Mentor Graphics (Sale & Services ) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 2526/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6710 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Related party transaction; Transfer pricing; Principle of natural justice; International transaction
• Section: 234B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-1, NEW DELHI , . , BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER / ITA NO:- 2526/DEL/2016 / ASSESSMENT YEAR: 2011-12 MENTOR GRAPHICS (SALE & SERVICE) .......... ! /APPELLANT PVT. LTD., B-92, 9 TH FLOOR, HIMALAYA HOUSE, 23, K.G. MARG, NEW DELHI PAN-AADCM9516F VS. THE DCIT, CIRCLE-16(2), ... '# ! / RESPONDENT NEW DELHI !$%& / APPELLANT BY :SH. HIMANSHU S. SINHA, ADV MS. VRINDA TUSHAN, ADV SH. BHUWAN DHOOPAR, ADV '# !$%& / RESPONDENT BY :SH. SANJAY I. BARA, CIT. DR '$()* / DATE OF HEARING : 26.09.2019 +, $()* / DATE OF PRONOUNCEMENT: 30.10.2019 / ORDER PER SUSHMA CHOWLA, JM: THE PRESENT APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF THE LEARNED ASSESSING OFFICER PASSED UNDER SECTION 143( 3) R.W.S. 144C(1) ORDER DATED 23.11.2015 RELATING TO ASSESSMENT YEAR 2011-12. / ITA NO:- 2526/DEL/2016 PAGE | 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL WHICH READ AS UNDER:- 1. ON THE FACTS AND IN LAW, THE LEARNED TRANSFER P RICING OFFICER - 11(2), NEW DELHI (LD. TPO) AND THE LEARNED DEPUTY COMMIS SIONER OF INCOME TAX -CIRCLE 16(2) (LD. AO) ERRED IN DETERMINING AND T HE HONBLE DISPUTE RESOLUTION PANEL (HONBLE DRP) ERRED IN CONFIRMIN G THE ADDITION OF RS. 1,71,96,956 TO THE VALUE OF INTERNATIONAL TRANSACTI ONS PERTAINING TO PROVISION OF MARKETING AND SALES SUPPORT SERVICES B Y THE APPELLANT TO ITS ASSOCIATED ENTERPRISES (AES) UNDER SECTION 92CA(3 ) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. ON FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND THE HONBLE DRP ERRED IN DETERMINING THE ARMS LENGTH PRICE AT 21.14 PERC ENT [BEING NET COST PLUS MARK-UP (NCP) MARGIN] UNDER TRANSACTIONAL NET MAR GIN METHOD (TNMM) EVEN THOUGH APPELLANTS INTERCOMPANY PRICING OF NCP MARGIN OF 13.99 PERCENT AND 15.41 PERCENT WAS DETERMINED TO BE AT A RMS LENGTH BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND LD . TPO IN IMMEDIATELY PRECEDING YEAR (AY 2010-11) AND IMMEDIA TELY SUCCEEDING YEAR (AY 2012-13) AND THERE HAS BEEN NO CHANGE IN T HE FACTS AND CIRCUMSTANCES IN AY 2011-12 VIS-A-VIS AFORESAID YEA RS. 3. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND THE HONBLE DRP ERRED IN SELECTING CERTAIN ALLEGED COMPANIES AS COM PARABLE, WITHOUT APPRECIATING THAT IN COGNIZANCE OF RULE 10B(2), THE FUNCTIONAL, ASSET AND RISK PROFILE OF THESE ALLEGED COMPANIES ARE DISSIMI LAR TO THAT OF THE APPELLANT AND THEREBY ERRED IN DISREGARDING VARIOUS JUDICIAL PRONOUNCEMENTS. 4. ON FACTS AND IN LAW, THE HONBLE DRP ERRED IN CO NFIRMING THE ACTION OF THE LD. TPO, WHEN CONDUCTING THE COMPARABILITY ANAL YSIS, BY MODIFYING/REJECTING CERTAIN FILTERS APPLIED BY THE APPELLANT AND ADDING CERTAIN FILTERS WITHOUT ANY COGENT REASON. 5. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND THE HONBLE DRP ERRED IN VIOLATING THE PROVISIONS OF RULE 10B(2) BY ALLEGING APAR CHEMTEK LUBRICANTS LTD. AS COMPARABLE TO THE APPELLANT. 6. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND THE HONBLE DRP ERRED IN VIOLATING THE PROVISIONS OF RULE 10B(2) BY ALLEGING INFO EDGE (INDIA) LTD. AS COMPARABLE TO THE APPELLANT. 7. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND THE HONBLE DRP ERRED IN VIOLATING THE PROVISIONS OF RULE 10B(2) BY ALLEGING MMTV LTD. AS COMPARABLE TO THE APPELLANT. 8. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. AO AND THE HONBLE DRP ERRED IN VIOLATING THE PROVISIONS OF RULE 10B(2) BY ALLEGING MEDIA RESEARCH USERS COUNCIL AS COMPARABLE TO THE APPELLANT. / ITA NO:- 2526/DEL/2016 PAGE | 3 9. ON THE FACTS AND IN LAW, THE LD. TPO, THE LD. A O AND THE HONBLE DRP ERRED IN REJECTING TECHNICOM CHEMIE (I) LIMITED WIT HOUT APPRECIATING THAT IN COGNIZANCE OF RULE 10B(2), THE FUNCTIONAL, ASSET AN D RISK PROFILE OF THE AFORESAID COMPARABLE COMPANY ARE SIMILAR WITH THAT OF THE APPELLANT. 10. ON FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN GROSSLY MISINTERPRETING THE REQUIREMENT OF CONTEMPORANEOUS DATA IN THE RULE 10B(4) BY NECESSARILY USING CURRENT YEA R ' DATA (I.E. FINANCIAL YEAR 2010-11), THEREBY BREACHING THE PRINCIPLES OF NATURAL JUSTICE AND IMPOSSIBILITY OF PERFORMANCE. 11. ON FACTS AND IN LAW, THE LD. TPO, THE LD. AO AN D THE HONBLE DRP ERRED IN LAW AND ON FACTS IN NOT ALLOWING APPROPRIA TE ADJUSTMENTS UNDER 10B( 1 )(E)(III) AND RULE 10B(3) TO ACCOUNT FOR DIF FERENCES IN RISK PROFILE OF THE COMPARABLES VIS-A-VIS THE APPELLANT. 12. ON FACTS AND IN LAW, THE LD. AO/ LD. TPO AND TH E HONBLE DRP ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1 )(C) OF THE ACT. 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN NOT GRANTING THE CREDIT OF ADVANCE TAX OF RS.9,55,000 PAID BY THE APPELLANT FOR ASSESSMENT YEAR 2011-12. 14. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN COMPUTING AND LEVYING INTEREST OF RS.348,8 24 UNDER SECTION 234B OF THE ACT AS PER THE IMPUGNED ASSESSMENT ORDER CON SEQUENTIAL TO THE ABOVE GRIEVANCES. THE GROUNDS OF APPEAL HEREIN ABOVE ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND AND/ OR WITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN OR ADD ANY FURTHER GRO UNDS AS MAY BE CONSIDERED NECESSARY AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER BEFORE OR DURING THE APPEAL HEARING. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T THE TRANSFER PRICING ADJUSTMENT MADE IN THE HANDS OF THE ASSESSE E. THE LIMITED ISSUE WHICH HAS BEEN ADDRESSED BY THE LEARNED AR FO R THE ASSESSEE BEFORE US IS IN CONNECTION WITH THE COMPARABLES FIN ALLY SELECTED TO BENCHMARK THE INTERNATIONAL TRANSACTION OF THE ASSE SSEE. HENCE WE PROCEED TO DECIDE THE APPEAL ACCORDINGLY. / ITA NO:- 2526/DEL/2016 PAGE | 4 4. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE H AD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 5,86 ,47,271/-. THE ASSESSEE WAS ENGAGED IN SALE OF SOFTWARE LICENSES A ND RENDERING SUPPORT SERVICES TO CUSTOMERS IN INDIA OF THE AE. T HE SAID SERVICES INCLUDED RENDERING MARKETING, PROMOTIONAL AND CUSTO MER LIASONING AND AFTER SALE SERVICES OF THE COMPUTER AIDED ENGIN EERING SYSTEMS TO THE PARENT COMPANY. THE ASSESSEE HAD ENTERED INTO V ARIOUS INTERNATIONAL TRANSACTIONS TOTALING RS. 42,15,45,83 7/-. THE AO MADE REFERENCE TO THE TPO TO BENCHMARK THE INTERNATIONAL TRANSACTIONS UNDER SECTION 92 CA (1) OF THE ACT. THE TPO NOTED T HAT THE ASSESSEE WAS ENGAGED IN TWO ACTIVITIES. ONE WAS OF DISTRIBUT ION OF SOFTWARE I.E. DIRECT SALES; ADMITTEDLY THERE IS NO DISPUTE WITH R EGARD TO THE SAID ACTIVITY. THE SECOND ACTIVITY UNDERTAKEN BY THE ASS ESSEE WAS MARKETING AND SALE SUPPORT SERVICES PROVIDED BY IT TO ITS AES. THE ASSESSEE HAS SELECTED TRANSACTIONAL NET MARGIN METH OD (TNMM) AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE SA ID TRANSACTION. THE PLI APPLIED BY THE ASSESSEE WAS OPERATING PROFI TS OVER TOTAL COST AND THE PLI OF THE ASSESSEE WORKED OUT TO 11.57%. T HE ASSESSEE HAD SELECTED NINE COMPANIES AS COMPARABLES, WHOSE MEAN MARGINS OF MULTIPLE YEAR DATA WAS 7.06%. THE TPO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE IN RESPECT OF THE PROPOSED FILTERS TO BE APPLIED AND ALSO POINTED OUT THAT FINAL SET OF COMPARABLES WOULD BE AT VARIANCE. THE ASSESSEE FILED ITS REPLY TO THE SAID SHOW CAUSE NOT ICE WHEREIN THE / ITA NO:- 2526/DEL/2016 PAGE | 5 CURRENT YEAR DATA WAS TO BE USED FOR COMPARABILITY ANALYSIS AND ALSO IN RESPECT OF OTHER FILTERS TO BE APPLIED. THE TPO IN THE FINAL ANALYSIS REJECTED SIX COMPARABLES OUT OF THE LIST FINALLY SE LECTED AND ADOPTED 15 COMPANIES AS COMPARABLE TO THE ASSESSEE AFTER MEETI NG WITH THE OBJECTIONS RAISED BY THE ASSESSEE IN THIS REGARD. T HE FINAL LIST OF COMPARABLE IS AT PAGE 40 OF THE TPOS ORDER. THE AO ISSUED DRAFT ASSESSMENT ORDER WITH REGARD TO THE PROPOSED UPWARD ADJUSTMENT OF RS. 2,24,98,003/-. THE ASSESSEE FILED OBJECTIONS BE FORE THE DRP WHICH REJECTED CERTAIN CONCERNS AS NOT COMPARABLE AND MEA N MARGINS OF THE BALANCE COMPARABLES WORKED OUT TO 21.14%. THE AO IN THE FINAL ASSESSMENT ORDER MADE AN ADJUSTMENT OF RS. 1,71,96, 956/-, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT CERTAIN COMPANIES WHICH HAVE BEEN FINALLY SELECTED ARE NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND / OR DO NOT FULFILL THE FILTERS WHICH WERE PROPOSED TO BE APPLIED BY THE TPO AND HENCE TH E SAME NEEDS TO BE EXCLUDED. WE WILL DEAL WITH THE CONCERNS TO BE E XCLUDED IN THE PARAS BELOW. 6. THE LEARNED DR FOR THE REVENUE OBJECTED TO THE S UBMISSIONS OF THE LEARNED AR FOR THE ASSESSEE AND PLACED HEAVY RE LIANCE ON THE ORDER OF THE AO/TPO. HE FAIRLY POINTED OUT THAT IN CASE ANY OF THE / ITA NO:- 2526/DEL/2016 PAGE | 6 CONCERNS DO NOT FULFILL THE RPT FILTER, THEN THE SA ME MERITS TO BE EXCLUDED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGA INST THE TRANSFER PRICING ADJUSTMENT MADE IN THE HANDS OF THE ASSESSE E OF RS. 1.71 CRORES. THE ASSESSEE IS AGGRIEVED BY THE FINAL SELE CTION OF THE COMPANIES AS COMPARABLES ON VARIOUS GROUNDS. THE ON LY ISSUE RAISED IS WITH REGARD TO THE MARKETING AND SALES SUPPORT S ERVICES PROVIDED BY THE ASSESSEE TO ITS AE. THE ASSESSEE HAD SELECTED T NMM METHOD AS THE MOST APPROPRIATE METHOD AND HAD APPLIED PLI OP/ OC. THE MARGINS OF THE ASSESSEE WAS 11.57%. THE SELECTION P ROCESS WAS REVISED BY THE TPO ON APPLYING DIFFERENT SET OF FIL TERS AND ALSO BY USING DATA FOR THE CONTEMPORANEOUS PERIOD. THE TPO THUS ARRIVED AT THE FINAL SET OF 15 COMPARABLES, WHOSE ARITHMETIC M EAN PLI WORKED OUT TO 24.09%. THE FINAL LIST OF COMPARABLES SELECT ED BY THE TPO READS AS UNDER:- SL. NO. COMPANY NAME OP/TC (%) 1. APAR CHEMATEK LUBRICANTS LTD. 42.31 2. APITCO LTD. 25.17 3. CONCEPT COMMUNICATION LTD. 4.73 4. CRYSTAL HUES LTD. 11.69 5. CYBER MEDIA RESEARCH & SERVICES LTD. 10.60 6. DHFL PROPERTY SERVICES LTD. 14.86 7. GLOBAL PROCUREMENT CONSULTANTS LTD. 30.86 8. ICRA MANAGEMENT CONSULTING SERVICES LTD. 16.14 9. INFO EDGE (INDIA) LTD. 45.53 10. MM TV LTD. 32.94 11. MEDIA RESEARCH USERS COUNCIL 40.53 12. POWER SYSTEM OPERATION CORPN. LTD. 22.52 / ITA NO:- 2526/DEL/2016 PAGE | 7 13. QUARDRANT COMMUNICATIONS LTD. 14.58 14. QUIPPO VALUERS & AUCTIONEERS PVT. LTD. 7.23 15. TSR DARASHAW LTD. 41.60 AVERAGE 24.09 8. THE DRP DIRECTED THE EXCLUSION OF APITCO LIMITED , POWER SYSTEM OPERATION CORPORATION LTD., GLOBAL PROCUREMENT CONS ULTANTS LTD AND TSR DARASHAW LTD. FROM THE FINAL SET OF COMPARABLE COMPANIES. THE DRP ALSO DIRECTED CERTAIN ADJUSTMENTS IN WORKING OF THE PLI AGAINST WHICH NO ISSUE HAS BEEN RAISED BEFORE US. THE REVIS ED MARGINS OF THE COMPARABLE COMPANIES, AFTER THE DIRECTIONS OF THE D RP WORKED OUT TO 21.14%. 9. THE FIRST GRIEVANCE OF THE ASSESSEE IS AGAINST T HE SELECTION OF APAR CHEMATEK LUBRICANTS LTD., ON THE GROUND THAT I T FAILS THE RELATED PARTY TRANSACTION FILTER. THE TPO WHILE APPLYING TH E SAID FILTER OF RPT AT PAGE 19 OF THE ORDER APPLIES THE FILTER OF 25% T HRESHOLD. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT AS FAR AS APAR CHEMATEK LUBRICANTS LTD., WAS CONCERNED, WHICH WAS HAVING 10 0% EARNINGS FROM ITS HOLDING COMPANY. IN THIS REGARD, REFERENCE WAS MADE TO THE ANNUAL REPORT OF THE HOLDING COMPANY OF THE SAID CO NCERN. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT THIS A SPECT WAS BROUGHT TO THE KNOWLEDGE OF THE DRP, HOWEVER THE SAID FACT WAS NOT ACCEPTED. FURTHER RELIANCE WAS ON THE DECISION OF THE DELHI T RIBUNAL IN KOBELCO CRANES INDIA (P.) LTD., VS. INCOME TAX OFFICER [201 6] 70 TAXMANN.COM 3 (DELHI-TRIB.) . / ITA NO:- 2526/DEL/2016 PAGE | 8 10. THE LEARNED DR FOR THE REVENUE FAIRLY POINTED O UT THAT SINCE THE RPT FILTER FAILS, THEN APAR CHEMATEK LUBRICANTS LTD NEEDS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. 11. ON THE PERUSAL OF THE ANNUAL REPORT OF THE HOLD ING COMPANY WHICH IS PLACED AT PAGE 12 OF THE PAPER BOOK AND AS THE TPO HIMSELF AT PAGE 14 HAD APPLIED THE RPT FILTER WITH 25% THRE SHOLD, WE FIND NO MERIT IN THE ORDER OF THE AUTHORITIES BELOW IN INCL UDING SALE APAR CHEMATEK LUBRICANTS LTD AS FUNCTIONALLY COMPARABLE TO THE ASSESSEE. THE EARNINGS OF THE SAID CONCERNS WERE 100% OF THE REVENUE EARNED FROM ITS HOLDING COMPANY. SINCE THE CONCERN FAILS T O FULFILL THE RPT FILTER, THE SAME IS DIRECTED TO BE EXCLUDED FROM TH E FINAL LIST OF THE COMPARABLES. ACCORDINGLY, WE HOLD SO. THE TRIBUNAL IN KOBELCO CRANES INDIA (P.) LTD., HAVE ALSO ACCORDINGLY HELD. 12. NOW COMING TO THE NEXT CONCERNS I.E. INFO EDGE (INDIA) LTD. THE LEARNED AR FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT THE SAID CONCERN WAS ENGAGED IN INTERNET BASED SERVICE DELIV ERY, OPERATING IN FOUR SERVICE VERTICALS THROUGH WEB PORTALS IN RESPE CTIVE VERTICAL, NAMELY, (I) NAUKRI.COM FOR RECRUITMENT RELATED SERV ICES; (II) JEEVANSATHI.COM FOR MATRIMONY RELATED SERVICES; (II I) 99 ACRES.COM FOR REAL ESTATE RELATED SERVICES AND (IV) SHIKSHA.COM F OR EDUCATION RELATED SERVICES. IT WAS FURTHER STATED BY THE LEARNED AR F OR THE ASSESSEE THAT THE ASSESSEE WAS PROVIDING MARKETING AND SALE SUPPO RT SERVICES TO THE / ITA NO:- 2526/DEL/2016 PAGE | 9 COMPANIES TO WHOM THE AE OF THE ASSESSEE SELLS THE PRODUCTS. HENCE THE SAID CONCERN WAS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE. IT WAS ALSO POINTED OUT THAT INFO EDGE (INDIA) LIMITED POSSESSES CERTAIN INTANGIBLE ASSETS AND ON THIS ACCOUNT ALSO THE CONC ERN CANNOT BE SAID TO BE COMPARABLE. AGAIN RELIANCE WAS PLACED ON THE DECISION OF DELHI BENCH IN KOBELCO CRANES INDIA (P.) LTD., (SUPRA). T HE LEARNED DR FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AU THORITIES BELOW. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND ARE OF THE VIEW THAT WHERE THE ASSESSEE WAS PROVIDED MARKETING AND SALES SUPPORT SERVICES TO ITS AE THEN A CONCERN WHICH IS ENGAGED IN PROVIDING INTERNET BASED SERVICES THROUGH WEB PORTAL FOR DIFF ERENT SERVICES I.E. RECRUITMENT / MATRIMONY RELATED SERVICES, ESTATE SE RVICES, EDUCATION RELATED SERVICES, THEN SUCH A CONCERN IS NOT FUNCTI ONALLY COMPARABLE TO THE ASSESSEE. THE SAID CONCERN CANNOT BE INCLUDE D IN THE FINAL SET OF COMPARABLES. ACCORDINGLY, WE HOLD SO. 14. THE NEXT CONCERN WHICH HAS BEEN INCLUDED IN THE FINAL LIST OF COMPARABLES IS MM TV LIMITED. THE ASSESSEE POINTED OUT THAT THE SAID CONCERN WAS ENGAGED IN TELEVISION BROADCASTING BUSINESS AND RELATED OPERATIONS AND ALSO RUNS KERELAS NO. 1 NEW S AND ENTERTAINMENT CHANNEL AND NEWS CHANNEL. HE FURTHER POINTED OUT THAT THE MAIN SOURCE OF INCOME WAS FROM ADVERTISING. THE SAID CONCERN ALSO OWNED SIGNIFICANT INTANGIBLES I.E. BROADCASTIN G RIGHTS AND / ITA NO:- 2526/DEL/2016 PAGE | 10 LICENSES ETC., AND HENCE WAS NOT COMPARABLE. IT WAS POINTED OUT BY THE LEARNED AR FOR THE ASSESSEE THAT IN THE CASE OF ROLLS ROYCE INDIA (PVT) LTD., WHICH WAS ENGAGED IN PROVIDING SALES SU PPORT SERVICES TO ITS AE, THE TRIBUNAL DIRECTED THE EXCLUSION OF MM TV LIMITED REPORTED IN ROLLS ROYCE INDIA (PVT) LTD., VS. DCIT [2016] 69 TAXMANN.COM 426. 15. WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT A CONCERN WHICH IS ENGAGED IN RUNNING BROADCASTING BUSINESS AND IS INVOLVED IN RELATED OPERATIONS IN THE SAID FIELD I.E. BY RUNNIN G ENTERTAINMENT CHANNEL, NEWS CHANNEL AND INFOTAINMENT CHANNEL, CAN NOT BE HELD TO BE FUNCTIONALLY COMPARABLE TO THE ASSESSEE, WHICH W AS PROVIDING MARKETING AND SALE SUPPORT SERVICES. THE SOURCE OF REVENUE IN THE CASE OF MM TV LIMITED IS FROM ADVERTISING INCOME AN D IT ALSO OWNED INTANGIBLES; AS AGAINST THE ASSESSEE WHICH WAS PROV IDING SUPPORT SERVICES AND DID NOT OWN ANY INTANGIBLES. ACCORDING LY, WE HOLD THAT SUCH A CONCERN CANNOT BE HELD TO BE FUNCTIONALLY CO MPARABLE TO THE ASSESSEE AND HAS TO BE EXCLUDED FROM THE LIST OF TH E COMPARABLES. ACCORDINGLY, WE HOLD SO. 16. THE LAST CONCERN WHICH THE ASSESSEE WANTS TO BE EXCLUDED IS MEDIA RESEARCH USERS COUNCIL REGISTERED AS NOT-FOR- PROFIT BODY OF MEMBERS REPRESENTING ADVERTISERS, ADVERTISING AGENC IES, PUBLISHERS, AND BROADCAST/OTHER MEDIA. THE LEARNED AR FOR THE A SSESSEE POINTED OUT THAT THE SAID CONCERN WAS SECTION 25 COMPANY AN D UNDERTOOK / ITA NO:- 2526/DEL/2016 PAGE | 11 RESEARCH FOR THE BENEFIT OF ITS MEMBERS, WHEREIN TH E MEMBERS WERE FROM THE MEDIA FIELD. THE TOTAL REVENUE SHOWN BY TH E SAID CONCERN WAS FROM MEMBERSHIP FEE ONLY. HE PLEADED THAT THE S AME COULD NOT BE FUNCTIONALLY COMPARED WITH THE ASSESSEE. 17. WE FIND MERIT IN THIS PLEA OF THE ASSESSEE ON T HE GROUND THAT THE SAID CONCERN WAS REGISTERED AS NOT-FOR-PROFIT BODY OF MEMBERS REPRESENTING ADVERTISERS, ADVERTISING AGENCIES, PUB LISHERS, AND BROADCAST/OTHER MEDIA. IT UNDERTOOK RESEARCH WORK F OR THE BENEFITS OF ITS OWN MEMBERS ONLY AND THE REVENUE EARNED WAS FRO M THE MEMBERSHIP FEE CHARGED TO THE MEMBERS. ON THE OTHER HAND, THE ASSESSEE WAS PROVIDING MARKETING AND SALE SUPPORT S ERVICES TO ITS AE. ACCORDINGLY, WE DIRECT ITS EXCLUSION FROM THE FINAL SET OF COMPARABLES. 18. THE LEARNED AR FOR THE ASSESSEE FAIRLY POINTED OUT THAT IN CASE THE FOUR CONCERNS APAR CHEMATEK LUBRICANTS LTD., IN FO EDGE (INDIA) LIMITED (INFO EDGE), MM TV LIMITED (MM TV) AND MEDIA RESEARCH USERS COUNCIL (MRUC) ARE EXCLUDED FROM THE FINAL LIST OF COMPARABLES, THEN THE MARGINS SHOWN BY THE ASSESSEE WOULD BE AT ARMS LENGTH WITH THE MEAN MARGINS OF THE BALANCE C OMPARABLE COMPANIES SELECTED. SINCE WE HAVE ALREADY DIRECTED THE EXCLUSION OF THE SAID CONCERNS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. NO OTHER ISSUE WAS RAISED BY THE LEARNED A R FOR THE ASSESSEE / ITA NO:- 2526/DEL/2016 PAGE | 12 DURING THE COURSE OF HEARING; HENCE THE GROUNDS OF APPEAL OF THE ASSESSEE STAND ALLOWED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF OCTOBER, 2019. SD/- SD/- (B.R.R. KUMAR) (SUSHM A CHOWLA) &*. &*. &*. &*. /ACCOUNTANT MEMBER . . . . /JUDICIAL MEMBER / DATED : 30 TH OCTOBER, 2019 . SH &-$'(/0&/(1 COPY OF THE ORDER IS FORWARDED TO : 1. ! / THE APPELLANT; 2. '# ! / THE RESPONDENT; 3. '2 3 4 / THE CIT(A) 4. /56'( / DR, ITAT, DELHI 5. 678 1 GUARD FILE. &-' &-' &-' &-' / BY ORDER , #/('( // TRUE COPY // :;.< , AR, ITAT, DELHI