Lockheed Martin India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 1701/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6560 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 26-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH ANTIL
• Keywords: Transfer pricing; International transaction; Bad and doubtful debts; Valuation report
• Section: 143(3); 144C; 64; 13; 22

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI I-1 B ENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI N.K. CHOUDHARY, JUDICIAL M EMBER ITA NO. 1701/DEL/2015 [ASSESSMENT YEAR: 2010-11] LOCKHEED MARTIN INDIA (P) LTD VS. THE A.C.I.T THE GRAND PLAZA, THE GRAND HOTEL CIRCLE 15(2) NELSON MANDELA ROAD, VASANT KUNJ NEW DELHI PHASE II, NEW DELHI PAN: AABCL 4556 E [APPELLANT] [RESPONDENT] DATE OF HEARING : 22.01.2020 DATE OF PRONOUNCEMENT : 07.02.2020 ASSESSEE BY : SHRI SUMIT MANGAL, ADV SHRI DEVASHISH PODDAR, ADV REVENUE BY : SHRI DINESH ANTIL, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ASSESSMENT ORDER DATED 30.01.2015 FRAMED U/S 143(3) R.W.S 144C OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] PERTAINING TO ASSESSMENT YEAR 2010-11. 2 2. THE GRIEVANCES OF THE ASSESSEE CAN BE SUMMARISED INTO THE FOLLOWING PARTS: 1. TP ADJUSTMENT BY INCLUDING AND EXCLUDING SOME COMPARABLES OBJECTED TO BY THE ASSESSEE. 2. TREATING SOME ITEMS AS NON-OPERATING WHILE COMPU TING MARGINS OF COMPARABLES. 3. DENIAL OF RISK ADJUSTMENT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE APPELLANT LOCKHEED MARTIN INDIA PVT LIMITED [LMIPL], INCORPOR ATED IN THE F.Y. 2007-08, MAINLY ACTS AS A COMMUNICATION CHANNEL BET WEEN ITS PARENT ENTITY AND POTENTIAL CUSTOMERS IN INDIA. SOME OF TH E MAIN FUNCTIONS UNDERTAKEN IN INDIA ARE AS FOLLOWS: A) PROVIDING INFORMATION ABOUT LOCKHEED MARTIN CORP ORATION (LMC) TO INDIAN COMPANIES; B) UNDERTAKING MARKET RESEARCH AND PROVIDING INFORM ATION ON INDIAN MARKET TO THE PARENT ENTITY; C) COLLATING INFORMATION ABOUT COMPETITORS OF LOCKH EED MARTIN GROUP IN INDIA AND PROVIDING INFORMATION ON THE SAM E TO ITS HEAD OFFICE; 3 D) DISTRIBUTION OF BROCHURES TO PROMOTE LOCKHEED MA RTIN IN INDIA AND PROVIDE INFORMATION TO POTENTIAL CUSTOMER S; E) ACTING AS LIAISON AND COMMUNICATION CHANNEL BETW EEN POTENTIAL INDIAN CUSTOMER AND GROUP ENTITIES; F) PROVIDING INFORMATION ON VARIOUS QUERIES RAISED BY GROUP ENTITIES 4. THE APPELLANT DEPLOYS NECESSARY ASSETS FOR PERFO RMING MARKETING SUPPORT SERVICES. BUT AT THE SAME TIME, IT DOES NOT OWN ANY MARKETING OR OTHER INTANGIBLES FOR RENDERING THESE SERVICES. FOR PROVIDING THE AFOREMENTIONED SERVICES, THE APPELLANT EMPLOYS NON- TECHNICAL PEOPLE WHO POSSESS GENERAL SKILLS. EMPLOYEES ARE NOT TECHN ICAL PEOPLE LIKE ENGINEERS, PHDS, SOFTWARE EXPERTS, ETC. THE APPELLA NT DOES NOT BEAR ANY RISK SINCE IT IS PROVIDING MARKETING SUPPORT SE RVICES AND IS COMPENSATED ON COST PLUS BASIS @ 10%. MARKET RISK AND RELATED PRODUCT LIABILITY RISK IS BORNE BY LMC AND/OR ITS G ROUP COMPANIES, SINCE THEY SELL THE PRODUCTS TO UNRELATED PARTIES DIRECTL Y. 5. DURING THE YEAR UNDER CONSIDERATION, THE APPELLA NT HAS UNDERTAKEN THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS AES AS DISCLOSED IN FORM 3CEB: 4 SR NO. NATURE OF TRANSACTION METHOD VALUE (IN INR) 1. PROVISION OF MARKETING SUPPORT SERVICES TRANSACTION NET MARGIN METHOD (TNMM) 136,527,647 2. REIMBURSEMENT OF EXPENSES BY AE NO BENCHMARKING REQUIRED 221,724 3. REIMBURSEMENT OF EXPENSES OF AE NO BENCHMARKING REQUIRED 42,870,136 TOTAL 179,619,507 6. IN ORDER TO BENCH MARK THE AFOREMENTIONED INTERN ATIONAL TRANSACTIONS, THE APPELLANT WAS SELECTED AS THE TES TED PARTY AND TNMM WAS CHOSEN AS THE MOST APPROPRIATE METHOD WITH OPER ATING PROFIT/OPERATING COST BEING USED AS THE PROFIT LEVE L INDICATOR. THE ASSESSEE WORKED OUT THE FOLLOWING SET OF COMPANIES UNDERTAKING COMPARABLE ACTIVITIES VIS A VIS THE PROVISION OF MA RKETING SUPPORT SERVICES BY THE ASSESSEE: NAME OF THE COMPANY OPERATING PROFITS ON OPERATING COSTS (%) AVERAGE OPERATING PROFITS ON OPERATING COSTS (%) 2009 2008 2007 ACCESS INDIA ADVISORS LTD. NA 6.62% 45.97% 34.77% ASIAN BUSINESS EXHIBITION & CONFERENCE LTD. NA 19.52% 15.85% 18.10% I C R A MANAGEMENT CONSULTING SERVICES LTD. NA -2.78% 3.22% 0.06% I D C (INDIA) LTD. NA 9.99% 14.87% 12.30% INHOUSE PRODUCTIONS LTD. NA 2.51% 0.56% 1.51% 5 INDIA TOURISM DEVELOPMENT CORPORATION LTD. NA -0.11% 9.43% 5.31% TECHNICOM CHEMIE (INDIA) LIMITED NA NC 5.68% 5.68% TIMES INNOVATIVE MEDIA LTD. NA NC -2.21% -2.21% ARITHMETIC MEAN 9.44% 7. SINCE THE ASSESSEE EARNED AN OPERATING MARGIN OF 10% ON OPERATING COST, AND SINCE THE AVERAGE MEAN OF THE A SSESSEE WAS AT 9.44%, THE ASSESSEE TREATED ITS INTERNATIONAL TRANS ACTION FOR MARKETING SUPPORT SERVICES AT ARMS LENGTH. 8. DURING THE TP ASSESSMENT PROCEEDINGS, THE TPO D ID NOT CONCUR WITH THE ANALYSIS UNDERTAKEN BY THE ASSESSEE TO BEN CH MARK THE TRANSACTIONS PERTAINING TO PROVISIONS OF MARKETING SUPPORT SERVICES TO ITS AE. ON THE ALLEGED FUNCTIONAL INCOMPARABILITY, THE TPO REJECTED SIX OUT OF 8 COMPARABLES SELECTED BY THE ASSESSEE. THE COMPARABLES REJECTED ARE AS UNDER: I) ACCESS INDIA ADVISORS LTD II) ASIAN BUSINESS EXHIBITION & CONFERENCE LTD III) INHOUSE PRODUCTIONS LTD IV) INDIA TOURISM DEVELOPMENT CORPORATION LTD 6 V) TECHNICOM CHEMIE [INDIA] LTD VI) TIMES INNOVATIVE MEDIA 9. THE TPO FURTHER SELECTED THE FOLLOWING COMPARABL ES: I) APTICO LTD II) CAMEO CORP SERVICES III) GLOBAL PROCUREMENT CONSULTANTS LTD IV) HCCA BUSINESS SERVICES PVT LTD V) QUADRANT COMMUNICATIONS LTD VI) TSR DARASHAW LIMITED 10. THE OPERATING MARGIN COMPUTED BY THE TPO IS AS UNDER: NAME OF THE COMPANY OPERATING PROFITS / OPERATING COST(%) APITCO LTD 40.09 CYBER MEDIA RESEARCH LTD. 14.85 GLOBAL PROCUREMENT CONSULTANTS LTD. 37.19 HCCA BUSINESS SERVICES PVT. LTD. 20.05 ICRA MANAGEMENT CONSULTING SERVICES LTD. 1.94 QUADRANT COMMUNICATION LTD. 13.11 TSR DARASHAW LTD 41.15 CAMEO CORPORATE SERVICES LTD 8.26 ARITHMETIC MEAN 22.08% 7 11. OBJECTIONS WERE RAISED BEFORE THE DRP AND PURSU ANT TO THE DRPS DIRECTIONS DATED 12.12.2014, THE TPO, VIDE OR DER DATED 28.01.2015 PROVIDED WORKING CAPITAL ADJUSTMENT TO T HE COMPARABLES SELECTED BY THE TPO FOR BENCH MARKING THE INTERNATI ONAL TRANSACTIONS OF THE APPELLANT AND COMPUTED THE REVISED ADDITIONS AS UNDER: S NO. NAME OF COMPANY ADJUSTED OP/OC (IN %) 1. APITCO LTD. 28.63 2. CAMEO CORPORATE SERVICE LTD. 4.72 3. CYBER MEDIA RESEARCH LTD. 10.63 4. ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD. -4.81 5. GLOBAL PROCUREMENT CONSULTANTS LTD. 32.95 6. HCCA BUSINESS SERVICES PVT. LTD. 17.85 7. QUADRANT COMMUNICATIONS LTD. 12.28 8. TSR DARASHAW LTD. 39.04 AVERAGE 17.66 HENCE, THE REVISED ADDITION WAS COMPUTED BY THE LD TPO AS UNDER: PARTICULARS AMOUNT IN INR OPERATING COST 12,411,6043 ARMS LENGTH PRICE AT A MARGIN OF 17.66% 146,034,936 PRICE RECEIVED 136,527,647 REVISED ADDITION 9,507,289 12. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 8 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ARG UED FOR THE EXCLUSION OF FOUR COMPARABLES AND INCLUSION OF TWO COMPARABLES. 14. WE WILL NOW ADDRESS TO THE EXCLUSION OF FOUR CO MPARABLES AS UNDER. (I) APTICO LIMITED 15. IT IS THE SAY OF THE LD. COUNSEL FOR THE ASSESS EE THAT APTICO LTD PROVIDES TECHNICAL AND ENGINEERING SERVICES AND WID E RANGE OF CONSULTING SERVICES, WHICH CANNOT BE COMPARED WITH THE MARKET SUPPORT SERVICES PROVIDED BY THE ASSESSEE. 16. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE F INDINGS OF THE TPO. IT IS THE SAY OF THE LD. DR THAT WHILE COMPARI NG THE COMPARABLES UNDER TNMM, A BROAD SIMILARITY OF FUNCT IONS HAS TO BE CONSIDERED AND APTICO LTD FULFILLS ALL THE CRITERIA . 17. WE HAVE GONE THROUGH THE ANNUAL REPORT OF APTIC O LTD WHICH IS PLACED ON RECORD. WE FIND THAT OTHER THAN PROVIDIN G TECHNICAL AND ENGINEERING AND WIDE RANGE OF CONSULTING SERVICES, APTICO LTD EVEN 9 EXECUTES PROJECTS ON TURNKEY BASIS, WHICH TANTAMOUN T TO CONSTRUCTION IN CERTAIN PROJECTS. APTICO LTD IS ALS O A PUBLIC SECTOR UNDERTAKING. ITS INCOME FROM OPERATIONS INCLUDE IN COME FROM MICRO ENTERPRISES DEVELOPMENT, SKILL DEVELOPMENT, ENTREPR ENEURSHIP DEVELOPMENT, TOURISM AND RESEARCH STUDIES, PROJECT RELATED SERVICES, INFRASTRUCTURE PLANNING AND DEVELOPMENT, ENVIRONMEN TAL MANAGEMENT, ENERGY RELATED SERVICES, CLUSTER DEVELO PMENT, ASSET RECONSTRUCTION AND MANAGEMENT SERVICES AND EMERGING AREAS. 