M/s. RTA Alesa AG, New Delhi V. DCIT (International Taxation), New Delhi

ITA 1659/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4694 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 31-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 20-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H S CHOUDHARY
• Assessee Lawyers: SSH RAVI SHARMA
• Keywords: Related party transaction; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Permanent establishment; Revised return
• Section: 143(3); 92D; 234B; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I - 2 , NEW DELHI BEFORE SH. VIJAY PAL RAO , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 1659 /DE L/ 2017 ASSESSMENT YEAR: 2012 - 13 M/S. RTA ALESA AG, APARTMENT NO. 100, A/5, GROUND FLOOR, THE CAPITAL COURT, OLOF PALAME MARG, MUNIRKA, NEW DELHI VS. DCIT (INTERNATIONAL TAXATION), CIRCLE - 3(1)(1), ROOM NO. 419, DR. SP MUKHERJEE CIVIC CENTER, J.L.N. MARG, NEW DELHI PAN : AAFCR2267N (APPELLANT) (RESPONDENT) APPELLANT BY S/SH. RAVI SHARMA & RISHABH MALHOTRA, ADV. RESPONDENT BY SH. H.S. CHOUDHARY, CIT - DR DATE OF HEARING 31.07.2017 DATE OF PRONOUNCEMENT 31.08.2017 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31/01/2017 PASSED BY THE ASSESSING OFFIC ER FOR ASSESSMENT YEAR 2011 - 12 , WHICH WAS IN CONSE QUENCE TO THE DIRECTION OF THE DISPUTE RESOLUTION P ANEL (DRP) . THE GROUNDS RAISED IN THE APPEAL ARE REPRODUCED AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW: 1. THE LEARNED ASSESSING OFFICER ( LD. AO ) HAS ERRED BOTH ON FACTS AND IN LAW IN COMPUTING THE INCOME OF THE APPELLANT AT INR 2,59,01,220 / - AS AGAINST THE TOTAL INCOME OF INR 1,91,09,481 IN THE FINAL ASSESSMENT ORDER DATED JANUARY 31, 2017 PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT IN PURSUANCE TO THE DIRECTIONS ISSUED BY THE HON BLE DRP WHICH ARE BAD IN LAW. 2 ITA NO.1659/DEL/2017 TRANSFER PRIC ING MATTERS 2. THAT THE HON BLE DRP/LD. TPO HAS ERRED BOTH ON FACTS AND IN LAW, BY RE - DETERMINING THE ARM S LENGTH PRICE ( ALP ) OF THE INTERNATIONAL TRANSACTIONS OF THE APPELLANT BY REJECTING THE TRANSACTION - BY - TRANSACTION APPROACH FOLLOWED IN THE TRANS FER PRICING ( TP ) DOCUMENTATION AND INSTEAD FOLLOWING AN AGGREGATED APPROACH. 3. THAT THE HON BLE DRP GROSSLY ERRED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN AGREEING WITH THE LD. TPO S ACTION OF: 3.1. DISREGARDING THE ARM S LENGTH PRIC E AND THE BENCHMARKING PROCESS CARRIED OUT BY THE APPELLANT IN THE TP DOCUMENTATION MAINTAINED BY IT IN TERMS OF SECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCOME TAX RULES, 1962 ( THE RULES ). 3.2. DISREGARDING MULTIPLE YEAR/ PRIOR YEARS DATA AS US ED BY THE APPELLANT IN THE TP DOCUMENTATION AND HOLDING THAT CURRENT YEAR (I.E. FY 2011 - 12) DATA FOR COMPARABLE COMPANIES SHOULD BE USED CONSIDERING THE FACT THAT THE APPELLANT IS ENGAGED IN THE EXECUTION OF LONG TERM TURNKEY CONTRACT AND IT IS IMPERATIVE TO ANALYSE THE PROFITABILITY OF SUCH CONTRACTS OVER A PERIOD OF TIME, IN LINE WITH THE APPLICABLE ACCOUNTING STANDARDS. 3.3. REJECTING THE COMPARABILITY ANALYSIS IN THE TP DOCUMENTATION AND IN CONDUCTING A FRESH COMPARABILITY ANALYSIS BASED ON APPLICATION OF ADDITIONAL/ REVISED FILTERS IN DETERMINING THE ALP AND REJECTING, IN PARTICULAR, THE FILTERS APPLIED BY THE APPELLANT IN ITS TP DOCUMENTATION; AND FURTHER ERRED IN BY CHERRY - PICKING OF THE COMPARABLE COMPANIES ON AN ARBITRARY BASIS WHICH, INTER ALIA, I S SELF - CONTRADICTORY TO HIS OWN SEARCH FILTERS AS APPLIED WHILE UNDERTAKING A FRESH COMPARABILITY ANALYSIS. 3.4. MODIFYING THE SET OF COMPARABLE COMPANIES SELECTED BY THE APPELLANT IN ITS TP DOCUMENTATION AND SELECTED FUNCTIONALLY DISSIMILAR COMPANIES. 3 .5. NOT ALLOWING APPROPRIATE ECONOMIC ADJUSTMENTS IN ACCORDANCE WITH THE PROVISION OF RULE IOB(I)(III) AND RULE IOB(3) OF THE RULES TO ACCOUNT FOR, INTER - ALIA, DIFFERENCE IN RISK ASSUMED, BETWEEN THE APPELLANT AND THE COMPARABLE COMPANIES SELECTED BY THE L D. TPO. 3 ITA NO.1659/DEL/2017 3.6. NOT ALLOWING BENEFIT OF PASS THROUGH AND SUB - CONTRACTOR COSTS INCURRED BY THE APPELLANT. CANNOT EXCEED THE PROFITS EARNED BY THE AES FROM THIRD - PARTIES. 5. WITHOUT PREJUDICE AND IN ALTERNATE TO GROUND 2 - 4 (TRANSFER PRICING MATTERS), THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/HON BLE DRP HAS ERRED IN IS CONSIDERING CERTAIN EXPENSE AS OPERATING IN NATURE WHEN THE SAME EXPENSE HAS BEEN DISALLOWED BY LD. AO UNDER SECTION 37 (1) OF THE ACT AND THEREBY LEADING TO DOUBLE TAXATION IN THE HANDS OF THE APPELLANT. CORPORATE TAX MATTERS 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON BLE DRP/ LD. AO HAS GROSSLY ERRED IN REJECTING THE ADDITIONAL CLAIM OF THE ASSESSEE ON ACCOUNT OF SALARY EXPENSE AMOUNTING TO INR 34,86,766/ - WHILE COMPUTING THE TOTAL INCOME, SINCE IT IS NOT CLAIMED IN ORIGINAL TAX RETURN OR REVISED TAX RETURN 7. ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON BLE DRP/ LD. AO ERRED IN REJECTING THE RELIANCE PLACED BY THE ASSESSEE UPON THE VARIOUS JUDICIAL PRECEDENTS WITHOUT GIVING ANY COGENT REASONS 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT, FOR DEFAULT IN PAYMENT OF ADVANCE TAX, WITHOUT APPRECIATING THE FACT THAT THE APPELLANT, BEING A NON RESIDENT, WAS NOT LIABLE TO PAY ANY ADVANCE TAX UNDER SECTION 209(I)(D) OF THE ACT 9. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. AO HAS GROSSLY ERRED IN INITIATING PENALTY PROCEEDINGS U/S 27I(I)(C) OF THE ACT. 2. T HE FACTS IN BRIEF OF THE CASE AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE TH AT : ( I ) M/S RTA ALESA AG, SWITZERLAND IS A SUBSIDIARY OF RIO TINTO PLC AND ENGAGED IN THE BUSINESS OF PROVIDING CUSTOMERS WITH 4 ITA NO.1659/DEL/2017 MATERIAL HANDLING TECHNOLOGIES AND SERVICE INCLUDING TURNKEY PROJECTS, HARBOUR FACILITIES, CONVEYING SYSTEMS, STORAGE EQUIPMENT, VE HICLE LOADING AND UNLOADING, TRAINING AND TECHNICAL ASSISTANCE. ITS EXPERTISE COVERS MATERIAL HANDLING, ANODE PLANT TECHNOLOGY, REDUCTION TECHNOLOGIES AND AUTOMATION. ( II ) M/S RTA ALESA AG, SWITZERLAND, WAS AWARDED A EPC CONTRACT BY M/S BHARAT ALUMINIUM COMP ANY LIMITED ( BALCO) FOR 55 TPH BATH PROCESSING PLANT FOR CARBON PLANT OF BALCO SMELTER EXPANSION PROJECT AT CORBA, CHATTISGARH ( INDIA). ACCORDINGLY, IT SET UP A PROJECT OFFICE (PO) IN INDIA FOR EXECUTING EPC PROJECT WITH BALCO ON A GENERAL PERMISSION FRO M THE RESERVE BANK OF INDIA (RBI). THIS PROJECT OFFICE CONSTITUTED PERMANENT ESTABLISHMENT (PE) OF RTA ALESA , SWITZERLAND INDIA I.E. AN ENTITY IN INDIA FOR TAX PURPOSES (ASSESSEE) . ( III ) THE BALCO PROJECT COMPRISED OF FOUR PARTS NAMELY ONSHORE SERVICES, ONSHORE SUPPLY, OFFSHORE SERVICES AND OFFSHORE SUPPLY. THE CONTRACT WITH BALCO WAS A TURNKEY PROJECT, WHICH INCLUDED SUPPLY OF EQUIPMENTS AND COMMISSIONING SPARES, MAINTENANCE SPARES, ERECTION, SUPE RVISION, INSPECTION AND COMPREHENSIVE PROJECT MANAGEMENT SERVICES. ( IV ) A SEPARATE ONSHORE AGREEMENT WAS ENTERED INTO BY THE BALCO WITH RTA ALESA INDIA PROJECT OFFICE ( RTAPO) AND A SEPARATE CONSIDERATION FOR THE ONSHORE PART OF THE CONTRACT WAS AGREED WITH THE BALCO , WHICH CONSISTED OF FOLLOWING SCOPE OF WORK: ( A ) SUPPLY OF EQUIPMENTS AND COMMISSIONING SPARES AND ( B ) RENDERING ERECTION, INLAND TRANSPORTATION, ON - SITE INSTALLATION AND COMMISSIONING SERVICES. 5 ITA NO.1659/DEL/2017 ( V ) DURING THE FINANCIAL YEAR CORRESPONDING TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE I.E. RTA ALESA INDIA PROJECT OFFICE EARNED THE CONTRACT REVENUE AS UNDER: P ARTICULARS AMOUNT ( IN INDIAN RUPEES) RENDERING OF SERVICES 5,12,31,796 (40.3 6%) SUPPLY OF EQUIPMENTS AND SPARES 7,53,86,570 (59.39 %) TOTAL 12,69,18,366 (100.00 %) ( VI ) T HE ASSESSEE FILED RETURN OF INCOME ON 27/11/2012 CLAIMING LOSS OF RS. 27,88,302/ - . THE RETURN WAS REVISED BY THE ASSESSEE ON 18/12/2013 DECLARING TOTAL INCOME OF RS.1,91,09,481/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTI CE UNDER SECTION 143 (2) OF THE I NCOME T AX ACT, 1961 (IN SHORT THE ACT ) WAS ISSUED AND COMPLIED WITH. ( VII ) THE ASSESSING OFFICER OBSERVED I NTERNATIONAL TRANSACTION OF RS. 18,56,86,534/ - WITH ITS ASSOCIATED E NTERPRISES (AES) AS UNDER: INTERNATIONAL TRANSACTION METHOD SELECTED RTAPO (TESTED PARTY) COMPARABLES TRANSFER PRICE (I NR) RATE/ MARGIN TYPE OF COMPANIES ARM S LENGTH PRICE/MARGIN RENDERING OF ONSHORE SERVICES - BALCO PROJECT TNMM USING OP/OC AS A PLI 51,231,796 18.51% COMPANIES ENGAGED IN PROVISION OF SIMILAR SERVICES. 18.80% SERVICE CHARGES PAID 2,883,150 6 ITA NO.1659/DEL/2017 SUPPLY OF EQUIPMENT AND SPARES - BALCO PROJECT TNMM USING OP/OC AS A PLI 75,386,570 1.47% COMPANIES ENGAGED IN TRADING OF SIMILAR EQUIPMENTS T 5.99 % PURCHASE OF BELT CONVEYOR 18,979,093 SUPERVISION SERVICES AS PART OF OFFSHORE CONTRACT METHOD SPECIFIED UNDER RULE 10 AB 37,205,925 NA NA NA ( VIII ) IN THE T RANSFER PRICING STUDY SUBMITTED , THE ASSESSEE COMPUTED THE OPERATING PROFIT MARGIN (OP/OC) AS UNDER: PARTICULARS SUPPLY OF EQUIPMENTS RENDERING OF SERVICES REVENUE CONTRACT INCOME - DOMESTIC 7,53,86,570 5,12,31,796 LESS: - NON - OPERATING INCOME - - TOTAL INCOME 7,53,86,570 5,12,31,796 TOTAL OPERATING REVENUE 7,53,86,570 5,12,31,796 EXPENDITURE OTHER CONTRACT COSTS - 3,62,39,107 MATERIAL 6,85,19,996 - PROVISION OF WARRANTY 51,15,650 - DEPRECIATION - 34,53,206 OTHER EXPENSES 467235 1,33,93,474 PROVISION FOR EXPECTED LOSS 1,94,040 1,31,868 TOTAL EXPENDITURE 7,42,96,921 5,32,17,655 LESS: - NON - OPERATING EXPENSES - - 7 ITA NO.1659/DEL/2017 TOTAL OPERATING COST 7,42,96,921 5,32,17,655 PROFIT BEFORE TAX 10,89,649 (19,85,858) ADJUSTMENTS EXPENSES RELATED TO OFFSHORE CONTRACT DEBITED IN P&L 99,87,037 ADJUSTED OPERATING PROFIT 10,89,649 80,01,179 OPERATING COSTS 7,42,96,921 4,32,30,618 OPERATING REVENUE 7,53,86,570 5,12,31,796 OP/OC 1.47%. 18.51% ( IX ) THE ASSESSEE BENCHMARKED THE TRANSACTION OF RENDERING OF SERVICE AND SERVI CE CHARGES PAID USING THE TNMM A S THE MOST APPROPRIATE METHOD WITH OP/OC AS PLI. THE MARGIN OF THE TESTED PARTY I.E. THE ASSESSEE , WAS COMPUTED AT 18.51%. THE ASSESSEE CHOSEN 4 COMPARABLES AND WO RKED OUT AVERAGE OP/OC MARGIN AS 18.80% USING MULTIPLE YEAR DATA , HOWEVER, D URING PROCEEDINGS BEFORE THE TPO, THE ASSESSEE SUBMITTED LIST OF NEW COMPARABLES & UPDATED MARGIN OF THE COMPARABLES HAVING MEAN OF 17.58% AS UNDER: SL. NO. NAME OF THE COMPANY FY: 2011 - 12 1 BALALJI RAIL ROAD SYSTEMS LTD. 24.96% 2. PROJECTS AND DEVELOPMENT INDIA LIMITED (SEG.) 46.43% 3. A2Z MAINTENANCE & ENGINEERING SERVICES LTD. 9.35% 4. COUNSEL TING ENGINEERS GROUP LTD. 17.89% 5. HIGH QUALITY STEEL LTD. 9.28% 6. BGR ENERGY SYSTEMS LTD. 15.34% 7. BIL INFRATECH LTD. - 0.21% 8 ITA NO.1659/DEL/2017 8. MN DASTUR & CO. PVT. LTD. NA 9. MAHINDRA COUNSEL TING ENGINEERS LTD. NA MEAN 17.58% ( X ) F URTHER , THE ASSESSEE BENCHMARKED THE INTERNATIONAL TRANSACTION RELATING TO SUPPLY OF EQUIPMENTS AND PURCHASE OF BELT CONVEYOR USING TNMM AS THE MOST APPROPRIATE METHOD WITH OP/OC A S PLI. THE TESTED PARTY MARGIN I.E. THE ASSESSEE WAS COMPUTED AT 1.47% . THE ASSESS EE CHOSEN FOUR COMPARABLES HAVING AVERAGE OP/OC MARGIN OF 5.99% USING MULTIPLE YEAR DATA. DURING PROCEEDING BEFORE THE TPO, THE ASSESSEE SUBMITTED UPDATED MARGIN OF THE COMPARABLES HAVING MEAN OF 2.95% AS UNDER: S. NO. NAME OF THE COMPANY FY : 2011 - 12 1 CUPRUM BAGRODIA LTD. NC 2. TIL LTD. 0.36% 3. INDIA TECHS LTD. 2.46% 4. GMMCO LTD. 6.03% MEAN 2.95% ( XI ) T HE TPO REJECTED THE APPROACH OF THE ASSESSEE OF BENCHMARKING TRANSACTION BY TRANSACTION AND ALSO THE SEARCH CONDUCTED FOR SUPPLY OF EQUIPMENT AND RENDERING OF SERVICES. THE LEARNED TPO THEREAFTER AGGREGATED THE TWO SEGMENTS AND CONDUCTED A COMMON SEARCH OF COMPARABLE COMPANIES FOR BOTH TRANSACTION. THE TPO CHOSEN FOLLOWING COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRANSACTION: 9 ITA NO.1659/DEL/2017 S . N O. COMPARABLE COMPANY MARGIN (OP/ OC) 1 CADES DIGITECH PVT. LTD. [MERGED] 2.92% 2 HOLTEC COUNSEL TING PVT. LTD. 59.00% 3 1 - DESIGN ENGINEERING SOLUTIONS LTD. 16.89% 4 NEILSOFT LTD. 2.57% 5 TRACTEBEL COUNSEL TING ENGINEERS PVT. LTD. 57.67% 6 MAHINDRA ENGINEERING SERVICES LIMITED EXCLUDED 7 TCE COUNSEL TING ENGINEERS LIMITED 21.15% 8 MAHINDRA COUNSEL TING ENGINEERING LIMITED 23.92% 9 BALAJI RAIL ROAD SYSTEMS LTD. 24.96% 10 PROJECTS & DEVELOPMENT INDIA LTD. (SEG.) 46.43% 11 COUNSEL TING ENGINEERS GROUP LTD 17.89% 12 BIL INFRATECH - 0.21% 13 BGR ENERGY SYSTEMS LTD. 15.34% AVERAGE 24.04% ( XII ) B ASED ON THE AVERAGE PLI OF COMPARABLES AT 24.04%, THE TPO COMPUTED THE ARM S LENGTH PRICE AS UNDER: TOTAL OPERATING REVENUES (A) 12,66,18,367 TOTAL OPERATING COST (B) 12,75,14,576 ARM S LENGTH PROFIT (C=24.04% OF B) 3,06,54,504 ARM S LENGTH PRICE (D= B+C) 15,81,69,080 DIFFERENCE (E= D - A) 3,15,50,713 ( XIII ) IN THE DRAFT ASSESSMENT ORDER PASSED UNDER SECTION 143(3)/144C(1) OF THE ACT ON 03/03/2016, THE LD. ASSESSING OFFICER PROPOSED TRANSFER PRICING ADDITION OF RS. 3, 15, 50, 713/ - UNDER SECTION 92CA(4) OF THE ACT. THE ASSESSING OFFICER ALSO PROPOSED DISALLOWA NCE OF RS. 34,86, 766/ - TOWARDS SALARY EXPENSES CLAIMED DURING ASSESSMENT PROCEEDINGS, ON THE GROUND THAT CLAIM WAS NEITHER MADE IN THE ORIGINAL RETURN NOR IN 10 ITA NO.1659/DEL/2017 THE REVISED RETURN OF INCOME AND THEREFORE I T WAS NOT ALLOWABLE IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD . VS. CIT, (2006) 284 ITR 323 (SC). ( XIV ) THE LD. DRP CONFIRMED THE APPROACH OF AGGREGATING BOTH THE TRANSACTION OF RENDERING OF SERVICE AND SUPPLY OF EQUIPME NTS FOR BENCHMARKING AND REJECTED THE CONTENTION OF THE ASSESSEE FOR DETERMINING THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION ON TRANSACTION BY TRANSACTION APPROACH. BEFORE THE LD. DRP, THE ASSESSEE REQUESTED FOR EXCLUSION OF THE THREE COMPARABL ES ON THE GROUND OF FAILING THE RELATED PARTY TRANSACTION(RPT) FILTER OF 25%, WHICH WAS AGREED BY THE LD. DRP. THE REQUEST OF THE ASSESSEE FOR RECTIFYING THE ERRORS IN COMPUTATION OF OPERATING MARGINS OF THE THREE COMPARABLES WAS ALSO ACCEPTED BY THE DRP. ( XV ) THE LD. DRP ALSO CONFIRMED THE DISALLOWANCE FOR CLAIM OF SALARY EXPENSES. 2.1 AGGRIEVED WITH THE TRANSFER PRICING ADDITION AS WELL AS THE DISALLOWANCE OF SALARY EXPENSES, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US , THE LEARNED COUNSEL FILED A PAPER BOOK CONTAINING PAGES 1 TO 722 . OUT OF THE VARIOUS GROUNDS RAISED IN RESPE CT OF TRANSFER PRICING ADDITION , THE LEARNED COUNSEL ARGUED THE ISSUES OF ADOPTING SEGREGATED APPROACH OF TRANSACTION BY TRANSACTION BASIS FOR BENCHMARKING THE INTERNA TIONAL TRANSACTION AND SELECTION OF COMPARABLES. OTHER ISSUES RAISED IN THE TRANSFER PRICING ADDITION GROUNDS WERE NOT ARGUED SPECIFICALLY BEFORE US. 4. ON THE ISSUE OF SEGREGATED APPROACH OF TRANSACTION BY TRANSACTION BASIS FOR BENCHMARKING THE INTERNAT IONAL TRANSACTION , THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE TWO ACTIVITIES OF RENDERING SERVICES 11 ITA NO.1659/DEL/2017 AND SUPPLY OF EQUIPMENTS AND SPARES CANNOT BE AGGRIGATED WHERE POSSIBILITY TO DETERMINE THE PROFIT FOR EACH TRANSACTION SEPARATELY EXIST, AND TH EREFORE, THE ECONOMIC ANALYSIS BE CARRIED OUT SEPARATELY EXCEPT IN THE CASES WHERE THE TRANSACTION ARE SO CLOSELY LINKED OR CONTINUES THAT THEY CANNOT BE EVALUATED ON A SEPARATE BASIS, ONLY IN THOSE CASES THE TRANSACTIONS MAY BE EVALUATED TOGETHER. HE FURT HER SUBMITTED THAT THE ASSESSEE HAS MAINTAINED SEPARATE RECORDS FOR PROVISION OF ONSHORE SERVICES AND SUPPLY OF EQUIPMENT AND THUS ANALYSIS SHOULD BE DONE ON TRANSACTION BY TRANSACTION APPROACH. 4.1 HE REFERRED TO CONTRACT AGREEMENT BETWEEN BALCO AND PROJECT OFFICE OF RTA, WHICH IS AVAILABLE ON PAGE 106 TO 164 OF THE PAPER BOOK. HE SUBMITTED THAT THE ASSESSEE E NTERED INTO CONTRACT WITH BALCO FOR SUPPLY OF EQUIPMENTS, SPARES ETC . AND SERVICE , ERECTION AND COMMISSIONING OF PLANT AND INDEPENDENTLY NEGOTIATED THE CONTRACT FOR SUPPLY AS WELL AS SERVICES. HE REFERRED TO PAGE 120 OF THE PAPER BOOK AND SUBMITTED THAT PRICE WAS SEPARATELY IDENTIFIED FOR ONSHORE EQUIPMENTS SUPPLY AND ONSHORE SERVICES. HE FURTHER REFERRED TO PAGE 122 OF THE PAPER BOOK AND S UBMITTED THAT PAYMENT TERMS WERE SEPARATELY AGREED IN THE CONTRACT FOR SUPPLY OF EQUIP MENTS AND RENDERING OF SERVICES . HE ALSO REFERRED TO PAGE 167 OF THE PAPER BOOK AND SUBMITTED THAT SEPARATE INVOICES WERE RAISED IN RESPECT OF SUPPLY OF EQUIPMENT AND SER VICES RENDERED . IN VIEW OF THE ABOVE, THE LD. COUNSEL SUBMITTED THAT BOTH TRANSACTIONS OF SUPPLY OF EQUIPMENTS AND SERVICES ARE SEPARATE AND ACCORDINGLY , SHOULD HAVE BEEN BENCHMARKED SEPARATELY FOLLOWING THE TRANSACTION BY TRANSACTION APPROACH. 4.2 LD. CI T ( DR ), ON THE OTHER HAND , SUBMITTED THAT THE ASSESSEE COMPANY WAS AWARDED A COMPOSITE CONTRACT OF COMMISSIONING OF THE PLANT WHICH INCLUDED ONSHORE AND OFFSHORE SUPPLY OF EQUIPMENTS , SPARE PARTS AS WELL AS ONSHORE AND OFFSHORE SERVICES OF ERECTION AND 12 ITA NO.1659/DEL/2017 COMM ISSIONING ETC. IT WAS A TURNKEY PROJECT AND FOR EXECUTING THE ONSHORE SUPPLY AND SERVICES, THE ASSESSEE SET UP A PROJECT OFFICE IN INDIA. ACCORDING TO THE LD. CIT( DR ) THE SUPPLY OF EQUIPMENTS WAS INTEGRAL PART OF THE WHOLE CONTRACT OF COMMISSIONING OF THE PLANT AND IT WAS AWARDED AS A WHOLE TO THE ASSESSEE. HE FURTHER REFERRED TO THE CONTRACT AGREEMENT BETWEEN BALCO AND THE PROJECT OFFICE OF THE ASSESSEE AND SUBMITTED THAT THE ONSHORE AGREEMENT OF SUPPLY OF EQUIPMENTS AND SERVICES IS A COMPOSITE AGREEMENT. HE SUBMITTED THAT MERELY IDENTIFYING THE PRICES OF THE PART OF THE CONTRACTS FOR SUPPLY OF EQUIPMENTS AND SERVICES CANNOT CHANGE THE COMPOSIT E NATURE OF THE TURNKEY PROJECT . IN VIEW OF THE SUBMISSION, HE PRAYED THAT THE APPROACH OF THE TPO AND THE DRP FOR AGGREGATING BOTH THE TRANSACTION OF SUPPLY OF EQUIPMENTS AND RENDERING OF SERVICES FOR BENCHMARKING BE UPHELD. 4.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD ON THE ISSUE IN DISPUTE. THE ISSUE IN DISPUTE IS IN RESPECT O F THE APPROACH FOR BENCHMARKING OF THE TRANSACTIONS OF SUPPLY OF EQUIPMENTS AND SERVICES I N AGGREGATE OR SEGREGATE MANNER . THE UNDISPUTED FACTS IN THE CASE ARE THAT PROJECT OF COMMISSIONING BATH P ROCESSI NG P LANT WAS AWARDED BY THE BALCO A S A TURNKEY PROJ ECT AND FOR EXECUTION OF THE ONSHORE SUPPLY OF EQUIPMENTS AND ONSHORE SERVICES, THE ASSESSEE SET UP A PROJECT OFFICE IN INDIA. THE ASSESSEE HAS BENCHMARKED TRANSACTION OF SUPPLY OF EQUIPMENT AND SERVICES SEPARATELY TAKING TNM M A S THE MOST APPROPRIATE METHOD . THE CONTENTION OF THE ASSESSEE IS THAT BOTH THE TRANSACTIONS ARE SEPARATE AND THE ASSESSEE HAS MAINTAINED SEPARATE RECORDS FOR PROVISION OF ONSHORE SERVICES AND SUPPLY OF EQUIPMENTS. THE LEARNED TPO AND THE LD. DRP , ON THE OTHER HAND, ARE OF THE VI EW THAT THE CONTRACT AWARDED TO THE ASSESSEE IS A TURNKEY PROJECT INVOLVING BOTH SUPPLY OF EQUIPMENTS, SPARE PARTS AND COMMISSIONING OF THE PLANT AND THUS BOTH THE TRANSACTION OF SUPPLY OF 13 ITA NO.1659/DEL/2017 EQUIPMENTS AND SERVICES RENDERED SHOULD BE BENCHMARKED O N AGGREGATE BASIS FOLLOWING TNM M A S THE MOST APPROPRIATE METHOD . 4. 3 .1 THE ISSUE OF ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION ON TRANSACTION BY TRANSACTION BASIS OR AS A BUNDLE TRANSACTION HAS BEEN DISCUSSED BY THE HON BLE DELHI HIGH COUR T IN THE CASE OF SONY ERICSSON M OBILE COMMUNICATION INDIA PRIVATE L IMITED VS. CIT, [2015] 55 TAXMANN.COM 240 (DELHI) . T HE HON BLE HIGH COURT OBSERVED THAT EXPRESSION CLASS OF TRANSACTION , FUNCTIONS PERFORMED BY THE PARTY UNDER SECTION 92C(1) OF THE ACT, ILLUSTRATE TH E WORD TRANSACTION INCLUDED BUNDLE OR A GROUP OF CONNECTED TRANSACTIONS. CLUBBING OF CLOSELY LINKED, WHICH INCLUDE CONTINUOUS TRANSACTION , MAY BE PERMISSIBLE UNDER THE ACT AND THE TAXPAYER CAN AGGREGATE THE CONTROL LED TRANSACTIONS IF THE TRANSACTION MEE T THE COMMON PORTFOLIO OR PACKET PARAMETER. 4. 3 .2 IN THE INSTANT CASE, THE LD. COUNSEL REFERRED TO PAGE 517 OF THE PAPER BOOK AND SUBMITTED THAT THE EXPENDITURE INCURRED WAS IDENTIFIABLE TOWARDS SUPPLY OF EQUIVALENT AND RENDERING OF SERVICES. THE LD. COUNSEL SUBMITTED THAT WHEREVER THE EXPENSES WERE NOT IDENTIFIABLE TO THE TRANSACTION, SAME HAVE BEEN ALLOCATED ON THE BASIS OF THE REVENUE RECOGNIZED. THE LD. COUNSEL SUBMITTED THAT FOLLOWING THIS PRINCIPLE MATERIAL COST, PROVISION FOR WARRANTY ETC . WAS F ULLY ALLOCATED TOWARDS SUPPLY OF EQUIPMENTS WHEREAS THE OTHER CONTRACT COST WAS ALLOCATED FULLY TOWARDS RENDERING OF SERVICES. THE PAYMENT TO AUDITORS, PRINTING STATIONARY ETC . WAS ALLOCATED ON THE BASIS OF THE REVENUE. BUT WHEN THE ATTENTION OF THE LD. CO UNSEL WAS BROUGHT TOWARDS DEPRECIATION EXPENSES DEBITED FULLY TOWARDS RENDERING OF SERVICES, HE FAILED TO EXPLAIN AS WHY THE ENTI RE DEPRECIATION EXPENSES OF RS.34,53, 206 / - WAS ALLOCATED ONLY TOWARD RENDERING OF SERVICES, THOUGH THE FIXED ASSETS OF THE ASS ESSEE INCLUDED OFFICE EQUIPMENTS, BUILDING, FURNITURE AND FIXTURES ETC . AND USE OF WHICH TOWARDS TRANSACTION OF SUPPLY OF EQUIPMENTS CANNOT BE IGNORED. 14 ITA NO.1659/DEL/2017 4. 3 .3 FURTHER, WE FIND THAT SINGLE CONTRACT AGREEMENT WITH THE BALCO FOR EXECUTION OF THE CONTRACT OF SUPPLY OF EQUIPMENTS AND RENDERING OF SERVICE, THOUGH THE PRICE OF BOTH THE COMPONENTS HAVE BEEN COMPUTED SEPARATELY. BUT MERELY BREAKING OF THE PRICE INTO COMPONENTS OF THE CONTRACT, CANNOT MAKE THE TRANSACTION SEPARABLE FROM EACH OTHER. THE EXECUTION OF THE TURNKEY PROJECT REQUIRE MATERIAL AND SERVICE SIDE BY SIDE FOR ERECTION AND COMMISSIONING AND INSTALLATION OF THE PLANT. THE DRP IN ITS ORDER HAS NOTED FEATURES OF THE EPC CONTRACTS AS UNDER: EPC (ALSO KNOWN AS 'LUMP - SUM - TURNKEY (LSTK) CONTRACT IS A FORM OF CONTRACTING ARRANGEMENT IN WHICH THE CONTRACTOR IS RESPONSIBLE FOR DESIGNING THE PROJECT, PROCURING THE NECESSARY MATERIALS AND CONSTRUCTING THE DESIGNED PROJECT. CONTRACTORS PERFORM SUCH TASKS EITHER THROUGH THEIR OWN LABOR OR BY SUBCONTRACTING A PART OF THE WORK TO THIRD PARTIES. ADDITIONALLY, THE CONTRACTOR DELIVERS THE COMPLETE FACILITY FOR A GUARANTEED PRICE BY A GUARANTEED DATE. BROADLY, EPC CONTRACTS ARE DIVIDED INTO TWO OR MORE SEPARATE CONTRACTS OFFSHORE CONTRACTS AND 'ONSHORE CONTRA CTS IN AN OFFSHORE CONTRACT, THE CONTRACTOR MANAGES THE SUPPLY OF DESIGN AND ENGINEERING SERVICES, PLANTS, EQUIPMENT AND MATERIALS SOURCED FROM OUTSIDE THE HOST COUNTRY. HOWEVER, IN AN ONSHORE CONTRACT, THE CONTRACTOR IS RESPONSIBLE FOR THE INSTALLATION OF EQUIPMENT PROCURED UNDER THE OFFSHORE CONTRACT, CONSTRUCTION, COMMISSIONING, ONSHORE DESIGN AND OTHER ONSITE ACTIVITIES, ALONG WITH THE SUPPLY OF EQUIPMENT SOURCED FROM WITHIN THE HOST COUNTRY. AS EPC CONTRACTS ARE COMMONLY USED WITHIN THE ENGINEERING AND CONSTRUCTION INDUSTRY, GROWTH IN SUCH CONTRACTS IS POSITIVELY CORRELATED TO THE GROWTH OF THESE TWO SECTORS. THE SALIENT FEATURES OF AN EPC CONTRACT ARE (I) SINGLE POINT OF CONTACT I.E. THE CONTRACTOR FOR DESIGN, ENGINEERING, PROCUREMENT, CONSTRUCTION, COMMISSIONING AND TESTING OF THE FACILITY, (II) FIXED CONTRACT PRICE UNDER WHICH THE RISK OF COSTS OVERRUNS AND THE BENEFIT OF ANY COST SAVING ACCRUE TO THE CONTRACTOR AND THE INVESTMENT REQUIRED IS PRE - DECIDED, (III) FIXED 15 ITA NO.1659/DEL/2017 COMPLETION DATE WHICH IS DECIDE D AT THE TIME OF COMMENCEMENT OF THE EPC CONTRACT FAILURE TO ABIDE BY WHICH MIGHT RESULT IN DELAYED LIQUIDATED DAMAGES TO THE CONTRACTOR, (IV) PERFORMANCE GUARANTEES REGARDING OUTPUT, EFFICIENCY AND RELIABILITY REQUIREMENTS FAILURE TO LIVE UP TO WHICH MIGH T CAUSE LIQUIDATED DAMAGES PAYABLE BY THE CONTRACTOR AND (V) SECURITY WHICH IS TO BE GIVEN BY THE CONTRACTOR TO THE PROJECT COMPANY TO ENSURE COMPLIANCE OF OBLIGATIONS PRESCRIBED UNDER THE EPC CONTRACT. THE EPC SECTOR PERFORMANCE IS PRIMARILY INTERLINKED W ITH INFRASTRUCTURE INVESTMENT. CONTRACTORS FOR EPC PROJECTS ARE SELECTED ON THE BASIS OF A TENDER PROCESS FOR LARGE HIGH - TECH PROJECT WHICH ARE EXECUTED IN THE PUBLIC PRIVATE PARTNERSHIP MODE. 4. 3 . 4 ON PERUSAL OF VARIOUS TERMS OF THE AGREEMENT BETWEEN T HE BALCO AND THE ASSESSEE , WHICH IS AVAILABLE ON PAGE 106 TO 164, WE FIND THAT THE ENTIRE CONTRACT IS A COMPOSITE CONTRACT AND THE ASSESSEE WAS REQUIRED TO DELIVER COMPLETE FACILITY TO THE BALCO. THE CLAUSE 3.3 OF THE AGREEMENT MAKES IT EVIDENT, WHICH IS REPRODUCED AS UNDER: 3.3 COMPLETENESS ANY SCOPE OF WORK, WHICH IS NOT SPECIFICALLY MENTIONED IN THIS CONTRACT, BUT IS REQUIRED FOR THE COMPLETION AND SAFE, TROUBLE FREE, NORMAL OPERATION OF THE FACILITY SHALL, UNLESS SPECIFICALLY EXCLUDED IN THIS CONTRACT, BE CONSIDERED AS INCLUDED IN THE SCOPE OF WORK AND SHALL BE SUPPLIED AND/OR RENDERED FREE OF COST TO THE OWNER, AT THE EARLIEST BUT LATEST BY THE TAKING OVER OF A EQUIPMENT. 4. 3.5 THUS , ACTIVITY OF SUPPLYING OF EQUIPMENTS, SPARE PARTS AND COMMISSIONING OF THE PLANT WAS A COMPLEX WEB OF ACTIVITIES, WHICH WERE CONTINUOUS INEXTRICABLY LINKED AN D INSEPARABLE FROM EACH OTHER AND WAS A CONTINUOUS ACTIVITY PERTAINING TO THE CONTRACT AWARDED BY THE BALCO. THIS FACT ALSO GETS STRENGTHEN FROM THE OBSERVATION THAT THE ASSESSEE HAS RECOGNIZED REVENUE FROM THE SUPPLY OF THE EQUIPMENTS AS WELL AS 16 ITA NO.1659/DEL/2017 FROM THE SERVICES IN THE RATIO OF THE PERCENTAGE OF CONTRACT WORK EXECUTED I.E. 85.35991%. THE ASSESSEE HA S APPLIED SAME RATIO BOTH OVER THE SUPPLY CONTRACT VALUE AND SERVICE CONTRACT VALUE FOR COMPUTING REVENUE RECOGNIZED FROM BOTH THESE COMPONENTS DURING THE YEAR. 4.3 . 6 IN VIEW OF ABOVE DISCUSSION, WE AGREE WITH THE FINDING OF THE TPO AS WELL AS THE LD. DRP IN AGGREGATING BOTH THE TRANSACTION OF SUPPLY OF EQUIPMENT AND RENDERING OF SERVICES FOR BENCHMARKING OF THE INTERNATIONAL TRANSACTION. ACCORDINGLY , WE UPHOLD THE ACTION OF THE LEARNE D TPO IN BENCHMARKING BOTH THE TRANSACTION OF SUPPLY OF EQUIPMENTS AND RENDERING OF SERVICES ON AGGREGATE BASIS . THERE IS NO DISPUTE AS FAR AS ADOPTING TNM M A S THE MOST APPROPRIATE METHOD. 5. THE NEXT ISSUE WHICH IS ARGUED BEFORE US IS A CHARACTERIZATION OF THE FUNCTIONS OF THE ASSESSEE BY THE TPO , WHICH HAS BEEN UPHELD BY THE LD. DRP AND SELECTION OF COMPARABLES BY THE TPO. 5.1 THE LD. COUNSEL SUBMITTED THAT THE TPO OBSERVED THE MAIN FUNCTION OF THE ASSESSEE COMPANY AS SERVICE , HOWEVER , THE SERVICE CON STITUTED 40% OF THE INCOME OF THE ASSESSEE AND BALANCE 60% INCOME IS FROM SUPPLY OF EQUIPMENT. THE LD. COUNSEL SUBMITTED THAT THE TPO HAS ACCORDINGLY CHOSEN THE COMPARABLES ENGAGED IN THE SERVICE INDUSTRY OR ENGAGED IN CONS U L TING TO CLIENTS. HE SPECIFICALLY BROUGHT OUR ATTENTION TO COMPARABLES , NAMELY , TCE C ONS U L TING ENGINEER L IMITED (TCE) AND HOLTEC CONSU L TANCY PRIVATE LIMITED (HOLTEC) . 5.2 THE LD. COUNSEL SUBM ITTED THAT ACCORDING TO THE TPO , THE TCE CONSULTING E NGINEERS INDIA LTD . WAS ENGAGED IN PROVIDING CO NS U L TANCY SERVICES IN RELATION TO THE PROJECT ACTIVITIES, DESIGN AND ENGINEERING, PROCUREMENT ASSISTANCE, PROJECT MANAGEMENT AND COORDINATION, INSPECTION CONSTRUCTION AND SUPERVISION ETC ACTIVITY IN EIGHT BUSINESS SEGMENTS WHICH INCLUDES INF RASTRUCTURE, MINING S AND MINERALS, STEELS AND METALS, POWER, OIL AND GAS, CONSTRUCTION, NUCLEAR, INDUSTRIAL. 17 ITA NO.1659/DEL/2017 5.3 REGARDING THE HOLTEC , THE LD. COUNSEL SUBMITTED THAT IT WAS ENGAGED IN PROVIDING SERVICE TO ENTIRE NEEDS OF THE GLOBAL CEMENT INDUSTRY AND OFFERED COMPREHENSIVE SERVICES IN THE AREAS OF POWER, HIGHWAYS AND BRIDGES , ENGINEERING SUPPORT SERVICES FOR BULK MATERIAL HANDLING, STRUCTURAL STEEL DETAILING ETC. ACCORDING TO THE LD. COUNSEL , THE COMPARABLE WAS ENGAGED IN SERVICE SEGMENT OF RENDERING EN GINEERING CONSULTANCY SERVICES AND , THEREFORE , CANNOT BE COMPARED WITH THE ASSESSEE. 5.4 THE LD. CIT - DR , ON THE OTHER HAND, SUPPORTED THE ORDER OF THE TPO. 5.5 WE HAVE HEARD THE RIVAL SUBMISSION ON THE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LD. TPO IN PARA - 7.2.4 OF THE TRANSFER PRICING ORDER, HAS CHARACTERIZED THE ASSESSEE A S ENGAGED IN PROVIDING ENGINEERING SERVICES. WHILE DECIDING THE ISSUE FOR BENCHMARKING THE AGGREGATE APPROACH, WE HAVE OBSERVED THAT 60% OF THE R EVENUE OF THE ASSESSEE IS EARNED FROM SUPPLYING EQUIPMENTS, SPARES ETC AND 40% OF THE REVENUE IS EARNED FROM RENDERING SERVICES. IN SUCH CIRCUMSTANCES THE ASSESSEE CANNOT BE CONSIDERED AS ENGAGED IN PROVIDING ENGINEERING SERVICES. THE ASSESSEE WAS ENGAGED IN EXECUTING TURNKEY PROJECTS INVOLVING BOTH OF SUPPLY OF MATERIAL/EQUIPMENTS AS WELL AS ERECTION, CONSTRUCTION AND COMMISSIONING OF THE PLANT. THUS, WE DIRECT THE TPO TO CHARACTERIZE THE ASSESSEE S FUNCTION AS EPC CONTRACTOR ENGAGED IN PROVIDING TURNKEY S OLUTIONS. SINCE THE TPO HAS CHARACTERIZED , THE FUNCTION OF THE ASSESSEE AS ENGAGED IN THE ENGINEERING SERVICES AND THE COMPARABLE HAVE ALSO BEEN CHOSEN KEEPING IN MIND THE FUNCTION OF THE ASSESSEE AS ENGINEERING SERVICES, THE COMPARABLES ALSO NEED A RELOOK . ON PERUSAL OF THE DOCUMENTS SUBMITTED IN RESPECT OF TCE AND HOLTEC, WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL THAT THE COMPARABLES TCE AND HOLTEC WERE ENGAGED IN 18 ITA NO.1659/DEL/2017 SERVICES OF ENGINEERING CONSULT ANCY ONLY . THEREFORE , IN OUR OPINION , THE TRANSFER PRICING OFFICER, NEED TO CARRY OUT A FRESH SEARCH OF COMPARABLES ENGAGED IN EXECUTION OF THE TURNKEY PROJECTS. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE RESTORE THE ISSUE OF SEARCHING COMPARABLES AND COMPUTATION OF ARM S LENGTH OF THE INTER NATIONAL TRANSACTIONS TO THE FILE OF THE TPO/AO FOR ADJUDICATING AFRESH. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE AFFORDED SUFFICIENT OPPORTUNITY OF HEARING ON THE ISSUE IN DISPUTE. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PU RPOSES. 6. IN GROUND NO. 6 THE ASSESSEE HAS AGITATED THE ISSUE OF ADDITIONAL CLAIM ON ACCOUNT OF S ALARY EXPENSES AMOUNTING TO RS.34,86, 766/ - . THE CONTENTION OF THE ASSESSEE IS THAT IT CAME TO KNOW THE CLAIM OF S ALARY EXPENSES AMOUNTING TO RS.34,86, 766/ - O NLY AFTER THE PERIOD OF REVISION OF THE RETURN OF INCOME EXPIRED AND , THEREFORE , CLAIM WAS MADE DURING THE ASSESSMENT PROCEEDING, WHICH WAS REJECTED BY THE ASSESSING OFFICER . ACCORDING TO THE ASSESSING OFFICER ALLOWING SUCH CLAIM WAS NOT WITHIN HIS PURVIE W, ACCORDING TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS. CIT (2006) 284 ITR 323. THE LD. COUNSEL SUBMITTED THAT THE LD. DRP WAS EMPOWERED TO GRANT ADDITIONAL CLAIM OF THE SALARY EXPENSES, HOWEVER SAME WAS NOT ACCEPTED. HE PRAYED TO CONSIDER THE GRANT OF CLAIM OF ADDITIONAL SALARY, RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS AND S HAREHOLDERS PRIVATE L IMITED, 349 ITR 336 (BOMBAY). 6.1 THE LD. CIT ( DR ), ON THE OTHER HAND , OPPOSED TO CONSIDER THE CLAIM OF THE ADDITIONAL SALARY ON THE GROUND THAT IT WAS FAILURE ON THE PART OF THE ASSESSEE TO CLAIM THE EXPENSES IN THE ORIGINAL RETURN OF INCOME OR IN THE REVISED OF INCOME. 6.2 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE HON BLE BOMBAY HIGH COURT IN THE CASE OF 19 ITA NO.1659/DEL/2017 PRUTHVI B ROKERS AND SHAREHOLDER S PRIVATE L IMITE D (SUPRA) HAS OBSERVED AS UNDER : 15. IT IS INDEED A QUESTION OF EXERCISE OF DISCR ETION WHETHER OR NOT TO ALLOW AN ASSESSEE TO RAISE A CLAIM WHICH WAS NOT RAISED WHEN THE RETURN WAS FILED OR THE ASSESSMENT ORDER WAS MADE. AS HELD BY THE SUPREME COURT THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RAISING OF A NEW PLEA IN APPEAL AND EACH CA SE MUST BE CONSIDERED ON ITS OWN FACTS. HOWEVER, SUCH CASES INCLUDE THOSE, WHERE THE GROUND THOUGH AVAILABLE WHEN THE RETURN WAS FILED OR THE ASSESSMENT ORDER WAS MADE, WAS NOT TAKEN OR RAISED FOR REASONS WHICH THE APPELLATE AUTHORITIES MAY CONSIDER VALID. IN OTHER WORDS, THE JURISDICTION OF THE APPELLATE AUTHORITIES TO CONSIDER A FRESH OR NEW GROUND OR CLAIM IS NOT RESTRICTED TO CASES WHERE SUCH A GROUND DID NOT EXIST WHEN THE RETURN WAS FILED AND THE ASSESSMENT ORDER WAS MADE. 6.3 LD. COUNSEL SUBMITTED THAT SALARY OF THE FEW EXPATRIATES WAS COMPUTED INCORRECTLY AT THE TIME OF FILING OF RETURN OF INCOME AND SUBSEQUENTLY HIGHER AMOUNT WAS FOUND TO BE PAYABLE TO THEM. HE ALSO REFERRED THE TAX DEDUCTION CERTIFICATES ISSUED TO THOSE EMPLOYEES AND RETURN OF I NCOME FILED BY THEM. IN OUR OPINION, IF THE ASSESSEE HAS ACTUALLY INCURRED HIGHER SALARY EXPENSES AND SAME ARE FOUND TO BE AS EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE IN TERMS OF SECTION 37(1) OF THE ACT, THEN SAME SHOULD BE ALLOWED TO THE ASSESSEE. IN VIEW OF ABOVE FACTS AND IN THE INTEREST OF JUSTICE , WE FEEL IT APPROPRIATE TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CLAI M OF THE SALARY EXPENSES OF RS.34,86, 766/ - AND ALLOW THE CLAIM IN ACCORDANCE WITH LAW. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE AFFORDED REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY , THE GROUND OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 20 ITA NO.1659/DEL/2017 7. NO OTHER GROUNDS EXCE PT THE GROUND ADJUDICATED ABOVE , WERE ARGUED BEFORE US AND THEREFORE , THE REST OF THE GROUNDS ARE DISMISSED AS INFRUCTUOUS. 8. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 3 1 S T AUGUST , 201 7 . S D / - S D / - ( VIJAY PAL RAO ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 1 S T AUGUST , 201 7 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI