIAL CO.LTD. 2.7. VIDE ORDER DATED 28.01.2013 THE LD.TPO PROPOSE D ADJUSTMENT OF RS. 3,59,87,126/- AND PROPOSED TO ASSESS THE INC OME OF THE ASSESSEE AT RS. 5,60,47,200/- . AGGRIEVED BY THE ABOVE ACTION OF THE LD.TPO, THE AS SESSEE FILED ITS OBJECTION BEFORE DRP. 3. THE DRP GRANTED PART RELIEF BY EXCLUDING KILLICK AGENCIES & MARKETING LTD. AND ORIENT ENGINEERING & COMMERCIAL CO.LTD. FROM 5 ITA NO. 16 31/DEL/2014 THE COMPARABLES. REGARDING THE OTHER COMPARABLE COM PANIES, THE ORDER OF THE LD.TPO, WAS APPROVED BY THE DRP. 4. FURTHER AGGRIEVED THE ASSESSEE IS BEFORE US ON T HE FOLLOWING GROUNDS: 1. THAT THE AO ERRED ON FACTS AND IN LAW IN COMPLETI NG ASSESSMENT U/S 144C/143(3) OF THE INCOME-TAX ACT, 1 961 (THE ACT) AT AN INCOME OF RS. 3,36,55,607/- AS AG AINST THE INCOME OF RS. 2,00,60,075/- RETURNED BY THE APPELLA NT; 2. THAT THE AO ERRED ON FACTS AND IN LAW IN MAKING AN ADJUSTMENT OF RS. 1,35,95,532/- IN THE INTERNATION AL TRANSACTIONS OF BUSINESS SUPPORT SERVICES, ON THE BASIS OF THE ORDER PASSED U/S 92CA(3) OF THE ACT BY THE TRAN SFER PRICING OFFICER (TPO); 2.1 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN REJECTING THE FOLLOWING COMPANIES FROM THE SET OF COMPARABLE COMPANIES ALLEGEDLY ON THE GROUND THAT THE SAID COM PANIES WERE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT: I) EDUCATIONAL CONSULTANTS INDIA LIMITED II) INDIA TOURISM DEVELOPMENT CORPORATION LIMITED 2.2 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN CONSIDERING FOLLOWING COMPANIES IN THE FINAL SET OF COMPARABLE COMPANIES ALLEGEDLY HOLDING THEM TO BE FUNCTIONALLY COMPARABLE TO THE APPELLANT: I) APITCO LIMITED II) GLOBAL PROCUREMENT CONSULTANT LIMITED III) HCCA BUSINESS SERVICES PVT. LTD. 2.3 THAT THE TPO/DRP ERRED ON FACTS AND IN LAW IN NOT ALLOWING ECONOMIC ADJUSTMENT WITH RESPECT TO THE OPERATING PROFIT MARGIN OF THE COMPARABLES/APPELLAN T ON ACCOUNT OF THE DIFFERENCE IN THE RISK PROFILE OF TH E APPELLANT AND SUCH COMPARABLE COMPANIES, ALLEGEDLY HOLDING THAT IN ABSENCE OF ROBUST AND RELIABLE DATA , RISK ADJUSTMENT COULD NOT BE CONSIDERED FOR ENHANCING COMPARABILITY. 2.4 THAT THE AO ERRED ON FACTS AND IN LAW IN LEVYING IN TEREST U/S 234B AND SECTION 234C OF THE ACT. 6 ITA NO. 16 31/DEL/2014 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR VARY ANY OF THE AFORESAID GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 5. SHRI AJAY VOHRA, LD. SR. ADVOCATE APPEARED ON BE HALF OF THE ASSESSEE AND SMT. MITALI MADHUSMITA, LD. CIT(DR) RE PRESENTED THE REVENUE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE PROVIDES PROFESSIONAL SUPPORT SERVICES TO ITS AE. HE EXPLAINED THE BUSINESS OPERATION OF THE ASSESSEE, A ND CONTENDED THAT CERTAIN COMPARABLES SELECTED BY THE ASSESSEE W ERE WRONGLY EXCLUDED BY THE TPO. HE ADVANCED DETAILED ARGUMENTS ON EACH OF THE COMPARABLES. WE WOULD BE DEALING WITH THEIR AGU MENTS IN OUR FINDINGS. 6. THE LD. CIT(DR) OPPOSED THE CONTENTIONS OF THE A SSESSEE. SHE ARGUED SUPPORTING THE COMPARABLE COMPANY SELECTED B Y AND EXCLUDED BY THE TPO. SHE RELIED ON THE FINDINGS OF THE TPO AS WELL AS THE DRP. WE WOULD BE REFERRING TO THESE ARGUMEN TS, AS AND WHEN IT IS NECESSARY IN OUR FINDINGS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS. ON A CAREFU L CONSIDERATION OF THE FACTS OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AND CASE LA WS CITED THE ISSUE THAT NEEDS TO BE ADDRESSED ARE; A) WHETHER THE DRP WAS RIGHT IN REJECTING THE COMPANIE S, SELECTED BY THE ASSESSEE AS COMPARABLE COMPANIES FOR THE PUR POSE OF BENCH MARKING, BEING: I) EDUCATIONAL CONSULTANT INDIA LIMITED; II) ICRA MANAGEMENT & CONSULTING SERVICES LTD.; III) INDIA TOURISM DEVELOPMENT CORPORATION LTD.; 7 ITA NO. 16 31/DEL/2014 B) WHETHER THE DRP WAS RIGHT IN UPHOLDING THE FINDING OF THE LD.TPO THAT THE FOLLOWING COMPANIES SHOULD BE TAKEN AS COMPARABLE COMPANIES FOR THE DETERMINATION FOR BENC H MARKING: I) APITCO LIMITED; II) GLOBAL PROCUREMENT CONSULTANT LIMITED; III) HCCA BUSINESS SERVICES PVT. LIMITED. 8. WE FIND THAT THE ASSESSEE, AS WELL AS THE LD.TPO HAS AGREED THAT THE FOLLOWING COMPANIES ARE FUNCTIONALLY COMPA RABLE TO THE ASSESSEE COMPANY FOR THE PURPOSE OF BENCHMARKING: I) ACCESS INDIA ADVISORS LIMITED; II) IDC (INDIA) LIMITED. THESE TWO COMPANIES ARE ACCEPTED BY BOTH PARTIES AS COMPARABLE COMPANIES THOUGH THE AREA IN WHICH THEY RENDER SERV ICE IS DIFFERENT FROM THAT OF THE ASSESSEE COMPANY. 9. BEFORE WE EXAMINE EACH OF THE COMPARABLE COMPANI ES, ON WHICH BOTH PARTIES HAVE DIFFERENCE OF OPINION, WE O BSERVE THAT BOTH THE ASSESSEE AS WELL AS THE LD.DR HAVE STATED THAT, COMPARABLE COMPANIES, PERFORMING THE SAME SPECIFIED SUPPORT SE RVICES AS THAT OF THE ASSESSEE COMPANY CANNOT BE FOUND, AND HENCE ONLY COMPANIES WHICH HAVE BROAD COMPARATIVE FUNCTIONAL P ROFILE OF UNDERTAKING SUPPORT SERVICES IN OTHER FIELDS, HAVE TO BE TAKEN AS COMPARABLES. THIS IS FOR THE REASON THAT THE ASSES SEE IS SPECIALIZED IN PROVIDING EMERGENCY ASSISTANCE AND SUPPORT SERVI CES TO THE MEMBERS/CLIENTS OF AE. THE FUNCTIONAL PROFILE OF T HE ASSESSEE IS 8 ITA NO. 16 31/DEL/2014 GIVEN FROM PARA 1.1 PAGE 1 OF THE TP REPORT WHICH I S EXTRACTED FOR THE READY REFERENCE: INTERNATIONAL SOS P. LIMITED, SINGAPORE SOS SINGAPORE IS ONE OF THE WORLDS LARGEST MEDICAL AND SECURITY ASSISTANCE ORGANIZATION AS WELL AS THE LEA DING PROVIDER OF REMOTE SITE MEDICAL SERVICES HEADQUARTE RED IN SINGAPORE. WITH OVER 6000 PROFESSIONALS IN 70 COUN TRIES AND 26 ALARM CENTERS, THE GROUP IS ENGAGED IN PRO VISION OF MEDICAL ASSISTANCE, HEALTH CARE, SECURITY AND RI SK MANAGEMENT SERVICES TO CORPORATIONS, GOVERNMENTS, A ND INDIVIDUALS. FOUNDED IN 1985 AS AEA INTERNATIONAL, THE GROUP FOC USES SPECIFICALLY ON PROVIDING MEDICAL CARE AND CONSULTI NG SERVICES TO EMPLOYEES AND EMPLOYERS. IT OFFERS ASS ISTANCE IN SETTING UP AND MANAGING HEALTHCARE FACILITIES. IT ALSO PROVIDES A RANGE OF OCCUPATIONAL HEALTH SERVICES. INTERNATIONAL SOS OFFERS MEDICAL AND EMERGENCY SUPP ORT SERVICES TO THOSE LIVING AND TRAVELLING OUTSIDE THE IR HOME COUNTRIES AND PROVIDES HEALTHCARE MANAGEMENT, CUSTO MER ASSISTANCE PROGRAMS AND SECURITY SERVICES TO THE CL IENTS. THE ALARM CENTERS ARE SIMILAR TO EMERGENCY HOTLI NES AND GIVE 24-HOUR ACCESS TO FULL TIME SECURITY PROFE SSIONALS WITH HANDS-ON EXPERIENCE IN CRISIS MANAGEMENT. THE SECURITY SPECIALISTS MONITOR GLOBAL RISKS AND ASSIS T MEMBERS TO REACH SAFE HAVENS WHERE THEIR SAFETY IS NOT THREATENED. THE COMPANY SPECIALIZES IN THE PROVISI ON OF SECURITY CONSULTING, EMPLOYEE PROTECTION, AND CRISI S AND RISK MANAGEMENT SERVICES. IT OFFERS EMERGENCY RESP ONSE PLANNING AND SECURITY EVACUATION SOLUTIONS. THE CL IENTS OF SOS SINGAPORE INCLUDE BANKS, UNIVERSITIES, PHARMACE UTICAL COMPANIES, AND GOVERNMENT AND NON-PROFIT ORGANIZATI ONS. INTERNATIONAL SOS SERVICES (INDIA) PRIVATE LIMITED BACKGROUND SOS INDIA IS A WHOLLY OWNED INDIAN SUBSIDIARY OF SO S SINGAPORE. SOS INDIA PRIMARILY ACTS AS A SUPPORT C ENTRE TO THE SOS SINGAPORE LOCATION. SOS INDIA PROVIDES EMER GENCY ASSISTANCE AND SUPPORT SERVICES TO MEMBERS/CLIENTS OF VARIOUS ASSOCIATED ENTERPRISES. THIS ENABLES CLIEN TS TO 9 ITA NO. 16 31/DEL/2014 ACCESS ITS STRONG MEDICAL NETWORK TO LOCATE DOCTORS , HOSPITALS, CLINICS, AND SERVICE PROVIDERS ACROSS IN DIA. SOS INDIA HAS ACCESS TO A NUMBER OF GLOBALLY TRAINE D DOCTORS IN INDIA ENABLING THEM TO ADVISE CLIENTS ON HOW TO MANAGE A MEDICAL SITUATION MORE RATIONALLY. FURTHE R, SOS INDIA HAS SECURED PARTNERSHIPS WITH LEADING INSURAN CE COMPANIES, BANKING AND FINANCIAL SERVICES, TELECOMMUNICATIONS AND OTHER TRANSACTIONAL BUSINESS CORPORATIONS. FURTHER, DURING THE FINANCIAL YEAR ENDING MARCH 31, 2009, SOS INDIA HAS ALSO PROVIDED ADMINISTRATIVE SUPPORT SERVICES TO TWO OF ITS ASSOCIATED ENTERPRISES. 10. THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THA T UNDER THE GIVEN FACTS AND CIRCUMSTANCES, COMPANIES PROVIDING SPECIALIZED SUPPORT SERVICES, IN DIFFERENT FIELDS, HAVE TO BE A CCEPTED AS COMPARABLE COMPANIES, FOR THE PURPOSE OF BENCH MARK ING, AS THEIR FUNCTIONS ARE BROADLY COMPARABLE WITH THE FUNCTIONS OF THE ASSESSEE CPMPANY. 11. WE FIND THAT ACCESS INDIA ADVISORS LIMITED, PROVIDES ADVISORY SERVICES, VIZ: I) BUSINESS ADVISORY; II) MANAGEMENT CONSULTANCY; III) REGULATORY STRATEGY AND IV) CONTEND DEVELOPMENT. THIS COMPANY WAS TAKEN AS THE COMPARABLE COMPANY, B Y THE ASSESSEE AND WAS ACCEPTED BY THE REVENUE THOUGH THE NATURE OF SERVICES RENDERED ARE TOTALLY DIFFERENT FROM THE NA TURE OF SERVICES RENDERED BY THE ASSESSEE COMPANY. THIS IS BECAUSE B OTH THE PARTIES ACCEPT THAT THE COMPANIES PROVIDING SPECIALIZED SUP PORT SERVICES SHOULD BE ADOPTED AS A COMPARABLE COMPANY. 10 ITA NO. 1 631/DEL/2014 SIMILARLY IN THE CASE OF M/S.IDC (I)LIMITED IS A COMPANY PROVIDING MARKETING INTELLIGENCE, ADVISORY SERVICES FOR THE I NFORMATION TECHNOLOGY, TELECOMMUNICATION AND CONSUMER TECHNOLO GY MARKETS. THIS COMPANY HAS BEEN ACCEPTED BY BOTH PARTIES AS C OMPARABLE. HENCE, COMPANIES RENDERING SPECIALIZED SERVICES, TH OUGH IN FUNCTIONALLY DIFFERENT AREAS, ARE ACCEPTED BY BOTH PARTIES AS COMPARABLE COMPANIES. 12. WITH THIS BACKGROUND, WE NOW EXAMINE EACH OF TH E COMPARABLE COMPANIES IN DISPUTE. 1. EDUCATIONAL CONSULTANT INDIA LIMITED THIS COMPANY IS A 100% GOVERNMENT OF INDIA OWNED CO MPANY. IN THE CASE OF M/S. THYSSENKRUPP INDUSTRIES INDIA PVT. LTD., VS. ADDL CIT RANGE(3), IN ITA NO. 6460/MUM/2012, THE COORDIN ATE BENCH OF THE MUMBAI TRIBUNAL, HAS HELD THAT A COMPARABLE BEI NG 100% GOVERNMENT OF INDIA OWNED COMPANY SHOULD NOT BE INC LUDED IN THE LIST OF COMPARABLES FOR THE REASONS THAT, PROFIT MO TIVE IS NOT A RELEVANT CONSIDERATION IN CASE OF GOVERNMENT UNDERT AKINGS. MANY GOVERNMENT UNDERTAKING OPERATE ON LOSSES IN FURTHER ANCE OF SOCIAL OBLIGATIONS OF THE GOVERNMENT. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT WORKS ARE ALLOTTED BY THE GOVERNMENT TO P.S.U ON A PREFERENTIAL BASIS OR ON DIFFERENT CONSIDERATIONS. RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN BY THE CO-ORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. THYSSENKRUPP INDUSTRIE S INDIA PVT.LTD(SUPRA), WE DIRECT THE TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES WHILE COMPUTING THE AL P. 2. ICRA MANAGEMENT & CONSULTING SERVICES LTD . 11 ITA NO. 1 631/DEL/2014 12.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING MANAGEMENT CON SULTANCY SERVICES AND HENCE SHOULD NOT BE TAKEN AS A COMPARA BLE COMPANY. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: LOYDS TBS GLOBAL SERVICES PVT.LTD. VS/ DCIT (ITA NO . 5928/MUM/2012) AND TEMASEK HOLDINGS ADVISORS(I) PVT.LTD. VS. DCIT (ITA NO. 4203/MUM/2012) THE LD. AR SUBMITTED THAT COMPANIES HAVING SIMILAR FUNCTIONAL PROFILE HAVE BEEN ACCEPTED BY THE REVENUE AS A COMP ARABLE. HE CITED THE CASE OF M/S.ACCESS INDIA ADVISORY LIMITED .THE LD.DR RELIED ON THE ORDERS OF THE DRP. 12.2 ON THE ISSUE OF FUNCTIONAL PROFILE WE AGREE WI TH THE SUBMISSION OF THE LD.AR. WHEN M/S.ACCESS INDIA ADVISORS LTD., HAVING A FUNCTIONAL PROFILE OF MANAGEMENT CONSULTANCY, BUSIN ESS ADVISORY ETC., IS AGREED AS A COMPARABLE BY THE TPO, THE QUE STION OF EXCLUDING ICRA MANAGEMENT CONSULTING SERVICES LIMITED, WHICH IS HAVING IDENTICAL FUNCTIONAL PROFILE AS A COMPARABLE COMPA NY ON THE GROUND OF FUNCTIONAL DIFFERENCES DOES NOT ARISE. 12.4 ANYHOW WE FIND THAT THE DRP HAS UPHELD THE TPO S FINDING THAT THIS COMPANY CANNOT BE A COMPARABLE ON THE FOLLOWIN G GROUNDS: A) THE COMPANY IS MAINLY WORKING WITH VARIOUS STATE GO VERNMENT AND CENTRAL GOVERNMENT IN THE FIELD OF TRANSPORTATI ON ETC. AND PRIMARY WORKING EDUCATION, INVESTMENT AND TAXATION REFORMS. B) RELATED PARTY TRANSACTION EXCEEDS 25% OF TOTAL REVE NUES; 12 ITA NO. 1 631/DEL/2014 C) THE ASSESSEE IS OWNING INTANGIBLE ASSET OF RS. 3,90 ,00,000/- IN THE FORM OF TECHNICAL KNOWHOW AND WHEREAS ICRA HAS NO INTANGIBLE ASSETS. 12.5 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE RELATED PARTY TRANSACTION ACTUALLY DOES NOT EXCEED 14%, AND HENCE THE DRP IS FACTUALLY WRONG. IN ANY EVENT LD. COUNSEL COULD NOT CONTROVERT THE FINDINGS OF THE DRP, ON THE FACT OF ICRA NOT BEING IN POSSESSION OF INTANGIBLE ASSETS. WHEN ONE COMPANY OWN INTANGIBLE ASSETS AND WHEN THE OTHER COMPANY DOES NOT OWN INTANGIBLE ASSE TS, BOTH CANNOT BE COMPARED. THUS, WE HAVE TO UPHOLD THE ORD ER OF THE DRP AND REJECT THE CLAIM OF THE ASSESSEE QUA SELECTION OF ICRA, MANAGEMENT CONSULTANCY SERVICE LIMITED. 3. INDIAN TOURISM DEVELOPMENT CORPORATION LTD. THIS COMPANY IS A 100% GOVERNMENT OF INDIA OWNED CO MPANY. IN THE CASE OF M/S. THYSSENKRUPP INDUSTRIES INDIA PVT. LTD., VS. ADDL CIT RANGE(3), IN ITA NO. 6460/MUM/2012, THE COORDIN ATE BENCH OF THE MUMBAI TRIBUNAL, HAS HELD THAT A COMPANY BEING 100% GOVERNMENT OF INDIA OWNED SHOULD NOT BE INCLUDED IN THE LIST OF COMPARABLES FOR THE REASONS THAT, PROFIT MOTIVE IS NOT THE ONLY RELEVANT CONSIDERATION IN CASE OF GOVERNMENT UNDERT AKINGS. MANY GOVERNMENT UNDERTAKING OPERATE ON LOSSES IN FURTHER ANCE OF SOCIAL OBLIGATIONS OF THE GOVERNMENT. EDUCATIONAL CONSULT ANTS INDIA WAS DIRECTED TO BE EXCLUDED FOR THE SAME REASON. RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN BY THE CO-ORDINATE BENCH OF THE ITAT IN THE CASE OF M/S. THYSSENKRUPP INDUSTRIES INDIA 13 ITA NO. 1 631/DEL/2014 PVT.LTD(SUPRA), WE DIRECT THE TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES WHILE COMPUTING THE AL P. 4. GLOBAL PROCUREMENT CONSULTANT LIMITED : 12.6 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THIS IS AN 100% GOVERNMENT OWNED COMPANY AS IT IS PROMOTED BY EXIM BANK. HE VEHEMENTLY CONTENDED THAT FUNCTIONALLY, THIS COM PANY 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 EDUCATION, ENVIRONMENT, INFOTECH ET C. THE PITH AND SUBSTANCE OF THE SUBMISSION ARE THAT THE AREAS IN W HICH THIS COMPANY PROVIDES SUPPORT SERVICES IS TOTALLY DIFFER ENT FROM THE TYPE OF SUPPORT SERVICES PROVIDED BY THE ASSESSEE. HE P LACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LIMITED VS. CIT, ITA NO. 1 02/2015 JUDGMENT DATED 10/08/2015 FOR THE PROPOSITION THAT FUNCTIONALLY DISSIMILAR COMPANIES CANNOT BE TAKEN AS COMPARABLES . HE POINTED OUT THAT DECISION OF THE SPL. BENCH OF THE TRIBUNAL IN THE CASE OF GLOBAL INDIA PVT. LIMITED HAS BEEN OVERRULED BY THE HONBLE DELHI HIGH COURT IN ITA NO. 7466/M/11 JUDGMENT DATED 07/0 3/2004. 12.7 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND, POINTED OUT THAT GLOBAL PROCUREMENT LIMITED IS NOT A 100% GOVERNMENT OF INDIA OWNED COMPANY AND THAT IT IS BE ING PROMOTED BY EXPORT IMPORT BANK OF INDIA, AS A PRIVATE SECTOR COMPANY IN PARTNERSHIP WITH LEADING CORPORATE GROUPS LIKE MECO N, ICCI, TCE CONSULTING ENGINEERS LTD. ETC. SHE SUBMITTED THAT THE FUNCTIONAL PROFILE IS THAT OF SPECIALIZED SUPPORT SERVICES, WH ICH REQUIRED HIGH 14 ITA NO. 1 631/DEL/2014 PROFILE SKILL AND TIMELY DELIVERY OF QUALITY SERVIC ES, WHICH IS COMPARABLE WITH THE FUNCTIONAL PROFILE OF THE ASSES SEE. 12.8 ON A CAREFUL CONSIDERATION OF THESE ARGUMENTS, WE ARE OF THE CONSIDERED OPINION THAT THIS COMPANY SHOULD BE TAKE N AS A COMPARABLE FOR THE FOLLOWING REASONS: A) THIS IS NOT A 100% GOVERNMENT OWNED COMPANY AS CLAI MED BY THE ASSESSEE. UNDER THE HEAD CORPORATE SYNERGY IT IS STATED THAT THIS COMPANY IS CO-PROMOTED BY THE EXPO RT 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 QUAL ITY OF SERVICE, THE SKILLS ARE COMPARABLE WITH THE QUALITY AND SKILL OF SUPPORT SERVICES PROVIDED BY THE ASSESSEE, THOUGH I N FUNCTIONALLY DIFFERENT AREAS. AS THE LD. COUNSEL F OR THE ASSESSEE HAS ACCEPTED BEFORE US THAT COMPARABLE COM PANIES RENDERING SERVICES IN THE SAME FIELD AS THAT OF THE ASSESSEE COMPANY CANNOT BE FOUND, COMPANIES RENDERING SUPPOR T SERVICES IN OTHER FIELDS HAVE TO BE TAKEN AS COMPAR ABLES. C) WE HAVE ALSO PERUSED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAMPGREEN 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 COMPARABLES CITED BY THE ASSESSEE AS WELL AS THE LD .TPO HAVE 15 ITA NO. 1 631/DEL/2014 TO BE EXCLUDED ON THE SAME PRINCIPLE. THIS WILL LE AVE 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 FU NCTIONAL PROFILE OF RENDERING SKILLED PROFESSIONAL SUPPORT S ERVICES, SHOULD BE TAKEN AS COMPARABLE COMPANIES, THE PROPOS ITION LAID DOWN IN RAMPGREEN SOLUTIONS PVT. LTD.(SUPRA), CANNOT BE APPLIED TO THE FACTS OF THE CASE ON HAND. IN VIEW O F THE ABOVE DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT GL OBAL PROCUREMENT CONSULTING LIMITED HAS RIGHTLY BE TAKEN AS THE COMPARABLE BY THE TPO. HENCE WE DISMISS THIS ARGUM ENT OF THE ASSESSEE. 5. HCCA BUSINESS SERVICES PVT. LTD. 12.9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING PAY ROLL PR OCESSING SERVICES AND HENCE IS NOT FUNCTIONALLY COMPARABLE. THE SUM AND SUBSTANCE OF HIS ARGUMENTS IS THAT THIS COMPANY RENDERS LOW E ND BPO SERVICES AND HENCE CANNOT BE COMPARED WITH THE ASSE SSEE COMPANY WHICH RENDERS HIGH PROFILE SUPPORT SERVICES. 12.10. HCCA BUSINESS PVT. LIMITED IS ENGAGED IN PRO VIDING PAYROLL PROCESSING SERVICES TO THEIR CLIENTS, TO MA NAGE THE INTERNAL PAY ROLL OPERATIONS. THE COMPANY IS A LEADING SERV ICE PROVIDER IN HR OPERATIONS AND ADMINISTRATION. IN THE SYNOPSIS FILED BEFORE US BY THE ASSESSEE. THE FUNCTIONS OF HCCA BUSINESS P VT. LTD. HAS BEEN LISTED BY THE ASSESSEE AS FOLLOWS: 1) PAYROLL PROCESSING AND COMPENSATION STRUCTURING 16 ITA NO. 1 631/DEL/2014 2) HR OPERATIONS AND ADMINISTRATION 3) MANAGEMENT OF LABOUR AND ALLIED HR RELATED COMPLIAN CES 4) REIMBURSEMENT PROCESSING 5) ACCOUNTING SERVICES 12.11. THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE IS TH AT THIS COMPANY RENDERS LOW END BPO SERVICES. IN OUR VIEW T HIS IS FACTUALLY INCORRECT. THUS, AS THIS COMPANY IS PROVIDING PROF ESSIONAL SUPPORT SERVICES, ON THE SAME ANALOGY USED WHILE CHOOSING A CCESS INDIA ADVISORS LTD., AND IDC (I) LTD. AS COMPARABLE COMPA NIES BY THE ASSESSEE, THIS COMPANY IS TO BE INCLUDED AS A COMPA RABLE. 13. IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT EDUCA TIONAL CONSULTANTS (I) PVT.LTD, INDIA TOURISM DEVELOPMENT CORPORATION LTD., APITCO LTD., BEING 100% GOVERNMENT ORGANIZATI ON ARE TO BE EXCLUDED AS COMPARABLES M/S I C R A MANAGEMENT CONS ULTING SERVICES LTD IS ALSO TO BE EXCLUDED. M/S GLOBAL PR OCUREMENT CONSULTANT LTD AND HCCA BUSINESS SERVICES PVT. LTD., ARE RIGHTLY INCLUDED AS COMPARABLE COMPANIES BY THE TPO. HENCE THE LD.TPO IS DIRECTED TO ADOPT THE FOLLOWING COMPANY AS COMPARABLES: S.NO. COMPANY NAME 1. ACCESS INDIA ADVISORS LTD 2. I D C (I NDIA ) PVT. LTD. 3. GLOBAL PROCUREMENT CONSULTANT LTD 4. HCCA BUSINESS SERVICES PVT. LTD. 17 ITA NO. 1 631/DEL/2014 NO OTHER ISSUE WAS ARGUED BEFORE US. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08/12/2015 SD/- SD/- (BEENA PILLAI) (J.S. REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08/12/2015 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 18 ITA NO. 1 631/DEL/2014 DATE 1. DRAFT DICTATED ON 07.10.15/16.11.15/4.12.15 2. DRAFT PLACED BEFORE AUTHOR 17.11.15/4.12.15 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 09.12.15 6. KEPT FOR PRONOUNCEMENT ON 08.12.15 7. FILE SENT TO THE BENCH CLERK 09.12.15 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.