18. THE CO-ORDINATE BENCH IN THE CASE OF ADIDAS TEC HNICAL SERVICES (P) LTD 69 TAXMANN.COM 401 HAS, FOR THE DIVERSIFIED ACTIVITIES OF APTICO LTD, HAS EXCLUDED THIS COMPANY. THE RELEVAN T FINDINGS OF THE CO-ORDINATE BENCH READ AS UNDER: A) APITCO LTD.:- APITCO LTD. IS A PUBLIC SECTOR UN DERTAKING PROVIDING VARIOUS SUPPORT SERVICES FOR THE DEVELOPM ENT OF TOURISM INDUSTRY. LATER THE FUNCTIONAL PROFILE OF T HE COMPANY HAD UNDERGONE A CHANCE, AND IT IS NOW ENGAGED IN PR OVIDING TECHNICAL CONSULTANCY RELATING TO ASSET RECONSTRUCT ION COMPANIES , MANAGEMENT SERVICES, MICRO ENTERPRISE DEVELOPMENT, SKILL DEVELOPMENT ETC. THIS IS A GOVERNMENT COMPANY . THE FACT THAT ITS OPERATIONS ARE MAINLY BASED ON THE POLICY REQUIREMENTS OF THE GOVERNMENT AND THE FACT THAT IT IS A PREFERR ED COMPANY 10 OF THE GOVERNMENT OF INDIA FOR ENTRUSTMENT OF WORKS , CANNOT BE IGNORED. BE IT AS IT MAY, IN OUR CONSIDERED OPINION , THE FUNCTIONAL PROFILE OF THIS COMPANY IS DIFFERENT FROM THAT OF T HE ASSESSEE COMPANY AND HENCE THE SAME SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES WHILE COMPUTING THE ALP. 19. IN THE CASE OF TREND MICRO INDIA (P) LTD 64 TAX MANN.COM 462, AGAIN APTICO LTD WAS EXCLUDED FOR THE REASONS GIVEN BELOW: 7.3 A CAREFUL PERUSAL OF THE OPERATIONS CARRIED OU T BY APITCO LIMITED REVEALS THAT THIS COMPANY IS PROVIDING SERV ICES IN THE NATURE OF PROJECT REPORT PREPARATION, TECHNICAL AND ECONOMIC STUDIES, FEASIBILITY STUDIES, MICRO ENTERPRISE DEVE LOPMENT, SKILL DEVELOPMENT, PROJECT MANAGEMENT CONSULTING, INDUSTR IAL CLUSTER DEVELOPMENT, ENVIRONMENTAL MANAGEMENT CONSULTING, E NERGY MANAGEMENT CONSULTING, MARKET AND SOCIAL RESEARCH A ND ASSET RECONSTRUCTION MANAGEMENT SERVICES. NO SEGMENT-WISE PROFITABILITY DATA OF THESE SERVICES IS AVAILABLE. THE TPO HAS CONSIDERED THIS COMPANY AS COMPARABLE ON ENTITY LEV EL. WE FIND THAT THERE IS A TINY RESEMBLANCE OF 'MARKET AND SOC IAL RESEARCH' FUNCTIONS PERFORMED BY THIS COMPANY WITH THE OVERAL L ACTIVITIES UNDERTAKEN BV THE ASSESSEE. ALL OTHER SERVICES ARE ENTIRELY DIFFERENT. WE FAIL TO APPRECIATE AS TO HOW ALL THE ABOVE LISTED SERVICES CAN BE CONSIDERED AS COMPARABLE WITH THE S ERVICES PROVIDED BY THE ASSESSEE, WHICH ARE RESTRICTED TO I DENTIFYING CUSTOMERS OF ANTIVIRUS PRODUCTS IN INDIA, SENDING S UCH INPUT TO 11 ITS AE, FINALIZING SALES AND, THEREAFTER, RENDERING BASIC TECHNICAL ASSISTANCE IN RESOLVING THE USE OF SUCH PRODUCTS, I F ANY, WHICH ARE EVENTUALLY MADE AND SOLD BY THE AE. 7.4 THE LD. DR STRENUOUSLY ARGUED THAT ALL THE ACTI VITIES DONE BY THIS COMPANY ARE BASICALLY BUSINESS SERVICES AND THE ASSESSEE IS ALSO RENDERING BUSINESS SERVICES. HE SUBMITTED T HAT DIFFERENTIATION OF FUNCTIONS IN THE OVERALL 'BUSINE SS SERVICES' UMBRELLA IS TAKEN CARE OF UNDER THE TNMM. HE HARPED ON THE CONTENTION THAT THERE IS NO REQUIREMENT TO HAVE IDE NTICAL SERVICES FOR THE PURPOSE OF MAKING COMPARISON UNDER THE TNMM. 7.5 WE ARE UNABLE TO ACCEPT THIS ARGUMENT IN VIEW O F THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF RAMPGREEN SOLUTION (P.) LTD. V. CIT [2015] 377 ITR 533/234 TAXMAN 573/60 TAXMANN.COM 355 (DELHI) IN WHICH IT H AS BEEN HELD THAT THE COMPARABLES ARE TO BE SELECTED ON THE BASIS OF SIMILARITY EVEN UNDER TNMM. THE HONBLE HIGH COURT HAS LAID DOWN THAT SELECTION OF COMPARABLES DOES NOT DIFFER WITH THE METHOD ADOPTED. EX CONSEQUENTI, IT IS NO MORE OPEN TO ARGUE THAT THE FUNCTIONAL DISSIMILARITY OF THE COMPANIES UNDER THE OVERALL BROADER CATEGORY CAN BE IGNORED UNDER THE T NMM. 7.6 IN VIEW OF THE FOREGOING DISCUSSION, WE FIND THAT THE FUNCTIONALLY SIMILARITY OF APITCO LIMITED IS LACKIN G ON ENTITY LEVEL WITH THE ASSESSEE COMPANY. AS SUCH, WE ORDER FOR IT S EXCLUSION FROM THE FINAL SET OF COMPARABLES. 12 20. IT IS PERTINENT TO MENTION HERE THAT SEGMENTAL INFORMATION OF THIS COMPANY IS NOT AVAILABLE IN ITS ANNUAL REPORT FOR F.Y. 2009-10. ASSUMING THAT EVEN SOME OF THE SERVICES PROVIDED BY APTICO LTD CAN BE CONSIDERED COMPARABLE TO THE APPELLANT, THEN ALS O, DUE TO LACK OF SEGMENTAL DATA, THIS COMPANY HAS TO BE REJECTED. C ONSIDERING THE FACTS IN TOTALITY, WE DIRECT THE TPO TO EXCLUDE APT ICO LTD FROM THE FINAL SET OF COMPARABLES. GLOBAL PROCUREMENT CONSULTANTS LTD [GPCL] 21. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT GP CL IS FUNCTIONALLY DIFFERENT AS IT IS NOT ENGAGED IN PROV IDING PROCUREMENT SUPPORT SERVICES BUT IS, IN FACT, ENGAGED IN PROVID ING CONSULTING SERVICES AND REVIEW OF PROCUREMENT PROCESSES FOR VA RIOUS PROJECTS FUNDED BY THE WORLD BANK. 22. DISMISSING THE CONTENTIONS OF THE ASSESSEE, THE TPO REFERRED TO THE ANNUAL REPORT OF THIS COMPANY BUT THAT ANNUAL R EPORT PERTAINS TO F.Y. 2010-11 AND CANNOT BE USED FOR F.Y. 2009-10 . IN OUR CONSIDERED OPINION, GPCL PROVIDES HIGH-END TECHNICA L CONSULTANCY IN INTERNATIONAL FUNDING REGULATIONS AND CANNOT BE COM PARED TO MARKET 13 SUPPORT SERVICES PROVIDED BY THE APPELLANT. THE SE RVICES PROVIDED BY THE ASSESSEE, AS EXTRACTED FROM ITS ANNUAL REPORT F OR F.Y. 2009-10, EXHIBITED AT PAGE 93 AND 94 OF THE PAPER BOOK IS AS UNDER: SERVICES: INITIAL STAGES: IDENTIFY PURPOSE / CONSTRAINTS UPON THE PROJECT E.G. MAJOR MILESTONES, POTENTIAL BOTTLENECKS. AGREE UPON ROLES/OPERATING METHODS WITH DONOR/RECIPIENT. AGREE UPON PROCUREMENT PLAN. ESTIMATION: PROVIDE BUDGETARY PRICES IF REQUIRED. SPECIFICATIONS: CHECK/RAISE QUERIES/AGREE WITH ALL PARTIES. OPEN UP FOR TENDERING WHETHER GENERAL OR BY DIRECT INVITATION. ENSURE GENERAL REQUIREMENTS APPROPRIATE TO DEVELOPING COUNTRIES. BID PREPARATION: PREPARE INSTRUCTIONS TO BIDDERS. ENSURE DONOR/OLD PROCEDURES ARE COMPLIED WITH. DECIDE PAYMENT TERMS/RETENTION/BID AND PERFORMANCE BOND. STIPULATE LOCAL REPRESENTATION. SPECIFY EVALUATION CONDITIONS. DETERMINE DELIVERY REQUIREMENTS. CONTRACT MATTERS: ENSURE CONDITIONS OF CONTRACT ARE APPROPRIATE TO PROTECT THE CLIENT. OBTAIN STATEMENT OF COMPLIANCE WITH SPECIFICATIONS AND TENDER CONDITIONS. REVIEW PREFERRED TENDERERS CAPABILITY PREPARE REPORTS TO COVER FULL COMMERCIAL, CONTRACTUAL AND DONOR PROCEDURAL FACTORS, TECHNICAL EVALUATION REPORTS IF AGREED UPON. MAKE RECOMMENDATION. CONTRACT: DRAFT CONTRACT. NEGOTIATE AS NECESSARY. PLACE ORDER. PROGRESS AND REPORT, APPLYING LIQUIDATED DAMAGES AS APPROPRIATE. PROVIDE FOR INSPECTION. ADVANCE/STAGE/FINAL PAYMENTS. ENSURE PERFORMANCE TEST COVERED. ENSURE WARRANTY IS IMPLEMENTED. SHIPPING: ARRANGE BY MOST APPROPRIATE METHOD. CONSOLIDATE/ CONTAINERIZE. ARRANGE TO SITE IF NECESSARY. DISTRIBUTE DOCUMENTATION. PAYMENT AND ACCOUNTING : PREPARE WITHDRAWAL APPLICATION. AUTHORISE. RECORD REPORT CO-ORDINATION: 14 SERVICES CONTRACT FOR INSTALLATION. TRAINING AND MAINTENANCE CONTRACTS. CHECK ELIGIBLE SOURCES. SHIPPING SPECIFICATIONS, METHODS AND TERMS SOURCING : KNOWLEDGE OF SUPPLIERS. GROUPING OF ITEMS FOR BID PACKAGES. ADVERTISING: AS REQUIRED, INCLUDING CIRCULATION WITHIN THE COUNTRY. BID DOCUMENTS: ARRANGE ISSUE AND RETURN UNDER SECURE ARRANGEMENTS. EVALUATION : OBTAIN CLARIFICATION / MISSING INFORMATION. ALL THE TIME, BETWEEN THE PARTIES. KNOW HOW TRANSFER: TRAINING THOUGH STATE OF THE ART TALLOR MADE TRAINING MODULES AND HANDS - ON TRANSFER OF EXPERTISE. GPCL HAS ENTERED INTO ON MOU WITH ADMINISTRATIVE STAFF COLLEGE OF INDIA TO PROVIDE COMPREHENSIVE TRAINING ON PROCUREMENT FOR CAPACITY BUILDING OF PROJECT IMPLEMENTATING AGENCIES. BID SUPPORT SERVICES: ADVICE TO EXPORT COMMUNITY ON CARE AND APPROACH TO BE TAKEN IN SUBMISSION OF BIDS IN INTERNATIONAL FUNDED PROJECTS, SO THAT SUCCESS RATE IS BETTER AND BIDS ARE NOT REJECTED FOR WANT OF COMPLIANCE WITH PROCUREMENT GUIDELINES. FURTHER, THE CAREERS EMPANELMENT PAGE OF THE W EBSITE OF GPCL ( HTTP://WWW.GPCL.IN/CAREER_EMPANELMENT.HTML ), THROWS SOME LIGHT ON THE NATURE OF QUALIFICATIONS AND EXPERIENC E THAT GPCL REQUIRES FROM ITS EMPLOYEES. CAREER EMPANELMENT GLOBAL PROCUREMENT CONSULTANTS LIMITED INVITES APPL ICATIONS FOR EMPANELMENT FROM EXPERT WHO HAVE THE REQUISITE EXPE RIENCE POSSESSING IMPECCABLE TRACK RECORD IN THE AREAS OF PROCUREMENT AND PROJECT MANAGEMENT PARTICULARLY IN BID TECHNICA L 15 SPECIFICATIONS FOR GOODS/WORKS, BID EVALUATION, CON TRACT MANAGEMENT, INSPECTION, AUDIT, ETC., IN SECTORS SUC H AS HEALTH, EDUCATION URBAN AND RURAL DEVELOPMENT ETC. EXPERIEN CE IN INTERNATIONALLY FUNDED PROJECTS AND FOREIGN LANGUAG E PROFICIENCY WOULD BE AN ADVANTAGE. 23. A BARE PERUSAL OF THE AFOREMENTIONED EXTRACTS S HOWS THAT THE SERVICES PROVIDED BY GPCL ARE MORE AKIN TO THOSE PR OVIDED BY CONSULTANTS WHO ASSIST THE CLIENTS TO PREPARE FOR L ARGE SCALE INFRASTRUCTURE PROJECTS AND REVIEW THEIR SUPPLY CHA IN PROCESSES TO ENSURE THAT THE SAME ARE OPERATING EFFICIENTLY AND ECONOMICALLY. 24. IN OUR CONSIDERED VIEW, GPCL CANNOT BE CONSIDER ED TO BE AN APPROPRIATE COMPARABLE AND WE DIRECT FOR EXCLUSION OF THE SAME. WE FIND SUPPORT FROM THE FOLLOWING DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF TREND MICRO INDIA PVT. LTD 64 TAXMAN N.COM 462 WHEREIN IT HAS BEEN HELD AS UNDER: 8.1. THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPAR ABLES DESPITE THE ASSESSEE'S OBJECTION THAT IT IS ENGAGED IN PROVIDING CONSULTANCY SERVICES AND REVIEW OF PROCUREMENT PROC ESSES FOR VARIOUS PROJECTS FUNDED BY THE WORLD BANK. THE ASSE SSEE FAILED TO CONVINCE EVEN THE DRP FOR ITS EXCLUSION. 16 8.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE RELEVANT MATERIAL ON RECORD. WE CONSIDER IT EXPEDIE NT TO FIRST DISCUSS THE NATURE OF ACTIVITIES CARRIED OUT BY GLO BAL PROCUREMENT CONSULTANTS LTD. A COPY OF ANNUAL REPOR T OF THIS COMPANY FOR THE RELEVANT YEAR IS AVAILABLE ON RECOR D. AS PER THIS REPORT. THIS COMPANY IS PROMOTED BY EXPORT- IMPORT BANK OF INDIA IN ASSOCIATION WITH LEADING INDIAN PUBLIC SEC TOR AND PRIVATE SECTOR CONSULTANCY ORGANISATIONS ON THE BASIS OF PU BLIC-PRIVATE PARTNERSHIP MODEL THAT OFFERS COLLECTIVE INDIAN EXP ERIENCE AND EXPERTISE THROUGH THE PROVISION OF A RANGE OF ADVIS ORY SERVICES WITH PARTICULAR FOCUS ON 'PROCUREMENT'. THIS COMPAN Y PROVIDES TECHNICAL ASSISTANCE IN ENHANCING QUALITY, TRANSPAR ENCY, EFFICIENCY AND EFFECTIVENESS OF PROCUREMENT AND IMP LEMENTATION SERVICE TO HELP ATTAIN DESIRED INSTITUTIONAL AND CO RPORATE OBJECTIVES. THE EXPERTISE OF THIS COMPANY IS AVAILABLE TO VARIO US SECTORS INCLUDING POWER, WATER RESOURCES, TRANSPORT ATION, INDUSTRIES, ETC. ITS SERVICES HAVE BEEN OUTLINED IN THE ANNUAL REPORT. FROM SUCH SERVICES RENDERED BY THIS COMPANY , IT CAN BE NOTICED THAT IT IS CONDUCTING INDEPENDENT PROCUREME NT REVIEW OF MULTILATERALLY FUNDED PROJECTS SPREAD ACROSS THE GLOBE. IT ALSO UNDERTAKES PROCUREMENT AUDITS, THIS COMPANY IS PROVIDING FULL TIME ADVICE ON PROCUREMENT AND CONTRACT RELATE D ASPECTS TO SEVERAL AGENCIES ACROSS THE GLOBE. FOR EXAMPLE, IN GEORGIA, IT PROVIDED ADVICE ON PROCUREMENT AND CONTRACT RELATED SERVICES TO MUNICIPAL DEVELOPMENT FUND (MDF), REPUBLIC OF GEORG IA. IN IRAN, THIS COMPANY PROVIDED PROCUREMENT ADVISORY SERVICES TO INTERNATIONAL FORUMS, SUCH AS, BAM RECONSTRUCTION O FFICE OF 17 MINISTRY OF HOUSING, TEHRAN. IN GUYANA, THIS COMPAN Y WAS SELECTED THROUGH AN INTERNATIONAL COMPETITIVE PROCE SS IN ASSISTING THE GOVERNMENT OF GUYANA IN 'STRENGTHENIN G OF ITS PROCUREMENT ADMINISTRATION UNDEI TECHNICAL ASSISTAN CE CREDIT FROM THE WORLD BANK. IN INDIA, IT PROVIDED PROCUREM ENT ADVISORY SERVICES TO IIT, BARAMATHY, PUNE, INDIA IN THE IMPLEMENTATION OF WORLD BANK ADMINISTERED 'EMPOWERI NG POOR: A PILOT ICT PROGRAMME FOR RURAL AREAS OF PUNE DISTR ICT FUNDED BY JAPAN SOCIAL DEVELOPMENT FUND GRANT. IT HAS ALSO CARRIED OUT REVIEW OF PROCUREMENT SYSTEMS AND ORGANISATION IN T HE STATE OF MADHYA PRADESH, PARTICULARLY, COVERING THE HEALTH, PUBLIC HEALTH, ENGINEERING AND WOMEN AND CHILD DEVELOPMENT DEPARTM ENTS. WHEN WE SO THROUGH THE NATURE OF SERVICES PROVIDED BY THIS COMPANY, WHICH BASICALLY AIM AT PROVIDING ADVICE ON PROCUREMENT AND ALSO CARRYING OUT PROCUREMENT AUDIT, IT BECOMES PALPABLE THAT THERE IS AN ABSOLUTE MISMATCH WITH THE SERVICE S PROVIDED BY THE ASSESSEE. THE SERVICES PROVIDED BY GLOBAL PR OCUREMENT CONSULTANTS LTD. ARE MILES APART FROM THOSE RENDERE D BY THE ASSESSEE, WHICH, IN TURN, ARE CONFINED TO ASSISTING ITS AE IN IDENTIFYING CUSTOMERS AND, THEN. FACILITATING THE S ALES OF ANTIVIRUS PRODUCTS. BY NO STANDARD. GLOBAL PROCUREM ENT CONSULTANTS LTD., CAN BE CONSIDERED AS COMPARABLE W ITH THE ASSESSEE COMPANY. WE, THEREFORE, ORDER FOR THE ELIM INATION OF THIS COMPANY FROM THE LIST OF COMPARABLES. 18 25. SIMILAR VIEW WAS TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF ADIDAS TECHNICAL SERVICES PVT LTD [SUPRA] WHEREIN I T HAS BEEN HELD AS UNDER: BUT THIS COMPANY IS ALSO UNDERTAKING MANY OTHER AC TIVITIES SUCH AS VALUATION ETC. THE ISSUE FOR CONSIDERATION WOULD BE AS TO WHETHER SEGMENTAL DATA IS AVAILABLE. IF SUCH DATA I S AVAILABLE THEN THE COMPANY HAS TO BE TAKEN AS A COMPARABLE. A S THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IS THA T THERE ARE NO SEGMENTAL RESULTS AVAILABLE, THIS COMPANY IS DIR ECTED TO BE EXCLUDED AS A COMPARABLE. 26. CONSIDERING THE FACTS OF THE CASE IN TOTALITY, WE DIRECT THE TPO TO EXCLUDE GPCL FROM THE FINAL SET OF COMPARABLES. HCCA BUSINESS SERVICES PVT LTD 27. THE LD. DR STRONGLY SUPPORTED THE INCLUSION OF THIS COMPANY BY RELYING UPON THE OBSERVATIONS OF THE TPO. 28. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE VE HEMENTLY ARGUED FOR EXCLUSION OF THIS COMPANY FROM THE FINAL SET OF COMPARABLES STATING THAT THIS COMPANY IS ENGAGED IN PROVIDING P AYROLL PROCESSING 19 SERVICES AND SOME OTHER HR SERVICES. THE LD. COUNSE L FOR THE ASSESSEE FURTHER POINTED OUT THAT THIS COMPANY ALSO OFFERS S PECIALIZED SERVICES FOR CERTIFIED PROCESSES, POLICIES ON DATA SECURITY, CONFIDENTIALITY, DISASTER MANAGEMENT, BUSINESS CONTINUITY AND COMPLI ANCE WITH SOX GUIDELINES. IT IS THE SAY OF THE LD. COUNSEL FOR T HE ASSESSEE THAT THIS COMPANY IS ENGAGED IN PROVIDING BUSINESS PROCESS OU TSOURCING SERVICES THAT ARE AKIN TO AN IT ENABLED SERVICE PRO VIDER AND NOT TO A MARKET/BUSINESS SERVICE PROVIDER LIKE THE ASSESSEE. 29. AT THE VERY OUTSET, WE HAVE TO STATE THAT CONSI DERING THE ACTIVITIES OF THIS COMPANY, VIS A VIS THOSE OF THE APPELLANT, THIS COMPANY CANNOT BE CONSIDERED AS A GOOD COMPARABLE. FOR THIS REASON, ITAT BANGALORE IN THE CASE OF ELECTRONICS F OR IMAGING INDIA [P] LTD 70 TAXMANN.COM 299, HAS EXCLUDED THIS COMPA NY BY HOLDING AS UNDER: 41. THE ASSESSEE OBJECTED AGAINST INCLUSION OF THI S COMPANY IN THE LIST OF COMPARABLES ON THE GROUND THAT THIS COM PANY IS ENGAGED IN PROVIDING PAYROLL PROCESS SERVICES AND T HEREFORE IT IS FUNCTIONALLY DIFFERENT. IN SUPPORT OF ITS CONTENTIO N, THE ASSESSEE REFERRED TO NOTES TO THE ACCOUNTS WHEREIN THE COMPA NY'S OPERATIONS COMPRISE OF PAYROLL PROCESSING SERVICES IS MENTIONED 20 AND HENCE IT IS NOT POSSIBLE TO GIVE THE QUANTITATI VE DETAILS OF SALES AND CERTAIN INFORMATION SEPARATELY. 42. THE DRP AFTER CONSIDERING THE ANNUAL REPORT NOT ED THAT EXCEPT THE NOTE 2.14, THERE IS NO OTHER OBSERVATION IN THE ANNUAL REPORT FROM WHICH IT CAN BE ESTABLISHED THAT THE COMPANY IS ENGAGED IN MARKETING AND SALES SUPPORT SERVICES COMPARABLE TO THE ASSESSEE. ACCORDINGLY, THE DRP DIRECTED THE AO TO EXCLUDE THE SAID COMPANY FROM THE COMPARABLES. 43. WE HAVE HEARD THE ID. DR AS WELL AS ID. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE DRP HAS CONSIDERED THE FACT THAT PAYROLL PROCESSINS SERVICE S WAS MAIN PART OF THE OPERATIONS OF THE COMPANY AND QUANTITAT IVE DETAILS OF SALES AND CERTAIN INFORMATION AS REQUIRED UNDER PART II OF SCHEDULE VI TO COMPANIES ACT WAS NOT POSSIBLE. THUS , IN THE ABSENCE OF ANY CONTRARY FACT ON RECORD BROUGHT BEFO RE US, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDIN G OF THE DRP, WHEN THE FUNCTIONS AND BUSINESS ACTIVITY OF THIS CO MPANY WAS FOUND TO BE DIFFERENT FROM MARKETING AND SALES SUPP ORT SERVICES OF THE ASSESSEE. ACCORDINGLY, THE OBJECTION OF THE REVENUE IS REJECTED. 30. THE ITAT DELHI BENCH IN THE CASE OF GENZYME IND IA PVT LTD VS. ACIT 93 TAXMANN.COM 222 HAS HELD AS UNDER: 21 36. SO FAR AS HCCA BUSINESS SERVICES PRIVATE LIMIT ED IS CONCERNED, WE FIND ITS OPERATIONS COMPRISE OF PAYRO LL PROCESSING SERVICES. FURTHER, IT CANNOT BE ESTABLISHED FROM TH E ANNUAL REPORT THAT THE COMPANY IS ENGAGED IN MARKETING SUP PORT SERVICES. IT IS SEEN THAT IT HAS DEVELOPED SOFTWARE FOR RENDERING PAYROLL SERVICES AND SUCH SOFTWARE DEVELOPMENT EXPE NSES CONSTITUTES APPROXIMATELY 21% OF THE TOTAL OPERATIN G COST WHICH IS VERIFIABLE FROM PAGE 165, 166 & 177 OF THE ANNUA L REPORT COMPENDIUM. 37. WE FIND THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ARUBA NETWORKS INDIA (P.) LTD. (SUPRA) HAS DIREC TED THE TPO TO EXCLUDE HCCA BY OBSERVING AS UNDER :- '32. THE LEARNED COUNSEL SUBMITTED THAT HCCA BUSINESS SERVICES IS ENGAGED IN PAYROLL PROCES SING. THEREFORE THIS COMPANY IS FUNCTIONALLY DIFFERENT FR OM THE APPELLANT AND SHOULD BE REJECTED. RELIANCE IS PLACE D ON IT AT DECISION IN THE CASE OF DCIT V. M/S ELECTRONICS FOR IMAGING INDIA PVT. LTD. IT (TP) A NO.212/BANG/2015-AY 10-11 , WHEREIN IT IS HELD AS UNDER: 38. IN VIEW OF THE ABOVE DISCUSSION, WE DIRECT THE TPO TO EXCLUDE HCCA BUSINESS SERVICES PRIVATE LIMITED FROM THE LIST OF COMPARABLES. 22 31. CONSIDERING THE BUSINESS PROFILE OF THIS COMPAN Y, IN THE LIGHT OF JUDICIAL DECISIONS REFERRED TO HEREINABOVE, WE DIRE CT FOR EXCLUSION OF THIS COMPANY FROM THE FINAL SET OF COMPARABLES. TSR DARASHAW LTD 32. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STA TED THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT AND CANNOT BE COM PARED WITH THE BUSINESS PROFILE OF THE ASSESSEE. 33. ON THE OTHER HAND, THE LD. DR SUPPORTED THE FIN DINGS OF THE TPO. 34. ON PERUSAL OF THE ANNUAL REPORT OF THIS COMPANY , WE FIND THAT THIS COMPANY OPERATES IN THREE DIFFERENT SEGMENTS, NAMELY: (A) REGISTRAR AND TRANSFER AGENT ACTIVITY, (B) RECORD MANAGEMENT ACTIVITY AND (C) PAYROLL AND TRUST FUND ACTIVITY. 23 NO SEGMENTAL DATA IS AVAILABLE. FOR SIMILAR REASON S, THE CO-ORDINATE BENCH IN THE CASE OF TREND MICRO INDIA PVT LTD [SUP RA] HAS EXCLUDED THIS COMPANY. THE RELEVANT FINDINGS READ AS UNDER: 9.1 THE ASSESSEE OBJECTED TO THE INCLUSION OF THIS COMPANY BY ARGUING THAT THE BUSINESS SEGMENTS OF THIS COMPANY ARE, REGISTRAR AND TRANSFER AGENT ACTIVITY; RECORDS MANA GEMENT ACTIVITY; AND PAYROLL AND TRUST FUND ACTIVITY. NOT CONVINCED WITH THE ASSESSEE'S SUBMISSIONS, THE TPO TREATED IT AS C OMPARABLE ON ENTITY LEVEL AGAINST WHICH THE ASSESSEE IS BEFORE U S. 9.2 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS COMP ANY IS A BROKING AND INVESTMENT BANKING HOUSE WITH ITS THREE SEGMENTS, NAMELY, REGISTRAR AND TRANSFER AGENT ACTIVITY (R&T) ; RECORDS MANAGEMENT ACTIVITY (RECORDS); AND PAYROLL AND TRUS T FUND ACTIVITY (PAYROLL). UNDER THE REGISTRAR AND TRANSFE R AGENT ACTIVITY, THIS COMPANY UNDERTAKES REGISTRAR AND TRA NSFER AGENT ACTIVITY FUNCTIONS FOR EQUITY AND PREFERENCE SHARES , DEBENTURE INSTRUMENTS AND BONDS, COMMERCIAL PAPER AND PRIVATE PLACEMENTS. IT ALSO UNDERTAKES TRANSFER PROCESSING, CUSTOMER/ QUERY HANDLING AND CORRESPONDENCE, SPLIT/CONSOLIDAT ION/RENEWAL OF CERTIFICATES, PROCESSING AND DISTRIBUTION OF INT EREST/DIVIDEND WARRANTS, PAYMENTS BY PHYSICAL WARRANTS/THROUGH ECS /DIRECT CREDIT. UNDER RECORDS MANAGEMENT ACTIVITY, THIS COM PANY UNDERTAKES STORAGE, RETENTION & RETRIEVAL OF PHYSIC AL AND/OR 24 ELECTRONIC RECORDS. UNDER PAYROLL AND TRUST FUND AC TIVITY, THIS COMPANY HANDLES THE ACTIVITIES NORMALLY HANDLED BY ''PAYROLL AND RETIREMENT FUNDS' SECTION IN ANY ORGANIZATION, INCL UDING INTERFACE WITH REGULATORY AUTHORITIES. WHEN WE COMP ARE ALL THE THREE BROADER ACTIVITIES UNDERTAKEN BY THIS COMPANY , NAMELY, R&T, RECORDS AND PAYROLL, WITH THE OVERALL PRE AND POST SALE SERVICES RENDERED BY THE ASSESSEE TO ITS AE, ON A C OST PLUS BASIS, WE FIND THAT THERE IS A HUGE FUNCTIONAL DISP ARITY BETWEEN THE TWO. THAT APART, THE CONSIDERATION OF THIS COMP ANY ON AN ENTITY LEVEL BY THE TPO HAS RENDERED THE ENTIRE EXE RCISE OF COMPARISON MEANINGLESS. FINDING STRIKING DISSIMILAR ITIES BETWEEN THIS COMPANY AND THE ASSESSEE, WE ORDER TO EXCLUDE THIS COMPANY FROM THE FINAL SET OF COMPARABLES. 35. SIMILAR VIEW WAS TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF ADIDAS TECHNICAL SERVICES PVT LTD WHEREIN IT HAS BE EN HELD AS UNDER: THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT THE COMPANY IS NOT FUNCTIONALLY COMPARABLE. IT IS CONTENDED THAT THERE CAN BE NO COMPARISON BETWEEN A SPECIFIC PAY ROLL SERVICE RENDERED AND MARKETING SUPPORT SERVICE PROV IDED. IT WAS CONTENDED THAT TSR DARASHAW LTD. IS A BROKING AND I NVESTMENT BANKING HOUSE AND AS 57.4% OF ITS INCOME IS FROM TH E SHARE REGISTRY SERVICES SEGMENT AND HENCE NOT A COMPARABL E. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS. 25 I. MICROSOFT CORPORATION INDIA (P.) LTD. V. DY. CIT [2 015] 63 TAXMANN.COM 178 (DELHI). II. PREMIER EXPLORATION SERVICES INDIA (P.) LTD. V. ITO [2013] 35 TAXMANN.COM 422/[2014] 146 ITO 580 (DELHI). IN OUR CONSIDERED OPINION TSR DARASHAW LTD. CANNOT BE TAKEN AS A COMPARABLE AS 57.4% OF ITS INCOME IS FROM SHARE R EGISTRY SERVICES SEGMENT. THIS SHOWS THE FUNCTIONAL PROFILE OF THE ASSESSEE IS DIFFERENT. 36. CONSIDERING THE DIVERSIFIED THREE SEGMENTS OF T HIS COMPANY, IN THE LIGHT OF THE DECISION OF THE CO-ORDINATE BENCHE S [SUPRA], WE DIRECT THE TPO TO EXCLUDE THIS COMPANY FROM THE FIN AL SET OF COMPARABLES. 37. NOW WE WILL DEAL WITH THE INCLUSION OF TWO COMP ARABLES. IN HOUSE PRODUCTION LIMITED 38. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STA TED THAT THIS COMPANY WAS ERRONEOUSLY EXCLUDED BY THE TPO WHEREAS THIS COMPANY FULFILLS ALL THE CRITERIA OF COMPARABILITY WITH THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT EVEN S EGMENTAL DATA IS 26 AVAILABLE FOR HEALTHCARE DIVISION. THEREFORE, THIS COMPANY CAN BE COMPARED WITH THAT OF THE ASSESSEE ON THE BASIS OF SEGMENTAL DATA. 39. PER CONTRA, THE LD. DR READ THE OBSERVATIONS OF THE TPO FOR EXCLUDING THIS COMPANY. 40. WE FIND THAT THE MAIN REASON FOR EXCLUDING THIS COMPANY GIVEN BY THE TPO IS THAT IT ALSO RUNS A KNOWLEDGE PROCESS OUTSOURCING CENTRE. HENCE THIS COMPANY IS MORE AKIN TO AN ITES PROVIDER. IN OUR CONSIDERED VIEW, SINCE THE SEGMENTAL DATA IS AVAILA BLE FOR HEALTHCARE INFORMATION, THE SAME CAN BE COMPARED WITH THE ASSE SSEE. WE, ACCORDINGLY, RESTORE THIS ISSUE TO THE FILE OF THE TPO. THE TPO IS DIRECTED TO DECIDE THE INCLUSION OF THIS COMPANY AF RESH AFTER CONSIDERING THE SEGMENTAL DATA OF THIS COMPANY. INDIA TOURISM DEVELOPMENT CORPORATION LIMITED 41. THE MAIN REASON FOR EXCLUDING THIS COMPANY GIVE N BY THE TPO IS THAT ITS SEGMENT ASHOK RESERVATION AND MARKETING SE RVICE DIVISION [ARMS] CAN BE CONSIDERED AS COMPARABLE TO THE ASSES SEE BUT OTHER SEGMENTS LIKE SOUND AND LIGHT SHOWS [SEL] AND MISCE LLANEOUS 27 OPERATIONS CANNOT BE CONSIDERED A COMPANY AS THEY A RE NOT EVEN IN THE NATURE OF BUSINESS SERVICES. THE TPO FURTHER O BSERVED THAT IT IS NOT CLEAR FROM THE ANNUAL REPORT WHETHER ARMS IS TH E PREDOMINANT SUB-SEGMENT OUT OF THREE SUB-SEGMENTS. INCOME BIFU RCATION OF THIS SEGMENT CAN BE UNDERSTOOD FROM THE FOLLOWING CHART: DIVISION INCOME IN AY 2010- 11 (IN CRORES) IN % ASHOK RESERVATION AND MARKETING SERVICES (ARMS) 7.2 58% SOUNDS AND LIGHT SHOW (SEL) 0.73 6% ASHOK INSTITUTE OF HOSPITALITY AND TOURISM MANAGEMENT (AIH & TM) 4.45 36% TOTAL 12.38 100% 42. FROM THE ABOVE CHART, IT CAN BE SEEN THAT ARMS SEGMENT IS THE DOMINANT SUB-SEGMENT AND SINCE THE TPO HIMSELF HAS ACCEPTED THAT ARMS CAN BE COMPARED WITH THE ASSESSEE, LOOKING TO THE AFOREMENTIONED CHART, WE ARE OF THE CONSIDERED VIEW THAT THIS COMPANY SHOULD BE TAKEN AS GOOD COMPARABLE. 43. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ALS O ARGUED THAT CERTAIN COMPARABLES WERE EXCLUDED ON APPLICATION OF EMPLOYEE COST FILTER OF 25%. THE LD. COUNSEL FOR THE ASSESSEE ST ATED THAT EMPLOYEE 28 COST IS NOT NECESSARILY A TRUE INDICATOR OF COMPARA BILITY OF COMPANIES OR THEIR PROFITABILITY. IT IS THE SAY OF THE LD. C OUNSEL FOR THE ASSESSEE THAT SINCE THE ASSESSEE HAS USED TNMM TO BENCH MARK THE IMPUGNED TRANSACTIONS, THERE IS NO NEED TO ARBITRARILY REDUC E THE NUMBER OF COMPARABLES BY APPLYING EMPLOYEE COST TO TOTAL COST RATIO AS LONG AS THE COMPANIES SELECTED FOR COMPARISON ARE FUNCTIONA LLY COMPARABLE TO THAT OF THE TESTED PARTY. 44. WE FIND FORCE IN THE CONTENTION OF THE LD. COUN SEL FOR THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT IF TH E FUNCTIONS ARE COMPARABLE WITH THOSE OF THE ASSESSEE, THEN THE COM PANIES CANNOT BE EXCLUDED AS THEY FAIL TO PASS THE EMPLOYEE COST FILTER. CONSIDERING THE BUSINESS PROFILE OF THE ASSESSEE, A ND IN PARTICULAR THE MARKETING SUPPORT SERVICES PROVIDED BY IT TO ITS AE , WE DO NOT FIND ANY MERIT IN APPLYING EMPLOYEE COST FILTER OF 25%. WE, THEREFORE, DIRECT THE TPO TO INCLUDE ALL THOSE COMPANIES WHICH ARE OTHERWISE FUNCTIONALLY COMPARABLE BUT FAIL TO PASS THE EMPLOY EE COST FILTER. 29 45. LAST ARGUMENT PUT FORTH BY THE LD. COUNSEL FOR THE ASSESSEE RELATES TO THE TREATMENT OF CERTAIN ITEMS AS NON-OP ERATING WHILE COMPUTING MARGINS OF COMPARABLES WHICH ARE FOREIGN EXCHANGE GAIN/ LOSS, BANK CHARGES AND PROVISION FOR DOUBTFUL DEBTS . 46. IN OUR CONSIDERED OPINION, FOREX GAIN/LOSS ARIS E IN NORMAL COURSE OF BUSINESS DUE TO REALIZATION OF EXPORT PRO CEEDS, SETTLEMENT OF IMPORT PAYABLES OR ADJUSTMENT OF CUSTOMER ADVANC ES AT A DIFFERENT RATE THAN THE RATE AT WHICH IT WAS BOOKED , AND SHOULD BE CONSIDERED AS OPERATING WHILE COMPUTING OPERATING M ARGINS OF COMPARABLES. 47. SIMILARLY, BANK CHARGES ARE LEVIED BY BANKS FOR MAINTENANCE OF BANK ACCOUNTS AND VARIOUS OTHER FACILITIES INTRINSI CALLY LINKED TO BUSINESS OPERATIONS OF AN ASSESSEE AND HENCE SHOULD BE CONSIDERED AS OPERATING WHILE COMPUTING OPERATING MARGINS OF COMP ARABLES. 48. IN OUR CONSIDERED OPINION, PROVISION FOR DOUBTF UL DEBT IS AN ESTIMATED PERCENTAGE OF DEBTORS THAT ARE NOT EXPECT ED TO PAY DURING THE YEAR AND HENCE DIRECTLY RELATE TO BUSINESS OPER ATIONS OF ASSESSEE 30 AND SHOULD BE CONSIDERED AS OPERATING WHILE COMPUTI NG OPERATING MARGINS OF COMPARABLES. 49. IN SO FAR AS RISK ADJUSTMENT IS CONSIDERED, THE RE IS NO QUARREL THAT THE ASSESSEE HAS A COST PLUS BUSINESS MODEL OP ERATING IN A LOW RISK OR ALMOST RISK MITIGATED ENVIRONMENT AS COMPAR ED TO THE COMPARABLE COMPANIES WHO ARE INDEPENDENT SERVICE PR OVIDERS AND BEAR SIGNIFICANT RISKS. 50. IN OUR CONSIDERED OPINION, THE ASSESSEE IS VERY MUCH ENTITLED FOR RISK ADJUSTMENT ACCORDINGLY. 51. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 1701/DEL/2015 IS ALLOWED IN PART FOR STATISTICAL PU RPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 07.02. 2020. SD/- SD/- [N.K. CHOUDHARY ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07 TH FEBRUARY, 2020. 31 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ASST. REGISTRAR 4. CIT(A) ITAT, NEW DELHI 5. DR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER