Honeywell Turbo (India) Pvt. Ltd., Pune V. Dy. CIT,

ITA 2584/PUN/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7151 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI; SUHAS S KULKARNI
• Keywords: Related party transaction; Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 2584 /P U N/201 2 / ASSESSMENT YEAR : 20 0 8 - 09 HONEYWELL TURBO TECHNOLOGIES (INDIA) PVT. LTD. (SUCCESSOR OF HONEYWELL TURBO (INDIA) PVT. LTD. ) , PLOT NO.4A, RAISON INDUSTRIAL ESTATE, VILLAGE MANN, NEAR HINJEWADI, PUNE 411057 . / APPELLANT PAN: AA BCH5865J VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), PUNE . / RESPONDENT / APPELLANT BY : S /S HRI RAJAN VORA AND RAJENDRA AGIWAL RAJENDRA AGIWAL / RESPONDENT BY : S /S HRI S.K. RASTOGI AND SUHAS S. KULKARNI / DATE OF HEARING : 1 4 . 1 2 .201 6 / DATE OF PRONOUNCEMENT: 10 . 0 2 .201 7 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF D CIT, CIRCLE 1(2), PUNE, DATED 23 . 1 0 .201 2 RELATING TO ASSESSMENT YEAR 20 0 8 - 09 PASSED UNDER SECTION 143(3) R.W.S. 144C(1 3 ) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 2 ON THE FA CT S A ND IN T H E C IR C UM S TANC ES OF THE CA S E AND IN L AW, TH E HON ' BLE DR P AND CONSEQU E NTI A LL Y TH E L E ARN E D AO HA VE : GROUND 1 GROUND 1 GENERAL GROUND CHALLENGING THE TRANSFER PRICING ADJUSTMENT OF L N R 13 , 84,17,150 E RR E D IN MA K IN G TRANS F ER P RI C IN G A DJUST M ENT A M O UN TI N G TO R S 13 , 84 ,1 7 ,1 50 T O T H E VA LU E OF INTERNAT I ONAL T RAN SAC TION S BY REJECTING THE ANALY S I S UND E RT A KEN B Y TH E APP E LLAN T T O D E TE R MIN E A R M ' S LEN G TH PR I CE FO R IT S INT E RN A TION A L TR A N SA CTI O N S . INTERNATIONAL T RAN S ACTIONS PERTAINING TO OVERALL TURBOCHARGER BUSINESS GROUND 2 REJECTION OF COMBINED OPERATING MARGINS OF HTI AND HONEYWELL TURBO TECHNOLOGIE S INDIA PRIVATE LIMITED ('HTTI') E R RE D I N REJEC T IN G T HE APPE LL A N T ' S MET H ODOL O G Y OF COMPA R I N G COMB I NED OPERATIN G M A RG I NS OF HT I AND HT T I WITH O PERATING M ARGI N S OF TH E CO MP ARA B LE COM P A N IES. GROUND 3 A S SIGNMENT F EES CO N S ID E RED AS A PART OF OPERA T IN G C OS T O F HTI ERRE D IN CON S ID E RI NG T H E APPORT I ONED AMOU N T O F ASS I G NM E N T FE E S AS A PART OF OPER AT IN G CO S T OF HTI FOR AY 2 008 - 09 IN S P ITE OF THE FACT T H AT T H E E NTIR E A MOU N T WAS CON S IDERED A S A PA R T OF O P ERA T I N G COST O F H T I BY T H E AO IN AY 20 06 - 0 7. INTERNA T ION A L TRAN S A C T ION P E RTAINING TO R E ND E RI N G OF S UPPL Y BA S E INTERNA T ION A L TRAN S A C T ION P E RTAINING TO R E ND E RI N G OF S UPPL Y BA S E D EV ELOPM E N T A N D O TH E R B A CK OFFIC E SERV I CES G ROUND 4 INCLU S ION O F A N ON - COMPAR ABL E CO M PAN Y IN THE FINAL SET O F COMPAR A BL E C O MP A N IES E RR E D I N IN C L UDIN G A NO N COMPARAB L E COMPANY I C R A O N LI N E LIM I TE D I N T H E F IN AL S E T OF COMPARABLE COMPANIES F O R THE F INANCI A L YEA R EN DE D 3 1 M ARC H 2008 . G R O UND 5 S ELECTION OF COMPANIE S HAVING SUPER NORMAL PR O FIT S S ELECTION OF COMPANIE S HAVING SUPER NORMAL PR O FIT S ER R E D I N INCLUDIN G COMP ARA BL E COMPANI ES WITH S UP ER N OR M A L PRO FI T S . INT E RNATIONAL TRANSACTION PE R TAINING TO RENDERING OF A PPLICAT I ON E NGIN E ERING SERV I CES GROUND 6 INCLU S ION OF A F UNCTIONALL Y NON - COMPARABL E COMPAN Y E ARNING EX TRA O RD I NAR Y MA R G IN S, IN THE FINAL SE T O F COMPARABLE COMPANIE S E RRED I N IN C LUDIN G V AR D A AN PROJECT S LIMIT E D WHI C H I S FUNCTI O N AL L Y NON - COMPARA BLE A ND E ARNIN G EXT R A - O RDINARY M A R G IN A S A C O MP A R A BL E C O MP A N Y F OR FIN A NCI A L YEA R E ND E D 3 1 M AR C H 2 008 . . FIN A NCI A L YEA R E ND E D 3 1 M AR C H 2 008 . . ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 3 GROUND 7 REJECTION OF A C E SOFTWARE E XPORTS LTD ('ACE') AS A COMPARABLE COMPAN Y E RR E D IN R EJECT IN G ACE SOFTW ARE EXP OR T S L IMITED AS A COM PARABL E CO M P AN Y . GROUND 8 SELECTION OF COMPANIES HAVING SUPER NORMAL PROFITS E RR ED I N I NC L UD IN G COM P A R A BL E COMP A N IES WIT H SUPER NORMA L P R O F I TS. OTHER GROUND S OF OBJECTIO N S GROUND 9 NON CONSIDERATION OF CONTEMPORANEOU S DATA E RR E D IN CONDUCTING A N ANA L YSIS BA SE D O N IN FO R MA T IO N S UB S EQUENTL Y AVA IL A B LE FOR DETE RMININ G AR M 'S L E N GT H PRICE WHIC H WAS NOT AVA IL A BL E AT THE TI M E OF CO MPL Y IN G W I TH T H E T RA N S FER PR ICI NG REG U LATION S . GROUND 10 DENIAL OF ADJU S TMENT FOR RISK DIFFER E NC ES E RR E D I N RE J EC T I N G A DJU ST M E N T O N ACC O UN T OF D I FFER E N CES IN T H E FUNCTI O N A L A ND RI SK P R O F I L E OF CO MP A R A BL E C O MPA NI ES V I S - A - V I S TH E A PP E L L A NT . GROUND 11 D E NI A L O F B E N EF I T O F +/ - 5 % RA NGE W HIL E C O MP UT I N G THE ADJU ST M E N T A M O U NT E RRED IN C O MP UTI N G TH E A R M 'S L E N GT H P R I CE, W ITH O U T TA K I N G INT O A C C O UNT T HE L OWER 5 PER CEN T VAR I ATION FR O M T H E MEA N ARM ' S L ENGT H PRICE DE TE RMIN E D. GROUND 12 ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND LEVYING INTEREST UNDER SECTION 234B, 234C AND 234D OF THE ACT. 3. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS OF APPEAL WHICH READ AS UNDER: - ON FACTS AND IN CIRCUMSTANCES OF THE CASE, LEARNED AO / TPO: GROUNDS IN RESPECT OF INTERNAT IONAL TRANSACTION PERTAINING TO OVERALL TURBOCHARGER BUSINESS ('MANUFACTURING OPERATION') BENEFIT OF VARIATION OF +/ - 5 % 13. ERRED IN NOT PROVIDING THE BENEFIT OF THE VARIATION OF 5 PERCENT AS PROVIDED IN THE PROVISO TO SECTION 92C(2) OF THE ACT , AN D ERRONEOUSLY PROCEEDED TO MAKE AN ADJUSTMENT TO THE VALUE O F INTERNATIONAL PROCEEDED TO MAKE AN ADJUSTMENT TO THE VALUE O F INTERNATIONAL TRANSACTION PERTAINING TO MANUFACTURING SEGMENT OF THE APPELLANT; ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 4 WORKING CAPITAL ADJUSTMENT 14. ERRED IN NOT GRANTING WORKING CAPITAL ADJUSTMENT TO THE OPERATING MARGINS OF THE CO M PARABLE COMPANIES TO ACCOUNT FOR DIFFERENCE IN THE MARGINS OF THE CO M PARABLE COMPANIES TO ACCOUNT FOR DIFFERENCE IN THE WORKING CAPITAL OF THE APPELLANT IN THE MANUFACTURING SEGMENT VIS - A - VIS COMPARABLE COMPANIES BE ALLOWED TO THE APPELLANT ADJUSTMENT SHOULD BE RESTRICTED TO INTERNATIONAL TRANSACTIONS WITH AE 15. WITH OUT PREJUDICE TO THE ABOVE , ERRED IN COMPUTING ADJUSTMENT ON THE TOTAL TURNOVER OF THE MANUFACTURING SEGMENT OF THE APPELLANT INSTEAD OF COMPUTING THE SAME ON THE VALUE OF AE RELATED INTERNATIONAL TRANSACTION PERTAINING TO OVERALL TURBOCHARGER BUSINESS ; GROUNDS IN RESPECT OF INTERNATIONAL TRANSACTION PERTAINING TO PROVISION OF BUSINESS SUPPORT SERVICES ('BSS SEGMENT') FUNCTIONALLY NOT SIMILAR SHOULD BE REJECTED 16. ERRED IN NOT EXCLUDING COMPANIES , WHICH ARE NOT FUNCTIONALLY COMPARABLE TO THE APPELLANT (I . E . TSR DARASHAW LIMITED , SAKET PROJECTS LIMITED , ACCESS INDIA ADV I SORS LIMITED) WORKING CAPITAL ADJUSTMENT 17. ERRED IN NOT GRANTING WORKING CAPITAL ADJUSTMENT TO THE OPERATING MARGINS OF THE COMPARABLE COMPANIES TO ACCOUNT FOR DIFFERENCE IN THE WOR KING CAPITAL OF THE APPELLANT IN THE BSS SEGMENT VIS - A - VIS COMPARABLE COMPANIES BE ALLOWED TO THE APPELLANT ; GROUNDS IN RESPECT OF INTERNATIONAL TRANSACTION PERTAINING TO PROVISION OF APPLICATION ENGINEERING SERVICES ('AE SEGMENT') CO MP ANIES HAVING SUBS TANTIAL RELATED PARTY TRANSACTIONS ('RPT') SHOULD BE EXCLUDE D 18. ERR ED IN NOT EXCLUDING ARTEFACTS PROJECTS LIMITED , WITHOUT APPRECIATING THE RPT OF THE SAID COMPARABLE EXCEEDS 25% OF TOTAL TURNOVER (THERE IS NO DISPUTE ON FILTER, I . E. FILTER OF 25% APPL IED BY THE APPELLANT IS ACCEPTED BY THE TPO); FUNCTIONALLY NOT SIMILAR SHOULD BE REJECTED 19. ERRED IN NOT EXCLUDING COMPANIES , WHICH ARE NOT FUNCTIONALLY COMPARABLE TO THE APPELLANT (I . E AGRIMA CONSULTANTS INTERNATIONAL LIMITED, L&T RAMBOLL CONSULTING ENGINEERS LIMITED AND MAHINDRA CONSULTING ENGINEERS LIMITED) ; WORKING CAPITAL ADJUSTMENT 20. ERRED IN NOT GRANTING WORKING CAPITAL ADJUSTMENT TO THE OPERATING MARGINS OF THE COMPARABLE COMPANIES TO ACCOUNT FOR DIFFERENCE IN THE WORKING CAPITAL OF THE AP PELLANT IN THE AE SEGMENT VIS - A - VIS COMPARABLE COMPANIES BE ALLOWED TO THE APPELLANT ; ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 5 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SALE OF TUR BO CHARGES AND COMPONENTS BY GETTING THE SAME MANUFACTURED FROM ITS CONSIGNMENT MANUFACTURERS. THE ASSESSEE ALSO RE - S ELLS TURBOCHARGES AND COMPONENTS IMPORTED FROM ITS ASSOCIATE ENTERPRISES AND ALSO PROVIDE AFTER SALES SERVICES TO THE CUSTOMERS. THE ASSE SSING OFFICER MADE A REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (IN SHORT THE TPO) FOR COMPUTATION OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. THE TPO NOTED THAT THE ASSESSEE HAD UNDERT AKEN SEVERAL INTERNATIONAL TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION WHICH ARE AS UNDER: - SR. NO. NATURE OF TRANSACTION AMOUNT (RS.) METHOD USED) 1 IMPORT OF RAW MATERIAL 17,16,79,825 TNMM 2 EXPORT OF MANUFACTURED FINISHED GOODS 1,22,212 TNMM 3 P AYMENT OF ROYALTY 2,27,01,724 TNMM 4 IMPORT OF TURBO CHARGERS AND COMPONENTS 2,61, 77,580 TNMM 5 SUPPLY BASE DEVELOPMENT SERVICES 9,33,02,753 TNMM 5 SUPPLY BASE DEVELOPMENT SERVICES PROVIDED 9,33,02,753 TNMM 6 IT AND BACK OFFICE SERVICES PROVIDED 60,99,476 TNMM 7 PROVISION OF APPLICATION ENGINEERING SERV ICES 4,23,90,531 TNMM 8 REIMBURSEMENT OF EXPENSES 4,73,142 TNMM 9 SERVICES AGREEMENT FROM 1 ST JANUARY, 2007 COST ALLOCATION OF CORPORATE FUNCTIONS 1,10,88,572 TNMM TOTAL 37,40,35,815 5. THE TPO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE ON VARIO US ISSUES, MADE THE FOLLOWING ADJUSTMENTS TO THE INCOME OF ASSESSEE. A. MANUFACTURING OPERATIONS: TRANSACTIONS PERTAINING TO TURBOCHARGES BUSINESS OP/OC OF THE ASSESSEE - 3 .66% MARGINS OF COMPARABLES - 8.54% TP ADJUSTMENT MADE BY THE TPO - RS. 9,53,57,800/ - B. BUSINESS SUPPORT SERVICES: MARGINS OF ASSESSEE - 7.85% MEAN MARGINS OF COMPARABLES - 47.33% TP ADJUSTMENT DETERMINED BY TPO - RS. 3,63,87,000/ - ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 6 C. PROVISION OF APPLICATION ENGINEERING SERVICES: MARGINS OF ASSESSEE - 9.85% MEAN MARGINS OF COMPARABLES - 27.14% TP ADJUSTMENT - RS. 66,72,350/ - 6. THE TPO ACCORDINGLY PROPOSED UPWARD ADJUSTMENT OF RS.13,84,17,150/ - . THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (IN SHORT THE DRP) , WHO VIDE ITS DIRECTI ONS DATED 05.09.2012, UPHELD THE ADJUSTMENT MADE BY THE TPO. 7. THE ASSESSING OFFICER CONSEQUENTLY, ISSUED ORDER UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT BY MAKING THE AFORESAID ADDITION OF RS. 13,84,17,150/ - . 8. THE ASSESSEE HAS RAISED SEVERAL G ROUNDS OF APPEAL AGAINST THE TP ADJUSTMENT MADE. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSEE IS GENERAL ADJUSTMENT MADE. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSEE IS GENERAL AGAINST THE TP ADJUSTMENT. THE OTHER GROUNDS RAISED ARE SPECIFIC ON ISSUES OF TP ADJUSTMENTS. THE FIRST TRANSACTION PERTAINING TO MANUFACTURING SEGMENT WAS HELD BY THE TPO TO BE NOT AT ARM'S LENGTH . THE ADJUSTMENT HAS BEEN MADE ON ACCOUNT OF EACH OF THE SEGMENT AND WE PROCEED TO DECIDE THE ISSUE BY REFERRING TO THE FACTS AND CIRCUMSTANCES OF EACH SEGMENT SEPARATELY. 9. IN RESPECT OF MANUFACTU RING SEGMENT , THE PLEA OF ASSESSEE BEFORE US WAS THAT NO ADJUSTMENT HAS TO BE MADE TO THE MANUFACTURING SEGMENT AS THE DIFFERENCE BETWEEN THE REVENUE EARNED BY THE ASSESSEE AND THE ARM'S LENGTH PRICE DETERMINED BY THE TPO DOES NOT EXCEED 5% AND HENCE, IT I S COVERED UNDER PROVISO TO SECTION 92C(2) OF THE ACT. UNDER THE UMBRELLA OF MANUFACTURING SEGMENT, THE TPO HAD CUMULATED THE INTERNATIONAL TRANSACTIONS ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 7 PERTAINING TO IMPORT OF COMPONENTS FROM MANUFACTURING, EXPORT OF MANUFACTURED GOODS AND PAYMENT OF ROYA LTY AND COMPUTED PLI OF TRANSACTIONS PERTAINING TO MANUFACTURING SEGMENT. THE COMPUTATION OF PLI OF ASSESSEE IS AS UNDER: - PARTICULARS F.Y. 2007 - 08 (RS.) OPERATION INCOME (A) 2,02,57,09,464 OPERATING COST - EXCLUDING ASSIGNMENT FEES (B) 1,85,30,09,270 ADD: ASSIGNMENT FEES (C) 10,10,43,750 OPERATING COST (D=B+C) 1,95,40,53,020 OPERATING PROFIT (E=A - D) 7,16,56,444 OP/OC (F=E/D) 3.66% 10. THE ARITHMETIC MEAN OF OPERATING MARGINS ON OPERATING CO ST OF COMPARABLES WAS COMPUTED AT 8.54%. THE LEARNED AUT HORIZED REPRESENTATIVE FOR THE ASSESSEE HAS GIVEN THE WORKING WHICH READS AS UNDER: - PARTICULARS AMOUNT (INR) OPERATING REVENUE OF THE APPELLANT 2,02,57,09,464 105% OF OPERATING REVENUE OF THE APPELLANT 2,12,69,94,937 OPERATING COST (AS CONSIDERED BY THE LD. TPO) 1,95,40,53,020 TPO) ARITHMETIC MEAN OF MARGINS OF COMPARABLES 8.54% 11. THE ASSESSEE COMPUTED ITS MARGINS AT 3.67% AND POINTS OUT THAT DIFFERENCE BETWEEN THE ARITHMETIC MEAN OF MARGINS OF COMPARABLES AND OF THE ASSESSEE WAS 4.70%. THE PLEA OF THE ASSESSEE BEFORE US IS THAT NO ADJUSTMENT IS WARRANTED IN RESPECT OF INTERNATIONAL TRANSACTIONS PERTAINING TO MANUFACTURING SEGMENT AS THE ARM'S LENGTH PRICE DETERMINED BY THE TPO WAS WITHIN RANGE OF +/ - 5% OF ACTUAL REVENUE FROM THE INTERNATIONAL TRANS ACTIONS PERTAINING TO MANUFACTURING SEGMENT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN VIEW OF THE AFORESAID GROUND OF APPEAL, THE ENTIRE TP ADJUSTMENT PERTAINING TO OVERALL TURBOCHARGES BUSINESS WOULD GET DELETED, HENCE T HE OTHER GROUNDS OF APPEAL PERTAINING TO THE SAID SEGMENT WERE NOT BEING PRESSED AS THESE WOULD RESULTANTLY BECOME ACADEMIC IN NATURE. ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 8 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORI TIES BELOW. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE BENCHMARKING OF INTERNATIONAL TRANSACTIONS HAVE BEEN CARRIED OUT BY THE TPO IN THE CASE OF ASSESSEE WHICH I N TURN HAS BEEN APPROVED BY THE DRP AND APPLIED BY THE ASSESSING OF FICER WHILE PASSING THE ORDER UNDER SECTION 143(3) R.W.S. 144C OF THE ACT. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TURBOCHARGES WHICH HAVE APPLICATION IN AUTOMOBILE ENGINES FOR SUPPLY TO DOMESTIC CUSTOMERS AND ALSO TO THE ASSOCIATE EN TERPRISES. THE ASSESSEE ALSO PROVIDED APPLICATION ENGINEERING AND SUPPLY BASE DEVELOPMENT SERVICES TO OVERSEAS RELATED GROUP ENTITIES. THE TPO WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAD CONSIDERED THE TRANSACTIONS UNDE R THE HEAD MANUFACTURING OPERATIONS I.E. TRANSACTIONS PERTAINING TO TURBOCHARGES BUSINESS ON ACCOUNT OF EXPORT OF MANUFACTUR ED GOODS AND PAYMENT OF ROYALTY. BOTH THE ASSESSEE AND THE TPO HAD APPLIED TNMM METHOD TO BENCHMARK THE INTERNATIONAL TRANSACTION S AND PLI OF ASSESSEE FOR THE SAID SEGMENT BY APPLYING OP/OC WAS WORKED OUT AT 3.66% (OR 3.67%). THE TPO HAD CALCULATED THE MARGINS OF COMPARABLES AND THE ARITHMETIC MEAN OF FINAL LIST OF COMPARABLES WORKED OUT TO 8.54%. PROVISO TO SECTION 92C(2) OF THE ACT PROVIDES A BENEFIT TO THE ASSESSEE THAT NO TRANSFER PRICING ADJUSTMENT WOULD BE MADE IN CASE THE ARM'S LENGTH PRICE DETERMINED BY THE TPO WAS WITHIN RANGE OF +/ - 5% OF THE ACTUAL REVENUE FROM THE INTERNATIONAL TRANSACTION. THE PERUSAL OF THE ORDER OF TPO AND THE DETAILS FILED BY THE ASSESSEE REFLECT THAT THE MARGINS OF INTERNATIONAL TRANSACTION RELATING TO MANUFACTURING SEGMENT WAS W ERE WITHIN +/ - 5% OF ACTUAL REVENUE EARNED FROM THE MANUFACTURING SEGMENT AND HENCE, WE DIRECT THE ASSESSING OFFICER TO VERIFY T HE CLAIM OF ASSESSEE AND ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 9 DELETE THE ADDITION . THE GROUNDS OF APPEAL NO.2 AND 3 RAISED BY THE ASSESSEE ARE THUS, DECIDED ON PRELIMINARY ISSUE . 14. NOW, COMING TO THE SECOND SEGMENT UNDERTAKEN BY THE ASSESSEE I.E. PROVISION OF BUSINESS SUPPORT SERVICES AND SUPPLY BASED DEVELOPMENT SERVICES AND INFORMATION TECHNOLOGIES (BSS SEGMENT ). 15. THE ASSESSEE PROVIDED TWO KINDS OF SERVICES UNDER THE SAID SEGMENT; SUPPLY BASED DEVELOPMENT SERVICES AND INFORMATION TECHNOLOGY AND BUSINESS SUPPORT SERVICES TO ITS ASSOCI ATE ENTERPRISES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD EXPLAINED THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO ITS ASSOCIATE ENTERPRISES IN BSS SEGMENT. THE ASSESSEE HAD PICKED UP 12 COMPARABLES ON MULTIPLE YEAR DATA BASIS AND T HE AVERAGE MARGINS OF COMPARABLES WORKED OUT TO 9.36%. HOWEVER, THE TPO DIRECTED THE ASSESSEE TO RE - WORK THE MARGINS ON SINGLE YEARS DATA AND AFTER EXCLUDING FEW OF THE EARLIER SELECTED COMPARABLES , T HE ASSESSEE RE - WORKED THE MEAN MARGINS OF COMPARABLES AT 6.22%. HOWEVER, THE TPO APPLIED MARGINS OF ALL THE COMPARABLES INITIALLY PICKED UP BY THE ASSESSEE AND THE AVERAGE MARGINS OF COMPARABLES WORKED OUT TO 47.3 3 %. 16. THE LIMITED PLEA WHIC H WAS RAISED BEFORE US WAS THE EXCLUSION OF CERTAIN COMPARABLES. THE CASE OF THE ASSESSEE WAS THAT IN CASE FEW OF THE CONCERNS WERE EXCLUDED / INCLUDED THEN, THE MARGINS SHOWN BY THE ASSESSEE WOULD BE WITHIN +/ - 5% MEAN MARGINS OF COMPARABLES AND LIMITED SUBMISSIONS WERE MADE BY THE LEARNED AUTHORIZED REPRESENTATIVE F OR THE ASSESSEE IN THIS REGARD, WHICH WE SHALL DEAL WITH IN THE FOLLOWING PARAS. THE FIRST CONCERN WHICH THE ASSESSEE WANTS TO BE EXCLUDED IS ICRA ONLINE LTD., SINCE IT WAS NOT ONLY ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 10 FUNCTIONALLY DIFFERENT , BUT HAD EXCEPTIONAL YEAR OF OPERATIONS AND WAS EA RNING SUPER NORMAL PROFITS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT ICRA ONLINE LTD. WAS RATING AGENCY, WHICH WAS OWNED BY SEVERAL INSTITUTIONS AND HAD DEVELOPED ITS OWN TOOLS . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID CONCERN WAS PICKED UP IN THE PRECEDING YEAR ALSO AND AGAINST ITS EXCLUSION, TWO GROUNDS OF APPEAL WERE RAISED I.E. (A) THE SAID CONCERN WAS FUNCTIONALLY DIFFERENT AND (B) IT HAD EARNED ABNORMAL PROFITS. OUR ATTENTION W A S DRAWN TO THE DECISION OF TRIBUNAL IN ITA NO.03/PN/2012 , RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 15.06.2015 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT DURING THE YEAR UNDER CONSIDERATION, THE FIRST OBJECTION THAT TH E SAID CONCERN WAS FUNCTIONALLY DIFFERENT IS BEING PRESSED THOUGH THE TRIBUNAL HAD DECIDED THE ISSUE ON ABNORMAL PROFITS EARNED BY ICRA ONLINE LTD. IN THE PRECEDING YEAR , BUT HAD NOT DECIDED ON FUNCTIONAL COMPARABILITY OF THE COMPANY. HE FURTHER ADMITTED THAT ICRA ONLINE LTD. WAS INCLUDED BY THE ASSESSEE IN THE ORIGINAL TP STUDY BUT BEFORE THE TPO AND DRP, OBJECTIONS WERE RAISED, ONCE COMPLETE INFORMATION WAS AVAILABLE IN RESPECT OF THE SAID CONCERN. 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE R EVENUE IN REPLY, POINTED OUT THAT 12 COMPANIES WERE SELECTED BY THE ASSESSEE WHEN THE TP STUDY REPORT WAS MADE AND CERTAIN CONCERNS WERE HELD TO BE FUNCTIONALLY COMPARABLE, THEN HOW LATER ON IT BECOMES NON - FUNCTIONAL. HE FURTHER POINTED OUT THAT THE MARGI NS OF COMPANIES , WHICH WERE APPLIED BY TPO , WERE ORIGINALLY SELECTED IN THE TP STUDY REPORT, BY TAKING MARGINS OF THREE YEARS ; BUT WHEN THE TPO DIRECTED THAT ONE YEARS DATA SHOULD BE APPLIED, LARGE NUMBER OF COMPANIES WERE EXCLUDED BY THE ASSESSEE . THE L EARNED AUTHORIZED ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 11 REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT AS PER AVERAGE MARGINS OF THREE YEARS DATA, PLI OF ICRA WORKED OUT TO 35.84%, WHICH WAS ACCEPTED BY THE ASSESSEE TO BE COMPARABLE BUT ON RE - WORKING THE DATA BY APPLYING ONE YEARS DATA, THE MARGINS ARE 26.78% BUT THE SAME ARE NOT ACCEPTABLE TO THE ASSESSEE. HE RE FERRING TO THE OBSERVATIONS OF TPO AT PAGES 25/26 OF THE ORDER, POINTED OUT THAT THE NATURE OF BUSINESS OF ASSESSEE WAS SPECIALIZED BASE KNOWLEDGE AND IT SERVICES. HE FURTHER STATE D THAT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS NOT PRESSED THE ISSUE ON THE BASIS OF PROFITS BUT ONLY PRESSED THE ISSUE OF THE SAID CONCERN BEING FUNCTIONALLY DIFFERENT BUT IN THE TP STUDY ON FAR ANALYSIS, THE SAID CONCERN WAS FOUND TO B E FUNCTIONALLY COMPARABLE. HE FURTHER STRESSED THAT THERE WAS NO PLEA THAT THE NATURE OF BUSINESS HAS CHANGED FROM PRECEDING YEAR, WHEREIN THE SAID CONCERN WAS EXCLUDED BECAUSE OF ABNORMAL PROFITS. 1 8 . ON PERUSAL OF RECORD AND VARIOUS SUBMISSIONS MADE IN RESPECT OF BUSINESS SUPPORT SERVICES, IT TRANSPIRES THAT THE ASSESSEE HAD PROVIDED SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISES I.E. SUPPLY BASED DEVELOPMENT SERVICES, WHEREIN THE REVENUE EARNED WAS RS. 9,34,38,095/ - . FURTHER, THE ASSESSEE HAD MADE PRO VISION OF IT SERVICES TO THE EXTENT OF RS. 59,64,133/ - WHICH CONSTITUTE IT AND OTHER BUSINESS SUPPORT SERVICES. THE ASSESSEE IN ITS TP STUDY REPORT HAD SELECTED 12 COMPANIES AS FUNCTIONALLY COMPARABLE AND ON THE BASIS OF AVERAGE MARGINS OF THREE YEARS FOUN D THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES AT ARM'S LENGTH PRICE. HOWEVER, THE TPO DIRECTED THE ASSESSING OFFICER TO APPLY ONLY MARGINS OF CURRENT YEAR IN ORDER TO WORK OUT THE MARGINS OF COMPARABLES. THE ASSESSEE THUS , RE - COMPUTED THE MARGINS OF COMPARABLES BUT IN THE PROCESS EXCLUDED CERTAIN CONCERNS AND APPLIED THE MARGINS OF FEW CONCERNS AND THE AVERAGE MARGINS ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 12 WORKED OUT AT 7.8 5%, WHICH WAS FOUND TO BE AT ARM'S LENGTH OF PLI DECLARED BY THE ASSESSEE. THE TPO HOWEV ER, APPLIED THE MARGINS OF THE CONCERNS ORIGINALLY PICKED UP BY THE ASSESSEE AS FUNCTIONALLY COMPARABLE AND UPDATED THE MARGINS BY APPLYING SINGLE YEARS DATA. THE ARITHMETIC MEAN OF FINAL LIST OF COMPARABLES WORKED OUT TO 47.33%, AGAINST WHICH THE TPO PR OPOSED ADJUSTMENT OF RS. 3,63,87,000/ - , AGAINST WHICH THE ASSESSEE IS IN APPEAL. 1 9 . THE FIRST PLEA RAISED BY THE ASSESSEE IS AGAINST EXCLUSION OF ICRA ONLINE LTD. FROM THE FINAL SET OF COMPARABLES. THE ASSESSEE HAD IN FIRST INSTANCE, ADOPTED THE MARGIN S OF SAID CONCERN AS IT S FAR ANALYSIS FOUND THE SAID CONCERN TO BE FUNCTIONALLY COMPARABLE. HOWEVER, DURING THE COURSE OF PROCEEDINGS BEFORE THE TPO, THE ASSESSEE SUBMITTED THAT ICRA ONLINE LTD WAS FUNCTIONALLY NOT COMPARABLE AND OBJECTED TO ITS IN CLUSION IN THE FINAL SET OF COMPARABLES FOR BSS SEGMENT. THE TPO ON THE OTHER HAND, POINTED OUT THAT THE SAID CONCERN WAS ENGAGED IN SIMILAR FUNCTIONAL AS PERFORMED BY THE ASSESSEE AND SINCE WAS SELECTED AS FUNCTIONALLY COMPARABLE BY THE ASSESSEE IN ITS TP STUDY REPORT IN THIS YEAR AND AS WELL AS IN THE EARLIER YEARS, THEN THE SAME IS TO BE ACCEPTED AS COMPARABLE TO THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT ICRA ONLINE LTD. IS ENGAGED IN CONDUCTING RESEARCH AND PRE PARING REPORTS, WHICH IN TURN, MAY BE USED AS TOOL FOR ANALYSIS. FURTHER, IT IS ALSO ENGAGED IN SELLING OF PRODUCT NAMELY MFI EXPLORER. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE FINANCIAL REPORTS OF ICRA IN THIS REGARD AND AL SO WEBSITE EXTRACT OF THE SAID CONCERN. 20 . THE NEXT CONTENTION OF THE ASSESSEE WAS THAT THE SAID CONCERN OWNED HIGH END PROPRIETARY SOFTWARE AND ALSO THAT THE YEAR UNDER CONSIDERATION W AS ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 13 AN EXCEPTIONAL YEAR AS THE OPERATING INCOME HAD DECREASED BUT TH E EMPLOYEE COST HAD INCREASED. THE SAID CONCERN WAS ALSO ADOPTED AS COMPARABLE BY THE TPO IN ASSESSMENT YEAR 2007 - 08. HOWEVER, THE SAME WAS EXCLUDED BY THE TRIBUNAL FOR ABNORMAL PROFITS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FURTHER POINTED OUT THAT EVEN WHERE A COMPANY WAS INCLUDED IN THE TP STUDY REPORT BY THE ASSESSEE HIMSELF, THE SAID COMPANY NEEDS TO BE REJECTED IF IT IS FOUND TO BE FUNCTIONALLY DIFFERENT. IN THIS REGARD, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: - A) SPEC IAL BENCH RULING IN THE CASE OF QUARK SYSTEMS PVT. LTD. (TS - 23 - ITAT - 2009) B) DECISION OF PUNE ITAT IN CASE OF Q LOGIC (INDIA) PVT. LTD. (TS - 352 - ITAT - 2014 (PUN) - TP) C) DECISION OF PUNE ITAT IN CASE OF TIBCO SOFTWARE (INDIA) PVT. LTD. (ITA NO.94/PN/2014) 2 1 . THE ASPECT WHICH NEEDS ADJUDICATION IS WHETHER IF CERTAIN COMPANIES HAVE BEEN SELECTED BY THE ASSESSEE TO BE FUNCTIONALLY COMPARABLE, CAN THE HAVE BEEN SELECTED BY THE ASSESSEE TO BE FUNCTIONALLY COMPARABLE, CAN THE SAME BE REJECTED WHILE MAKING FINAL ANALYSIS IN THE CASE OF ASSESSEE. THIS ISSUE HAS BEEN DECIDED BY DIFFEREN T BENCHES OF TRIBUNAL THAT THE CONCERN WHICH WAS ORIGINALLY SELECTED BY THE ASSESSEE CAN BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES IF NOT FOUND FUNCTIONALLY COMPARABLE. THE ONUS WAS UPON THE ASSESSEE TO ESTABLISH THAT THE SAID CONCERN WAS NOT FUNCTIO NALLY COMPARABLE. WHERE THE NATURE OF BUSINESS UNDERTAKEN BY THE ASSESSEE WAS PROVISION OF SPECIALIZED BASE KNOWLEDGE CONNECTED TO IT SERVICES, THEN EVEN ICRA ONLINE LTD. WAS RATE AGENCY AND WAS PROVIDING CERTAIN SERVICES OF CONDUCTING RESEARCH AND PREPAR ING REPORTS WHICH WERE BEING PROVIDED TO ITS CUSTOMERS. THE ASSESSEE HIMSELF HAD PICKED UP THE SAID CONCERN TO BE FUNCTIONALLY COMPARABLE NOT ONLY IN THE YEAR UNDER CONSIDERATION BUT ALSO IN THE EARLIER YEARS. THE SAID CONCERN WAS EXCLUDED FROM THE FINAL LIST OF COMPARABLES BY THE TRIBUNAL IN ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 14 ASSESSMENT YEAR 2007 - 08 ON THE PREMISE THAT THE SAID CONCERN FOR THE SAID YEAR HAD EARNED ABNORMAL PROFITS. HOWEVER, FOR THE YEAR UNDER APPEAL, THE PLEA OF ASSESSEE IS NOT OF ABNORMAL PROFITS BUT OF IT BEING FUNCTIO NALLY DIFFERENT. WE FIND NO MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD, SINCE THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE NATURE OF BUSINESS UNDERTAKEN BY ICRA ONLINE LTD. HAS CHANGED DURING THE YEAR AS AGAINST THE ACTIVITIES C ARRIED ON IN THE PRECEDING YEAR. THE ONUS WAS UPON THE ASSESSEE TO ESTABLISH THE SAME AND I N THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE PLEA OF ASSESSEE AND ACCORDINGLY, WE UPHOLD THE INCLUSION OF ICRA ONLINE LTD. IN THE FINAL SET OF COMPARABLES. T HE GROUND OF APPEAL NO.4 IS THUS, DISMISSED. 2 2 . THE NEXT CONCERN WHICH NEEDS TO BE EXCLUDED AS PER THE ASSESSEE IS TSR DARASHAW LTD. IN THE BSS SEGMENT. THE REASON FOR EXCLUSION OF SAID COMPANY WHICH WAS ORIGINALLY PICKED UP BY THE ASSESSEE IN ITS TP ST UDY REPORT IS ITS SUPER NORMAL PROFITS EARNED DURING THE YEAR WHICH IS CHALLENGED BY WAY OF GROUND OF APPEAL NO.5. FURTHER, THE ASSESSEE HAS BY WAY OF GROUND OF APPEAL NO.6 CHALLENGED THE INCLUSION OF SAID COMPANY ON THE GROUND THAT IT IS NOT FUNCTIONALLY COMPARABLE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID CONCERN HAD DEVELOPED SOFTWARE FOR PAY ROLL PROCESSING, WHICH WAS OWNED BY IT AND THE INCOME THROUGH SOFTWARE WAS EARNED DURING ASSESSMENT YEAR 2008 - 09 AS ALSO I N ASSESSMENT YEAR 2007 - 08 . HE REFERRED TO THE ORDER OF TRIBUNAL IN ITA NO. 03/PN/2012 (SUPRA) AND POINTED OUT THAT THE TRIBUNAL HAD DIRECTED TO EXCLUDE TSR DARASHAW LTD. FROM THE FINAL SET OF COMPARABLES AS IT WAS FUNCTIONALLY NON - COMPARABLE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT THAT THE SUPER NORMAL PROFITS AT 81.73% WERE EARNED BY THE SAID CONCERN AND HENCE THE SAME SHOULD BE REJECTED AS COMPARABLE TO THE ASSESSEE. ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 15 2 3 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE STRESSED THAT WHERE THE ASSESSEE HIMSELF HAD INCLUDED THE SAID CONCERN IN ITS TP S T UDY AND THE SAME COULD NOT BE REJECTED ON THE GROUND THAT IT HAS EARNED SUPER NORMAL PROFITS DURING THE YEAR. IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE SPECIAL BENCH IN MAERSK GLOBAL CENTRES VS. ACIT IN ITA NO.7466/MUM/2012, ORDER DATED 07.03.2014 , WHEREIN IT WAS HELD THAT IF SUPER NORMAL PROFITS OR LOSSES ARE EARNED, BUT WHERE THE CO NCERNS ARE FUNCTIONALLY COMPARABLE, THEN THE SAID COMPANIES COUL D NOT BE EXCLUD ED FROM THE LIST OF COMPARABLES. 2 4 . WE FIND THAT THE ISSUE OF SAID CONCERN TSR DARASHAW LTD. BEING FUNCTIONALLY NON - COMPARABLE TO THE BSS SEGMENT OF THE ASSESSEE AROSE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2007 - 08. ADMITTEDLY, IN THE EA RLIER YEARS, THE SAID CONCERN WAS PICKED UP AS COMPARABLE BUT WHEN THE FINANCIAL YEAR DATA WAS PERUSED FOR FINANCIAL YEAR 2007 - 08, IT WAS NOTED THAT THE BUSINESS PR OFILE OF THE CONCERN HAD UNDERWENT CHANGE DURING THAT YEAR, WHEREIN THE SAID CONCERN HAD DEV ELOPED SOFTWARE FOR PAY ROLL PROCESSING AND THE INCOMES WERE EARNED THROUGH SUCH SOFTWARE. THE TRIBUNAL IN TURN, RELYING ON THE RATIO LAID DOWN BY DELHI BENCH OF TRIBUNAL IN PREMIER EXPLORATION SERVICES PVT. LTD. VS. ITO IN ITA NO.4935/DE/2011, RELATING T O ASSESSMENT YEAR 2007 - 08, ORDER DATED 31.05.2013 APPLIED THE SAID RATIO, WHEREIN THE DELHI BENCH OF TRIBUNAL HAD ANALYZED THE FUNCTIONAL PROFILE OF TSR DARASHAW LTD. FOR THE SAME FINANCIAL YEAR AND HELD THAT THE FUNCTIONS PERFORMED BY THE SAID COMPANY WER E SIMILAR TO THE COMPANIES PROVIDING SERVICES OF IT / ITES. THE TRIBUNAL ALSO HELD THAT THE CHANGE IN PROFILE OF THE COMPANY IN COMPARISON TO THE EARLIER TWO YEARS MAKES IT NON - COMPARABLE AND JUST BECAUSE IT HAD BEEN SELECTED BY THE ASSESSEE ITSELF IN ITS TP STUDY, SUCH COMPANY COULD NOT BE MADE COMPARABLE. FOLLOWING THE ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 16 SAID DECISION, THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08, DIRECTED THE ASSESSING OFFICER / TPO TO EXCLUDE TSR DARASHAW LTD. FROM THE FINAL SET OF COMPARABLES. THE S AID COMPANY IN THE YEAR UNDER CONSIDERATION IS ALSO ENGAGED IN THE SAME BUSINESS AS IN THE EARLIER YEAR, WHEREIN IT IS EARNING REVENUE BY USING SOFTWARE DE VELOPED FOR PAYROLL PROCESSING. THE SAID CONCERN IS FUNCTIONALLY DIFFERENT FROM THE ACTIVITIES CARRI ED ON BY THE ASSESSEE AND HENCE, THE MARGINS OF SAID CONCERN CANNOT BE APPLIED IN ORDER TO BENCHMARK THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THE SAME FROM THE FINAL SET OF COMPARABLES. AT TH IS JUNCTURE, WE ARE NOT ADDRESSING THE ISSUE OF SUPER NORMAL PROFITS AS THE SAME BECOMES ACADEMIC VIS - - VIS TSR DARASHAW LTD. 2 5 . NOW, COMING TO THE SECOND ISSUE O F SAKET PROJECTS LTD. , WHEREIN THE PLEA OF ASSESSEE WAS THAT IT WAS EARNING SUPER NORMAL PRO FITS AND ALSO IT WAS FUNCTIONALLY DIFFERENT. THE MARGINS OF PROFITS EARNED BY THE SAID CONCERN FOR THE YEAR UNDER CONSIDERATION WERE 158.22%. THE SECOND ISSUE WHICH WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THERE WAS FLUCTUATING PROFITS OF THE SAID CONCERN, WHEREIN DURING THE YEAR UNDER CONSIDERATION, THE SEGMENTAL MARGINS ARE 159.37% AS AGAINST 11.25% IN ASSESSMENT YEAR 2007 - 08 AND 76.76% IN ASSESSMENT YEAR 2006 - 07. THE THIRD ISSUE FOR REJECTION OF SAID CONCERN W AS THAT THE SAID CONCERN WAS FUNCTIONALLY NON - COMPARABLE AS IT WAS ORGANIZING EVENTS WITH VARIOUS KINDS OF SPONSORERS. IN THIS REGARD, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON VARIOUS DECISIONS OF TRIBUNAL INCLUDING THE DE LHI BENCH OF TRIBUNAL IN PREMIER EXPLORATION SERVICES PVT. LTD. VS. ITO IN ITA NO.5293/DEL/2012 , RELATING TO ASSESSMENT YEAR 2008 - 09 , ORDER DATED 22.11.2013 . ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 17 2 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REITERATED ITS SUBMISSIONS AS IN RE SPECT OF EARLIER TSR DARASHAW LTD. 2 7 . IN ORDER TO APPLY THE MARGINS OF ANY CONCERN, THE FIRST TEST WHICH HAS TO BE APPLIED IS T HE TEST OF FUNCTIONALLY COMPARABILITY . S UCH CONCERN S NEED TO BE PICKED UP FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS UNDE RTAKEN BY THE ASSESSEE, WHICH ARE ENGAGED IN SIMILAR BUSINESS AND HENCE, ARE FUNCTIONALLY COMPARABLE . THE PROFILE OF SAKET PROJECTS LTD. IS THAT IT IS ENGAGED IN ORGANIZING EVENTS WITH VARIOUS KINDS OF SPONSORERS. THE SAID FUNCTIONAL ANALYSIS HAS BEEN CO NSIDERED BY THE DELHI BENCH OF TRIBUNAL IN PREMIER EXPLORATION SERVICES PVT. LTD. VS. ITO (SUUPRA) AND VARIOUS OTHER DECISIONS FOR ASSESSMENT YEAR 2008 - 09 AND IT HAS BEEN FOUND TO BE NOT FUNCTIONALLY COMPARABLE TO THE COMPANIES ENGAGED IN THE BUSINESS OF B USINESS SUPPORT SERVICES SEGMENT. ON THIS PRELIMINARY ISSUE ITSELF, WE HOLD THAT THE SAID CONCERN IS NOT FUNCTIONALLY COMPARABLE AND HENCE, CANNOT BE INCLUDED IN THE FINAL LIST OF COMPANIES AND WE HOLD SO. WE ARE NOT ADDRESSING THE OTHER ISSUES RAISED IN RESPECT OF THE SAID CONCERN IN VIEW THEREOF. 2 8 . THE LAST CONCERN WHICH THE ASSESSEE WANTS TO BE EXCLUDED IN BSS SEGMENT IS ACCESS INDIA ADVISORS LTD. ON THE GROUND THAT IT IS SUPER NORMAL PROFIT MAKING CONCERN AND BY WAY OF ADDITIONAL GROUND OF APPEAL NO.16, BEING FUNCTIONALLY NOT COMPARABLE. THE FIRST OBJECTION OF THE TPO FOR EXCLUSION OF THE SAID CONCERN WAS IT IS INCLUDED BY THE ASSESSEE IN ITS TP STUDY REPORT. AS W AS HELD BY US IN THE PARAS HEREINABOVE, IN CASE THE ASSESSEE IS ABLE TO BRING ON RE CORD ANY EVIDENCE TO PROVE ITS CASE THAT THE SAID CONCERN WHICH WAS CONSIDERED TO BE FUNCTIONALLY COMPARABLE TO IT, IS NOW NOT FUNCTIONALLY COMPARABLE BECAUSE OF THE CHANGED CIRCUMSTANCES OR CHANGED ACTIVITIES, THEN ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 18 SUCH CONCERN CAN BE EXCLUDED FROM FINAL SET OF COMPARABLES. WE HAVE HELD SO IN RESPECT OF TSR DARASHAW LTD. AND ALSO IN RESPECT OF SAKET PROJECTS LTD. THE ASSESSEE THOUGH HAS CHALLENGED THE SAID CONCERN TO BE FUNCTIONALLY NON - COMPARABLE BUT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSE E HAS FAILED TO POINT OUT HOW THE SAME IS NOT COMPARABLE. THE SECOND ASPECT WHICH HAS BEEN RAISED BY THE ASSESSEE IS THE SUPER NORMAL MARGINS EARNED BY THE ASSESSEE AT 45.96%. IN CASE THE CONCERN IS FOUND TO BE FUNCTIONALLY COMPARABLE, THEN WHERE THE MAR GINS EARNED ARE HIGHER, DOES NOT MAKE THE SAID CONCERN AS NOT COMPARABLE. SUCH IS THE RATIO LAID DOWN BY THE SPECIAL BENCH OF TRIBUNAL IN MAERSK GLOBAL CENTRES VS. ACIT IN ITA NO.7466/MUM/2012, ORDER DATED 07.03.2014. 2 9 . NOW, COMING TO THE LAST LIMB OF OBJECTION THAT THE SAID CONCERN WAS HAVING VARYING PROFITS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS POINTED OUT THAT THERE IS FLUCTUATION IN OPERATING MARGINS OF ACCESS INDIA ADVISORS LTD. AND THERE WAS SHORT DECREASE IN MARGINS FOR THE SUCCEEDING YEARS, WHICH ESTABLISHED THAT THE ASSESSMENT YEAR 2008 - 09 WAS AN EXCEPTIONAL YEAR . O PERATING MARGINS I.E. OPERATING PROFIT / OPERATING COST OF THE ASSESSEE IN ASSESSMENT YEAR 2006 - 07 WAS 20.50%, IN ASSESSMENT YEAR 2007 - 08 WAS 16.48% AND IN ASS ESSMENT YEAR 2008 - 09 WAS 45.97%. THE ASSESSEE CLAIM ED IT IS TO BE SUPER NORMAL PROFITS. IT IS FURTHER POINTED OUT BY THE ASSESSEE THAT IN THE SUCCEEDING YEARS, THE MARGINS HAVE DECREASED I.E. IN ASSESSMENT YEAR 2009 - 10 , IT WAS 6.62% AND IN ASSESSMENT YEA R 2010 - 11, IT WAS ( - ) 74.60% AND HENCE, THE CONCERN WITH SUCH VARYING MARGINS COULD NOT BE HELD TO BE FUNCTIONALLY COMPARABLE. THE PERUSAL OF TABULATED DETAILS FILED BY THE ASSESSEE IN ITS WRITTEN SUBMISSIONS REFLECT THAT THERE IS SUBSTANTIAL INCREASE IN TURNOVER IN ASSESSMENT YEAR 2008 - 09 AND THEN THERE IS CONSTANT DECLINE IN THE TURNOVER IN ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 19 THE SUCCEEDING YEAR . THE MARGINS SHOWN BY THE CONCERN ARE ALSO DEVIATING FROM YEAR TO YEAR, HENCE THE SAME CANNOT BE RELIED ON AND AS SUCH WE DIRECT ITS EXCLUSION ON THIS GROUND. 30 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE GROUND OF APPEAL NO.10 FOR ALLOWING THE RISK ADJUSTMENT IN BSS SEGMENT AND POINTED OUT THAT SINCE THE ASSESSEE WAS RISK MITIGATING ENTITY, AS FAR AS BSS SERVICES WERE CONCERNED, THEN THE ADJUSTMENT FOR DIFFERENCE IN THE RISK PROFILE OF COMPARABLE COMPANIES SHOULD BE ALLOWED TO THE ASSESSEE. THE SAID CLAIM WAS MADE BY THE ASSESSEE BEFORE THE TPO IN RESPECT OF ALL INTERNATIONAL TRANSACTIONS. HOWEVER, THE TPO CONCLUDED BY STATING THAT THE ASSESSEE WAS NOT RISK FREE ENTITY AND NO RISK ANALYSIS WAS UNDERTAKEN BY THE ASSESSEE . 3 1 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FAIRLY ADMITTED THAT THE TPO HAS FAILED TO ADDRESS THE SAID ISSUE OF WHETHER RISK ADJU STMENT IS TO BE ALLOWED. 3 2 . UNDER THE TP PROVISIONS, WHERE IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS RISK MITIGATING ENTITY, WHEREIN ALL THE RISKS ARE TAKEN CARE OF BY THE ASSOCIATE ENTERPRISES, THEN ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN THE R ISK PROFILE OF COMPARABLE COMPANIES MERITS TO BE ALLOWED WHILE BENCHMARKING THE INTERNATIONAL TRANSACTION OF ASSESSEE. THE BANGALORE BENCH OF TRIBUNAL IN THE CASE OF PHILIPS SOFTWARE CENTRE PVT. LTD. VS. ACIT REPORTED IN 26 SOT 226 HAS UPHELD THAT THE ADJ USTMENT OF RISK TO BE COMPUTED AS DIFFERENCE BETWEEN THE PLR AND THE RISK FREE RATE OF TURN. THE ASSESSEE PREPARED A SUMMARY COMPUTATION CONSIDERING THE AFORESAID RULE, WHICH READS AS UNDER: - ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 20 PARTICULAR % AVERAGE PRIME LENDING RATE DURING AY 2008 - 09 (A ) 12.93 PERCENT AVERAGE BANK RATE DURING AY 2008 - 09 (B) 6.00 PERCENT DIFFERENCE BETWEEN THE PRIME LENDING RATE AND BANK RATE C = (A - B) 6.93 PERCENT RISK ADJUSTMENT (C) 6.93 PERCENT 3 3 . FURTHER, THE DELHI BENCH OF TRIBUNAL IN THE CASE OF SONY INDIA PV T. LTD. REPORTED IN 114 ITD 448 HAS ALLOWED 20% RISK ADJUSTMENT CONSIDERING THE FACT THAT IT MAY NOT BE POSSIBLE TO QUANTIFY RISK ADJUSTMENTS. THE ASSESSEE APPLYING THE SAID RATIO IN THE CASE OF SONY INDIA PVT. LT D. (SUPRA) HAS WORKED OUT THE RISK ADJUSTM ENT ON THE OPERATING MARGINS OF COMPARABLES TO BE ALLOWED WHEN COMPUTED @ 20%. WE DIRECT THE ASSESSING OFFICER TO ALLOW THE RISK ADJUSTMENT AND RE - COMPUTE THE MARGINS OF COMPARABLES BY APPLYING THE RATIO LAID DOWN BY DELHI BENCH OF TRIBUNAL IN THE CASE OF SONY INDIA PVT. LTD. (SUPRA) AND COMPUTE THE TP ADJUSTMENT, IF ANY, IN THE HANDS OF ASSESSEE. 3 4 . THE GROUNDS OF APPEAL NO.4 AND 5 I.E. ADJUSTMENT IN RESPECT OF BSS SEGMENT ARE PARTLY ALLOWED AND EVEN GROUND OF APPEAL NO.10 FOR RISK ADJUSTMENT IS ALLOW ED FOR STATISTICAL PURPOSES. 3 5 . THE GROUNDS OF APPEAL NO.6, 7 AND 8 ARE IN RESPECT OF ADJUSTMENTS MADE TO APPLICATION ENGINEERING SERVICES SEGMENT. 3 6 . THE ASSESSEE HAS EXPLAINED THAT THE APPLICATION ENGINEERING SERVICES WAS COMPRISED OF CUSTOMIZATION O F BUSINESS OF TURBOCHARGES TO PARTICULAR VEHICLE MODELS OF DIFFERENT CUSTOMERS, WHERE THE BEST DESIGN OF TURBOCHARGES IS ALREADY DEVELOPED AND PATENTED AND THE ASSESSEE PROVIDES SERVICES RELATING TO CUSTOMIZATION OF THE BEST DESIGN AS PER THE REQUIREMENTS OF CUSTOMER. IN ORDER TO ANALYZE THE INTERNATIONAL TRANSACTIONS OF AE SEGMENT, THE ASSESSEE HAD ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 21 FOLLOWED TNMM METHOD AND HAD SELECTED CONCERNS TOTALING 15. HOWEVER, THE TPO DIRECTED THE ASSESSEE ONLY TO CONSIDER SINGLE YEARS DATA AND THE ASSESSEE RE - COM PUTED THE MARGINS OF COMPARABLES BUT EXCLUDED CERTAIN CONCERNS. THE TPO APPLIED THE MARGINS OF MOST OF THE CONCERNS WHICH WERE INITIALLY SELECTED BY THE ASSESSEE AS FUNCTIONALLY COMPARABLE AND HELD THE SAME TO BE NOT AT ARM'S LENGTH AND MADE ADDITION OF R S.66,72,350/ - , AGAINST WHICH THE ASSESSEE IS IN APPEAL. 3 7 . THE PLI OF ASSESSEE I.E. WHILE ADOPTING OP/OC WAS 9.85% AND THE MARGINS OF COMPARABLES WAS WORKED OUT BY THE TPO WAS 27.14%. THE CONTENTION RAISED BEFORE US IS IN RESPECT OF INCLUSION / EXCLUSIO N OF COMPARABLES. THE FIRST CONCERN I.E. ACE SOFTWARE EXPORTS LTD. , WHICH WAS REJECTED BY THE TPO BEING FUNCTIONALLY NOT COMPARABLE WAS SOUGHT TO BE INCLUDED IN THE FINAL LIST OF COMPARABLES. THE SAID CONCERN WAS REJECTED BECAUSE OF ITS LOSSES AT 36.54%. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE LAST YEAR, THE SAME CONCERN WAS ACCEPTED AS FUNCTIONALLY COMPARABLE AND WHERE THE SAID CONCERN WAS NOT PERSISTENTLY LOSS MAKING, THEN THE RESULTS OF THE SAID CONCERNS FOR THE YEAR UNDER CONSIDERATION SHOULD BE PICKED UP IN THE LIST OF COMPARABLES FOR BENCHMARKING INTERNATIONAL TRANSACTIONS. THE SECOND CONCERN WHICH THE ASSESSEE WANTS TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES IS VARDAN PROJECTS LTD. FOR BEING FUNCTIONAL LY NOT COMPARABLE AND BEING SUPER NORMAL PROFITS MAKING CONCERN. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID CONCERN HAD VARYING PROFITS AND HENCE, IS TO BE EXCLUDED FROM THE LIST OF COMPARABLES. ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 22 3 8 . THE LEARNED DEPAR TMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE CONCERN ACE SOFTWARE EXPORTS LTD. WAS EXCLUDED BY THE TPO BEING NOT FUNCTIONALLY SIMILAR AND ALSO BEING CONSISTENTLY LOSS MAKING CONCERN. HE FURTHER POINTED OUT THAT IN THE LAST YEAR, THE TRIBUNA L SAID THAT THE SAID COMPANY WAS FUNCTIONALLY SIMILAR BUT IF SUCH LOSS MAKING COMPANIES ARE EXCLUDED, THEN SUCH C OMPANIES MAKE HIGHER PROFITS, BUT MARGINS OF FUNCTIONALLY SIMILAR SHOULD ALSO BE APPLIED. HE POINTED OUT THAT IF ACE SOFTWARE EXPORTS LTD. IS TO BE EXCLUDED, THEN VARDAN PROJECTS LTD., CANNOT BE EXCLUDED ON THE PREMISE THAT IT HAS SUPER NORMAL PROFITS. IN RESPECT OF TH IRD CONCERN ARTEFACT PROJECT LTD., THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID CONCERN DOES NOT FULFILL THE RPT FILTER AND HENCE, TO BE EXCLUDED. 3 9 . IN THIS REGARD, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT IN CASE THE SAID CONCERN DOES NOT FULFILL THE R PT FILTER, THE TPO MAY VERIFY THE CONTENTION OF ASSESSEE A ND IN CASE THE RPT FILTER IS NOT FULFILLED, THEN THE SAID CONCERN IS TO BE REJECTED FROM THE LIST OF COMPARABLES. 40 . THE NEXT CONTENTION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS IN ALLOWING RISK ADJUSTMENT IN AE SEGMENT ALSO. 4 1 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE CASE OF THE ASSESSEE WAS THAT IN CASE FEW OF THE CONCERNS WERE EXCLUDED / INCLUDED THEN, THE MARGINS SHOWN BY THE ASSESSEE WOULD BE WITHIN +/ - 5% MEAN MARGINS OF COMPARABLES AND LIMITED SUBMISSIONS WERE MADE BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD, WHICH WE SHALL DEAL WITH IN THE FOLLOWING PARAS. THE FIRST CONCERN WHICH THE ASSESSEE WANTS TO BE INCLUDED IN THE FINAL LIST IS ACE SOFTWARE EXPORTS LTD. THE ASSESSEE HAS ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 23 FURNISHED TABULATED DETAILS OF OPERATING PROFITS, OPERATING COST AND OPERATING MARGINS OF THE SAID CONCERN FOR THE PAST THREE YEARS WHICH READS AS UNDER: - PARTICULAR AY 2006 - 07 (RS.) AY 2007 - 08 (RS.) AY 2008 - 09 (RS.) OPERATING PROFIT (A) 36,6 3,704 (34,26,797) (1,73,00,667) OPERATING COST (B) 4,62,48,015 4,86,99,104 4,73,47,807 OPERATING MARGIN (A/B) 7.92% - 7.04% - 36.54% 4 2 . THE PERUSAL OF THE ABOVE DETAILS REFLECTS THAT THE OPERATING MARGINS ARE VARYING I.E. IN THE FIRST YEAR, IT WAS 7.92 % BUT IN ASSESSMENT YEAR 2007 - 08, IT WAS ( - ) 7.04% AND IN THIS YEAR IT IS ( - ) 36.54% . THE SAID CONCERN WAS ACCEPTED AS FUNCTIONALLY COMPARABLE IN THE PRECEDING YEAR, WHERE ITS MARGINS WERE AT ( - ) 7.04%. HOWEVER, DURING THE YEAR UNDER CONSIDERATION T HOUGH THERE IS INCREASE ON THE VOLUME OF BUSINESS OF THE SAID CONCERN, THE MARGINS ARE STEAD FASTLY REDUCING AND IT HAS SHOWN OPERATING MARGINS AT ( - ) 36.54% . THE SAID CONCERN WAS HELD TO BE FUNCTIONALLY COMPARABLE TO THE ASSESSEE IN THE PRECEDING YEAR. THE REVENUE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO SHOW THAT THERE IS THE REVENUE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO SHOW THAT THERE IS ANY CHANGE IN THE FUNCTIONALITY OF THE SAID CONCERN IN THE YEAR UNDER APPEAL AND IN THE ABSENCE OF THE SAME, THERE IS NO MERIT IN THE PLEA OF ASSESSEE THAT IT IS NOT FUNCTIONALLY COMP ARABLE AND HENCE, TO BE REJECTED. TH E OPERATING MARGINS SHOWN BY ACE SOFTWARE EXPORTS LTD. DO NOT REFLECT IT TO BE PERSISTENTLY LOSS MAKING CONCERN AND ACCORDINGLY, WE HOLD THAT ACE SOFTWARE EXPORTS LTD. IS TO BE INCLUDED IN THE FINAL SET OF COMP A RABLES . ON THE SIMILAR ANOMALY, VARDAN PROJECTS LTD. WHICH IS SHOWING HIGHER MARGINS OF 96.33% CANNOT BE EXCLUDED ON THE GROUND THAT IT WAS SHOWING HIGH PROFIT MARGINS, IF IT SATISFIES THE COMPARABILITY ANALYSIS. THE ASSESSEE HAS FAILED TO SATISFY THAT HIGH PROF IT MARGINS DOES NOT REFLECT THE NORMAL BUSINESS CONDITION. IN THE ABSENCE OF THE SAME AND FOLLOWING THE PRINCIPL E LAID DOWN BY SPECIAL BENCH OF TRIBUNAL, WE HOLD THAT VARDAN PROJECTS LTD. IS TO BE INCLUDED IN THE FINAL LIST OF COMPARABLES. ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 24 43. THE THIRD CONCERN WHICH IS UNDER DISCUSSION IS ARTEFACT PROJECT LTD. BOTH THE LEARNED AUTHORIZED REPRESENTATIVES HAVE ADMITTED THAT IN CASE THE SAID CONCERN DOES NOT FULFILL THE R P T FILTER, THEN THE SAME MERITS TO BE EXCLUDED. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF ASSESSEE IN THIS REGARD AND DECIDE THE ISSUE ACCORDINGLY. 44. NOW, COMING TO THE LAST LIMB OF TP ADJUSTMENT IN AE SEGMENT I.E. RISK ADJUSTMENT HAS BEEN DECIDED BY US IN THE PARAS HEREINABOVE IN RESPECT OF BSS SEGMENT. WE DIRECT THE ASSESSING OFFICER TO ALLOW RISK ADJUSTMENT IN THE MARGINS OF COMPARABLES FOLLOWING THE RATIO LAID DOWN BY DELHI BENCH OF TRIBUNAL IN THE CASE OF SONY INDIA PVT. LTD. (SUPRA) @ 20%. 45. THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APPEAL NO. 13 TO 20. HOWEVER, ALL THE OTHER GROUNDS OF APPEAL EXCEPT GROUND OF APPEAL NO.18 WERE NOT PRESSED BY THE ASSESSEE IN FINAL ARGUMENTS I.E. IN APPLYING RPT FILTER WHILE NOT PRESSED BY THE ASSESSEE IN FINAL ARGUMENTS I.E. IN APPLYING RPT FILTER WHILE CONSIDERING INCLUSION OF ARTEFACT PROJECT LTD. WE HAVE ALREADY ADJUDICATED ON THIS ISSU E IN THE PARAS HEREINABOVE AND RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER AND HENCE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ALL THE OTHER GROUNDS OF APPEAL I.E. GROUNDS OF APPEAL NO.13 TO 20 EXCEPT GROUND OF APPEAL NO.18 ARE DISMISSED AS NOT PRESSED AND ARE ACADEMIC IN NATURE AND EVEN GROUND OF APPEAL ON WORKING CAPITAL ADJUSTMENT IS NOT PRESSED. 46. THE ASSESSEE HAD FILED CERTAIN SUBMISSIONS IN WHICH REFERENCE WAS MADE TO THE INCLUSION / EXCLUSION OF SOME OTHER CONCERN S ALSO, BUT NO SUBMISSIONS HAVE BEEN MADE BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD AND HENCE, THE SAME ARE REJECTED. ITA NO. 2584 /P U N/20 1 2 HONEYWELL TURBO (INDIA) P VT. LTD. 25 47. THE NEXT PLEA RAISED BY THE ASSESSEE WAS ONLY IN RESPECT OF GRANT OF RISK ADJUSTMENT WHICH WE HAVE AL READY DIRECTED THE ASSESSING OFFICER TO ALLOW FOLLOWING THE PRINCIPLE LAID DOWN IN THE CASE OF SONY INDIA PVT. LTD. (SUPRA). THE BALANCE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE HAVE BEEN FIRST ARGUED AND THEN WITHDRAWN ON A LATER DATE AND HENCE, THE SAME ARE DISMISSED AS WITHDRAWN. 48. THE GROUNDS OF APPEAL NO.6 TO 8 AND GROUND OF APPEAL NO.10 FOR RISK ADJUSTMENT ARE PARTLY ALLOWED. 4 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 10 TH DAY OF FEBRUARY , 201 7 . SD/ - SD/ - (R.K. PANDA ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 10 TH FEBRUARY , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DIT (INTL. TAXATION), PUNE ; 4. THE DRP, PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE . / BY ORDER, // TRUE COPY // / ASSISTANT REGISTRAR, , / ITAT, PUNE