BT Limited, Gurgaon V. DDIT, New Delhi

ITA 2604/DEL/2012

• Counselvise Citation: 260420114 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 30-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: YOGESH K VERMA
• Assessee Lawyers: MANONEET DALAL; ARIJIT CHAKRAVARTY
• Keywords: Related party transaction; Business income; Transfer pricing; International transaction; Question of law
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-2604/DEL/ 2012 (ASSESSMENT YEAR-2004-05) BT LIMITED, C/O-SRBC & ASSOCIATES, 4 TH FLOOR, GOLD VIEW CORPORATE TOWER B, SECTOR-42, GURGAON-122002 P AN-AAACB2836L (APPELLANT) VS DDIT, CIRCLE-1(1), INTERNATIONAL TAXATION, NEW DELHI. (RESPONDENT) APPELLANT BY SH. ARIJIT CHAKRAVARTY, ADV. & SH. MANONEET DALAL, ADV. RESPONDENT BY SH. YOGESH K. VERMA, CIT DR ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 28.02.2012 OF CIT(A)-XI, NEW DELHI PERTAINING TO 2004-05 ASSESSME NT YEAR ON VARIOUS GROUNDS. HOWEVER AT THE TIME OF HEARING, LD. AR SUBMITTED TH AT HE DOES NOT WISH TO PRESS GROUND NO.-2,3,4 & 9 AND GROUND NO-1 IS GENERAL AS SUCH HE WOULD CONFINE HIS ARGUMENTS TO GROUND NO-5 WHICH IS AGAINST THE ADDIT ION OF RS.45,25,000/- MADE ON ACCOUNT OF DIFFERENCE BETWEEN ARMS LENGTH PRICE (HE REINAFTER REFERRED TO AS ALP) DETERMINED BY THE TRANSFER PRICING OFFICER (HEREINA FTER REFERRED TO AS TPO) AND THE ALP DETERMINED BY THE ASSESSEE. 2. ACCORDINGLY WE FIRST SET OUT GROUND NO-5 AGITATE D BY THE ASSESSEE WHICH READS AS UNDER:- ITA NO. 2604/DEL/12 2 5. THE TPO/AO/CIT(A) HAS ERRED BY SELECTING DATAMA TICS TECHNOLOGIES LIMITED, A COMPANY WITH SIGNIFICANT RE LATED PARTY TRANSACTIONS, AS COMPARABLE TO THE APPELLANT. 2.1. THE UNDISPUTED FACTS ON RECORD ARE THAT THE AS SESSEE RENDERED SUPPORT SERVICES TO ITS PARENT COMPANY IN UK, WHICH BELONGS TO GROUP OF BT, UK. THE VALUATION OF INTERNATIONAL TRANSACTION WAS REFERRED BY THE AO TO THE TRANSFER PRICING OFFICER (HEREINAFTER REFERRED TO AS THE TPO) FOR DETERMININ G THE ARMS LENGTH PRICE (HEREINAFTER REFERRED TO AS THE ALP) U/S 92CA (3). THE TRANSFER PRICING OFFICER IN HIS ORDER DATED 27/11/06 ADDRESSING THE BACKGROUND OBSERVED THAT BT WW INDIA IS A BRANCH OF BT (WORLDWIDE) LTD., A COMPANY INCORPORATED IN UK. BT WW, UKS PRINCIPAL ACTIVITY IS THE PROVISION OF SERVICES TO ITS ULTIMATE SHAREHOLD ER, BRITISH TELECOMMUNICATIONS PC AND ITS COMPANIES AND THE PROVISION OF ITS PRODUCTS AND SERVICES IN THE OVERSEAS MARKETS THROUGH ITS BRANCHES. BRITISH TELECOMMUNICATIONS P C IS ONE OF THE WORLDS LEADING PROVIDERS OF TELECOMMUNICATIONS SERVICES AND ONE OF THE LARGEST PRIVATE SECTOR COMPANIES IN EUROPE. IT WAS FURTHER OBSERVED BY HI M THAT BTWW INDIA PROVIDES SUPPORT SERVICES TO THE HEAD OFFICE, BTWW, UK WHICH FELL UNDER THE PURVIEW OF THE GENERAL SERVICES AGREEMENT, INDIA (GSA) AND THE PRO CUREMENT OF SERVICES AGREEMENT (PSA), BOTH OF WHICH WERE BETWEEN BTWW UK AND BT PC , WITH CORRESPONDING SIDE LETTER FROM BTWW UK TO BTWW INDIA. 2.2. THE TPO OBSERVED THAT THE FOLLOWING INTERNATIO NAL TRANSACTIONS WERE REPORTED IN FORM NO-3CEB :- S.NO. DESCRIPTION OF TRANSACTION METHOD VALUE (IN R S.) 1. PROVISION OF SUPPORT SERVICES TNMM RS.6,89,05,46 6/- 2.3. ADDRESSING THE TRANSFER PRICING APPROACH ADOPT ED BY THE ASSESSEE, HE OBSERVED THAT TNMM HAS BEEN SELECTED AS THE MOST APPROPRIATE METHOD FOR DEMONSTRATING ITS ADHERENCE TO THE ARMS LENGTH PROVISION OF THE INCO ME TAX ACT AND THE ASSESSEE HAD TAKEN THE PROFIT LEVEL INDICATOR (HEREINAFTER REFER RED TO AS THE PLI) AS OPERATING PROFIT ITA NO. 2604/DEL/12 3 COMPUTED IN RELATION TO OPERATING COST (HEREINAFTER REFERRED TO AS OP/OC). THE ASSESSEE HAS COMPUTED ITS PLI AT 10%. 2.3. THE TPO FURTHER OBSERVED THAT THE ASSESSEE HAD SELECTED THE FOLLOWING 8 COMPARABLES AND THEIR AVERAGE OPERATING PROFIT MAR GINS WORKED OUT TO 9.76%. S.NO. NAME OP/TC MARGIN FOR THE F.Y.2003-04 1. FI SOFEX LIMITED -47.91% 2. TATA SERVICES LIMITED 0.46% 3. PATEL ON BOARD COURIERS LIMITED 3.75% 4. MCS LIMITED 4.41% 5. INTERNATIONAL TRAVEL HOUSE LTD. 14.13% 6. ACE SOFTWARE EXPORTS LIMITED 0.00% 7. DATAMATICS TECHNOLOGIES LIMITED 81.33% 8. MAX HEALTHSCRIBE LIMITED NA 2.4. CONSIDERING THE 8 COMPARABLES, THE TPO EXCLUDE D COMPARABLE AT SERIAL NO-1 AND 8. THE ASSESSEE INITIALLY OPPOSED THE EXCLUSION OF THE COMPARABLES AT SERIAL NO-1 I.E F1 SOFEX LIMITED BEFORE THE CIT(A) HOWEVER NO GRIEV ANCE AGAINST THE EXCLUSION OF THE SAME WAS CANVASSED BEFORE US. 2.5. THE TPO COMPUTED THE ARMS LENGTH PLI ON THE BA SIS OF THE REMAINING 6 COMPARABLES AT 17.34% IN THE FOLLOWING MANNER :- S.NO. NAME OP/TC MARGIN FOR THE F.Y.2003-04 1. TATA SERVICES LIMITED 0.46% 2. PATEL ON BOARD COURIERS LIMITED 3.75% 3. MCS LIMITED 4.41% 4. INTERNATIONAL TRAVEL HOUSE LTD. 14.13% 5. ACE SOFTWARE EXPORTS LIMITED 0.00% 6. DATAMATICS TECHNOLOGIES LIMITED 81.33% AVERAGE 17.34% 2.6. CONSEQUENT TO THIS THE DIFFERENCE PROPOSED BY TPO OF RS.45,25,000/- WAS CONFIRMED BY THE CIT(A). THE TPOS CALCULATION CON FIRMED BY THE CIT(A) IS REPRODUCED HEREUNDER:- COMPUTATION OF ARMS LENGTH PRICE OF THE INTERNATI ONAL TRANSACTION ITA NO. 2604/DEL/12 4 THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSAC TION IS COMPUTED IN THE FOLLOWING MANNER :- VALUE OF INTERNATIONAL TRANSACTION 6,89,05,466/- TOTAL OPERATING COST AS COMPUTED BY THE ASSESSEE 6 ,25,79,228/- TOTAL OPERATION PROFIT AS COMPUTED BY THE ASSESSEE 85,46,191/- OPERATING PROFIT/OPERATING COST AS COMPUTED BY THE ASSESSEE 10% ARMS LENGTH OP/TC AS COMPUTED ABOVE 17.34% OPERATING PROFIT AT ARMS LENGTH OP/TC 1,08,51, 238/- ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION 7,34,30,466/- DIFFERENCE IN VALUE 45,25,000/- 3. IN THE SAID BACKGROUND THE LD. AR REFERRING TO P AGE 93 OF THE PAPER BOOK EXPLAINED THAT AT THE TIME OF THE PREPARATION OF TH E TP STUDY THE SELECTION OF TIME PERIOD WAS DONE BY THE ASSESSEE IN THE FOLLOWING MANNER AS SET OUT IN PARA 2.6.6 OF THE TP REPORT HEREUNDER:- 2.6.6. FURTHER, THE REGULATIONS REQUIRE THAT THE C OMPARABLE DATA, AS FAR AS POSSIBLE, SHOULD BE CONTEMPORANEOUS. HENCE, THE CUT OFF POIN T FOR EXAMINING THE COMPARABLE DATA SHOULD NOT BE BEYOND THE END OF THE CURRENT FI NANCIAL YEAR. ACCORDINGLY, INFORMATION IN DATABASES UPDATED TILL FEBRUARY 16, 2004 WAS USED FOR THIS ANALYSIS. 3.1. BASED ON THIS IT WAS SUBMITTED THAT BENCH-MARK ING ANALYSIS HAS BEEN FOCUSED ON THE FINANCIAL RESULTS OF COMPANIES HAVING FINANCIAL YEAR ENDING ON 01.04.2001 AND 16.02.2004 SO AS TO AVERAGE OUT THE IMPACT ON THE B USINESS OF PRODUCTS CYCLES BY RESORTING TO MULTIPLE YEAR DATA. THE LD. AR WAS RE QUIRED TO ADVANCE HIS SUBMISSIONS IN THE BACKGROUND OF THE FACT THAT THE TP REPORT IS DA TED 27.10.2004 CONSEQUENTLY THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE DATA FOR MA RCH 2004 WAS NOT AVAILABLE. MOREOVER THE APPROACH ADOPTED AS CANVASSED IS NOT A S PER THE REQUIREMENTS OF THE INDIAN TRANSFER PRICING RULES AND PROVISIONS. LD. AR IN THE SAID BACKGROUND CONFINED HIS ARGUMENTS TO ADDRESSING THE EXCLUSION OF DATAMA TICS TECHNOLOGIES LIMITED WHICH HAS BEEN OBJECTED TO BY THE ASSESSEE ON THE GROUND THAT IT HAD SIGNIFICANT RELATED PARTY TRANSACTION AND THESE ARGUMENTS HAVE NOT BEEN CONSI DERED BY THE CIT(A) WHO HAS MERELY RELIED UPON THE REMAND REPORT OF THE TPO. I T WAS HIS STAND THAT THE DEPARTMENTAL STAND THAT IT WAS THE COMPARABLE OFFER ED BY THE ASSESSEE CANNOT BE GIVEN ITA NO. 2604/DEL/12 5 SO MUCH IMPORTANCE THAT ONCE AN INCOMPARABLE FACT I S POINTED OUT ON RECORD THAT IT SHOULD STILL BE IGNORED WITHOUT CONSIDERING THE FAC TS WHICH MAKE IT AN INCOMPARABLE. IT WAS SUBMITTED THAT IT IS NOT DISPUTED BY THE ASSESS EE THAT DATAMATICS TECHNOLOGIES LTD IS A FUNCTIONAL COMPARABLE WHICH IS WHY IT WAS OFFE RED AS A COMPARABLE BY THE ASSESSEE. IT WAS SUBMITTED THAT WHEN DATA IN THE PUBLIC DOMAI N SHOWED THAT IT HAD SIGNIFICANT RELATED PARTY TRANSACTION AND ON THE NOTICING OF TH IS FACT IT BECOMES EVIDENT THAT THE ASSESSEE HAD MADE A MISTAKE IN CHOOSING THE SAID CO MPARABLE, IN THESE CIRCUMSTANCES, IT WAS ARGUED THE ASSESSEE CANNOT BE SADDLED WITH THE SAID COMPARABLE WITHOUT GIVING COGENT REASON AS TO WHY IT CAN STILL BE HELD AS A C OMPARABLE. IT WAS ARGUED THAT DATAMATICS TECHNOLOGIES LIMITED HAD 39% RELATED PAR TY TRANSACTIONS AS SUCH IT CANNOT BE SAID TO BE AN INDEPENDENT COMPARABLE. RELIANCE WAS PLACED UPON THE DECISION OF THE SPECIAL BENCH RENDERED IN THE CASE OF DCIT VS QUARK SYSTEMS INDIA (P) LTD. (2010) 4 ITR (T) 606 (CHANDIGARH) (SB). IT WAS SUBMITTED TH AT THIS DECISION RENDERED IN THE CASE OF VERY SAME COMPARABLE FOR THE VERY SAME ASSESSMEN T YEAR I.E. 2004-05 WAS CONFIRMED BY THE HONBLE PUNJAB & HARYANA HIGH COUR T IN CIT VS QUARK SYSTEMS INDIA (P.) LTD (2011) 244 CTR 542 (P&H). SPECIFIC ATTENTION WAS INVITED TO PARA 3-6 OF THE SAID JUDGEMENT (COPY FILED IN THE COURT) SO AS TO CONTEND THAT THE ISSUE HAD BEEN GIVEN UP BY THE REVENUE BEFORE THE HONBLE HIGH COU RT. 3.2. INVITING ATTENTION TO THE OBJECTIONS POSED TO THE SAID COMPARABLE BEFORE THE CIT(A) PAPER BOOK PAGES 150-154 WERE REFERRED TO. A PERUSAL OF THE SAME SHOWS THAT IT IS A LETTER ADDRESSED TO CIT(A) DATED 21.02.2011 WH EREIN RELIANCE WAS PLACED UPON DCIT VS SONY INDIA PRIVATE LTD. 114 ITD 448. IT WA S SUBMITTED THAT IN THE SAID DECISION IT HAS BEEN HELD THAT AN ENTITY CAN BE TAK EN AS UNCONTROLLED IF ITS RELATED PARTY TRANSACTION DID NOT EXCEED 10 TO 15% OF TOTAL REVEN UE. IT WAS SUBMITTED THAT IT HAS BEEN HELD THAT WITHIN THE ABOVE LIMIT TRANSACTIONS CANNO T BE HELD TO BE SIGNIFICANT TO INFLUENCE THE PROFITABILITY OF A COMPARABLE. HOWEVER IN THE FACTS OF DATAMATICS TECHNOLOGIES LTD, IT WAS SUBMITTED IT HAD BEEN POINTED OUT THAT THE P ERCENTAGE OF RELATED PARTY ITA NO. 2604/DEL/12 6 TRANSACTION TO OPERATING REVENUE WAS 38.93%. FOR R EADY-REFERENCE, WE REPRODUCE FROM THE SAID LETTER THE RELEVANT EXTRACT:- BASED ON A REVIEW OF THE FINANCIALS (RELEVANT EXTR ACTS FROM CAPITALLINE PLUS DATABASE IS ENCLOSED AS ANNEXURE 2) OF DTL FOR FINANCIAL YEA R (FY) 2003-04, IT IS OBSERVED THAT THE RELATED PARTY TRANSACTIONS CONSTITUTE 38.9 3 PER CENT OF THE OPERATING REVENUE OF DTL. THE DETAILED COMPUTATION OF THE RELATED PARTY TRANSACTIONS IS GIVEN BELOW:- FIGURES: IN RUPEES CRORES OPERATING INCOME (A) 55.50 RELATED PARTY TRANSACTIONS (RPT) (B): SALES 21.50 SOFTWARE DEVELOPMENT CHARGES 0.11 TOTAL (B) 21.61 RPT/OPERATING INCOME (A/B) 38.93% 3.3. IN ORDER TO JUSTIFY THE CALCULATIONS GIVEN, OU R ATTENTION WAS INVITED TO PAGE 208 WHERE A COPY OF THE P&L A/C FOR DATAMATICS TECHNOLO GIES LIMITED FOR THE YEAR ENDED 31.03.2004 IS ENCLOSED WHICH INCLUDES THE RELATED P ARTY DISCLOSURES GIVEN BY THE SAID COMPANY WHICH ARE FOUND AT PAGE 221 OF THE PAPER BO OK AVAILABLE ON RECORD. IT WAS SUBMITTED THAT THESE SUBMISSIONS WERE REITERATED BE FORE THE CIT(A) AGAIN ON 08.12.2011 (COPY PLACED AT PAGES 157-161) WHEREIN AGAIN THE AS SESSEE AGITATED THAT DATAMATICS TECHNOLOGIES LIMITED HAVING SIGNIFICANT RELATED PAR TY TRANSACTIONS SHOULD BE EXCLUDED. THESE SUBMISSIONS IT WAS STATED WERE REITERATED AGA IN ON 10.02.2012 (COPY PLACED AT PAGES 162-163 OF THE PAPER BOOK). INVITING ATTENTI ON TO THE SAME, IT WAS SUBMITTED THAT THE ASSESSEE FURTHER ADDED THE OTHER INCOMES CONS IDERING THE SPLIT UP GIVEN IN SCHEDULE L (COPY PLACED AT PAGE 214 AND ONLY EXCLUD ED THE MISCELLANEOUS INCOME AND SUNDRY BALANCES WRITTEN BACK AND AS PER PAGE 162 OF THE PAPER BOOK DEMONSTRATED TO THE CIT(A) THAT EVEN THEN THE RELATED PARTY TR ANSACTION COME TO 38.38 % WHICH IS STILL VERY HIGH SO AS TO MAKE THE SAID COMPARABLE AN INCOMPARABLE. THE FIGURES PROVIDED TO THE CIT(A) AS PER PAGE 162 READ AS UNDE R :- OPERATING INCOME (A) 562,934,514 RELATED PARTY TRANSACTIONS (RPT) (B): ITA NO. 2604/DEL/12 7 SALES WITH SUBSIDIARY COMPANY 171,532,588 SALES WITH ASSOCIATE COMPANY 43,473,664 SOFTWARE DEVELOPMENT CHARGES WITH ASSOCIATE COMPANY 1,050,000 TOTAL (B) 216,056,252 RPT/OPERATING INCOME (A/B) 38.38% 3.4. ON QUERY IT WAS FURTHER STATED THAT EVEN IF TH E AMOUNTS MENTIONED IN MISCELLANEOUS INCOME AND SUNDRY BALANCES WRITTE N BACK ARE INCLUDED EVEN THEN THE PERCENTAGE OF RELATED PARTY TRANSACTION WOULD WORK OUT TO 36% WHICH WOULD STILL MAKE THE COMPARABLE AN INCOMPARABLE. IN THE SAID BACKGR OUND, INVITING ATTENTION TO THE REMAND REPORT OF THE AO (COPY PLACED AT PAGE 155OF THE PAPER BOOK). IT WAS SUBMITTED THAT THE TPO HAS NOT ADDRESSED THE BASIS OF THE OBJECTIONS TO THE SAID COMPARABLE AND HAS MERELY RE-ITERATED HIS STAND. I N ORDER TO CONSIDER THE DEPARTMENTAL STAND WE DEEM IT APPROPRIATE TO EXTRACT THE RELEVAN T PORTION FROM THE REMAND REPORT AVAILABLE ON RECORD:- THE CLAIM OF THE ASSESSEE FOR REMOVAL OF DATAMATIC S TECHNOLOGIES LTD. (DTL) ON GROUNDS OF RELATED PARTY TRANSACTIONS, USING FI SOF EX LTD. AS AN EXAMPLE IE, THEREFORE, MISLEADING. AS FAR AS THE OP/TC MARGIN OF DTL IS C ONCERNED THERE IS NO GROUND ON WHICH SAME CAN BE CONTESTED AND THEREFORE, ITS MARG IN OF 81.33% SHOULD BE ACCEPTED, SINCE IT IS FUNCTIONALLY THE SAME AS THE ASSESSEE. IT WOULD BE PERTINENT TO POINT OUT THAT THE ASSESSEE ITSELF HAD CHOSEN THESE COMPARABLES AF TER CARRYING OUT THE NECESSARY SEARCH. 3.5. THE LD. AR IN THE SAID BACKGROUND INVITING ATT ENTION TO THE IMPUGNED ORDER WHICH IS RUNNING INTO 48 PAGES SUBMITTED THAT THE C IT(A) AFTER REPRODUCING THE ENTIRE ARGUMENTS ON BEHALF OF THE ASSESSEE CAME TO THE FOL LOWING FINDING AT PAGE 48 WHICH CANNOT BE SAID TO BE A JUDICIALLY ACCEPTABLE CONCLU SION. THE SAME IS REPRODUCED HEREUNDER:- GROUND NO.3, 4, 5, 6 & 7 COVER THE SAME ISSUE. IT IS SEEN THAT AFTER THE MATTER WAS REFERRED TO TPO, SUFFICIENT OPPORTUNITIES WERE GIVE N TO THE APPELLANT TOT GIVE ITS SUBMISSIONS. AFTER ANALYZING ALL ASPECTS THE TPO H AD DETERMINED THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION. FURTHER WH EN THE MATTER WAS REMANDED TO THE ADDL. DIT FOR A FURTHER REPORT ON THE SUBMISSIONS O F THE APPELLANT, IT WAS STATED THAT THE APPELLANT HIMSELF HAD CHOSEN THE COMPARABLES FO R CARRYING OUT THE NECESSARY ITA NO. 2604/DEL/12 8 SEARCH. FURTHER FI SOFEX LTD. WAS REJECTED AS IT W AS NOT FUNCTIONALLY COMPARABLE AND WAS NOT SIMILAR TO THE APPELLANT IN TERMS OF BUSINE SS FUNCTIONS. REGARDING DTL IT WAS SELECTED AS IT WAS FUNCTIONALLY THE SAME AS THE APP ELLANT. I AM IN AGREEMENT WITH THE COMMENTS OF THE ADDL. CIT, TPO-1(1), NEW DELHI GIVE N IN THE REMAND REPORT AND THE STAND OF THE AO. THE ADDITION OF RS.45,25,000/- IS CONFIRMED. 3.6. IN THE LIGHT OF THESE FACTS AVAILABLE ON RECOR D, IT WAS HIS SUBMISSION THAT SINCE THE CIT(A) HAS NOT ARRIVED AT ANY INDEPENDENT FINDING N OR HAS HE ASSAILED THE CALCULATION GIVEN BY THE ASSESSEE NOR FOR THAT MATTER HAS THE T PO IN THE REMAND PROCEEDINGS ASSAILED THE CALCULATIONS PROVIDED ACCORDINGLY CON SIDERING THE PRINCIPLE SETTLED IN THE CASE OF SONY INDIA PRIVATE LTD., WHEREIN BETWEEN10- 15% OF RELATED PARTY TRANSACTION HAS BEEN HELD TO CONSTITUTE A COMPARABLE AND BEYOND THAT BY NECESSARY IMPLICATION AN INCOMPARABLE CONSEQUENTLY THE SAID COMPARABLE SHOUL D BE EXCLUDED. ATTENTION WAS ALSO INVITED TO ADP (P) LTD. VS DCIT 45 SOT 172 (HY DERABAD) AND GLOBAL LOGIC INDIA (P.) LTD. VS DCIT (2011) 46 SOT 285, WHEREIN 25% OF RELATED TRANSACTION HAVE BEEN FOUND TO BE ACCEPTABLE AND BEYOND THAT WOULD TANTAM OUNT TO MAKING THE COMPARABLE AN INCOMPARABLE. SIMILARLY IN THE CASE OF HAPEG LLOYD GLOBAL SERVICES IN THE ORDER DATED 28.02.2013 IN ITA NO.-8499/DEL/2010 IT WAS SUBMITT ED RELATED PARTY TRANSACTION TO THE EXTENT OF 25% HAVE BEEN HELD AS COMPARABLE. IN THE SE CIRCUMSTANCES WHERE ADMITTEDLY THE RELATED PARTY TRANSACTION EVEN IF THE ENTIRE OT HER INCOME IS ADDED WOULD STILL WORK OUT TO 36.39% AS SUCH ON THE SAID GROUND ITSELF IT WAS SUBMITTED THE SAID COMPARABLE HAS WRONGLY BEEN TAKEN AS A COMPARABLE AS SUCH SHOULD B E EXCLUDED. 4. IN REPLY THE LD. CIT DR SUBMITTED THAT THE ASSES SEE BEFORE THE TPO DID NOT OBJECT TO THE INCLUSION OF THE SAID COMPARABLE ON T HE GROUND OF RELATED PARTY TRANSACTION AS THE FACTS REMAINS THAT IT WAS A COMPARABLE PROVI DED BY THE ASSESSEE ITSELF. IT WAS ALSO HIS STAND THAT THE ASSESSEE HAS RELIED UPON MULTIPL E YEAR DATA WHICH IS CONTRARY TO THE TRANSFER PRICING RULES AND REGULATIONS AND THE SAID GROUND SHOULD BE REJECTED. HOWEVER SINCE THE ASSESSEE HAS NOT SERIOUSLY ARGUED THESE I SSUES AND HAS ONLY AGITATED AND CONFINED HIS ARGUMENTS ONLY TO THE REQUEST THAT THE SAID COMPARABLE BE EXCLUDED ITA NO. 2604/DEL/12 9 ACCORDINGLY IT WAS HIS SUBMISSION THAT THE DEPARTME NT WOULD HEAVILY EMPHASISE THE FACT THAT FIRSTLY IT IS A COMPARABLE OFFERED BY THE ASS ESSEE ITSELF AND SECONDLY THE INCLUSION OF THE SAME HAS NOT BEEN AGITATED IN THE ASSESSMENT PROCEEDINGS. IT WAS CONCEDED THAT NO DOUBT THE INCLUSION OF THE SAID COMPARABLE HAS B EEN OBJECTED TO BEFORE THE CIT(A) WHO HAS CALLED FOR A REMAND REPORT AND THEREAFTER N OT AGREED TO WITH THE ASSESSEES REQUEST AS SUCH THE DECISION OF THE CIT(A) WAS RELI ED UPON. IN THESE CIRCUMSTANCES RELIANCE WAS PLACED UPON THE IMPUGNED ORDER AND THE REMAND REPORT. 5. IN REPLY THE LD. AR REITERATED THAT IT IS THE SA ME COMPARABLE WHICH HAS BEEN CONSIDERED IN THE CASE OF QUARK SYSTEMS INDIA (P) L TD. WHEREIN THE VIEW OF THE SPECIAL BENCH HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT AND READING OF THE ORDER OF THE TRIBUNAL WOULD SHOW THAT THE VERY SAME STAND WAS TA KEN BY THE REVENUE IN THE CASE OF QUARK SYSTEMS INDIA (P) LTD WHICH HAS NOT BEEN ACCE PTED. ACCORDINGLY IN THE FACTS OF THE ASSESSEES CASE ALSO THE EXCLUSION OF THE SAID COMPARABLES SHOULD BE ACCEPTED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE EXCLUSION OF DATAMATIC S TECHNOLOGIES LIMITED IS SOUGHT BY THE ASSESSEE ON THE GROUND THAT IT HAS SIGNIFICANT RELATED PARTY TRANSACTION BY WAY OF CALCULATIONS. IN SUPPORT OF ITS CLAIM IT HAS BEEN ARGUED THAT EVEN IF THE ENTIRE OTHER INCOME IS INCLUDED AS PER THE P&L ACCOUNT OF DATAM ATICS TECHNOLOGIES LIMITED MADE AVAILABLE IN THE PUBLIC DOMAIN AND AVAILABLE ON REC ORD FOR THE YEAR UNDER CONSIDERATION EVEN THEN THE RELATED PARTY TRANSACTION WOULD WORK OUT TO 36%. RELIANCE HAS BEEN PLACED ON THE JUDGMENT IN THE CASE OF CIT VS. QUARK SYSTEM PVT. LTD. A PERUSAL OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF DCIT VS QUARK SYSTEMS PVT. LTD WHICH HAS BEEN UPHELD BY THE HONBLE PUNJAB AND HARYANA H IGH COURT SHOWS THAT THE SPECIAL BENCH CONSIDERING THE OBJECTIONS POSED BY WAY OF AD DITIONAL GROUND RAISED BEFORE ITAT HAS FOR THE VERY SAME ASSESSMENT YEAR I.E 2004 -05 ALLOWED THE GROUND AND DIRECTED THE TPO TO EXCLUDE THE SAID COMPARABLE ON THE GROUND OF SIGNIFICANT RELATED ITA NO. 2604/DEL/12 10 PARTY TRANSACTION IF FOUND CORRECT. FOR READY-REFER ENCE, WE REPRODUCE THE RELEVANT EXTRACT FROM THE SAID ORDER:- 9. IN ADDITION TO THE ABOVE TWO ISSUES, ONE MORE I SSUE IS RAISED FOR OUR CONSIDERATION. THIS IS RAISED BY THE ASSESSEE AS A N ADDITIONAL GROUND OF APPEAL. IT IS ASSESSEES CONTENTION THAT ONE OF THE INDEPENDENT C OMPARABLE WHICH HAS BEEN INCLUDED BY THE ASSESSEE AS ALSO BY THE TPO HAS BEE N WRONGLY INCLUDED IN THE COMPARABLE FOR MORE REASONS THAN ONE. FIRSTLY, ACC ORDING TO THE ASSESSEE, IN THE CASE OF DATA MATRIX TECHNOLOGIES LTD., OUT OF TOTAL SALE S OF RS.54.85 CRORES, ITS TRANSACTIONS WITH THE ASSOCIATED CONCERN AMOUNT TO RS.17.15 CRORES WHICH WORKS OUT TO 31.27 PER CENT OF THE TOTAL SALES MADE BY THE DA TAMATICS TECHNOLOGIES LTD. THE ASSESSEE SUBMITS AS IS THE ACCEPTED TRANSFER PRICIN G CANNOT BE CONSIDERED AS UNCONTROLLED TRANSACTIONS. IT IS ALSO SUBMITTED TH AT THERE IS AN ARITHMETICAL ERROR ON ACCOUNT OF WHICH OPERATING EXPENSES OF RS.579 CRORE S WERE NOT TAKEN INTO ACCOUNT WHILE AGGREGATING TOTAL EXPENDITURE AS A RESULT OF WHICH THE ORIGINAL PROFIT TO COST RATIO WORKED OUT TO 138.46 PER CENT. THE ASSESSEE S CONTENTION IS THAT THE INCLUSION OF THIS COMPARABLE, WHICH TAKES INTO ACCOUNT PROFIT ON COST AT 138.46 PER CENT HAS VITIATED THE TRANSFER PRICING ANALYSES. IT IS SUBM ITTED THAT THIS MISTAKE IS AN INADVERTENT MISTAKE AND IN ANY EVENT SINCE THE CIT( A) HAD BALANCE SHEET OF THE DATA MATRIX TECHNOLOGIES LTD. BEFORE WHOM HE OUGHT TO HA VE BEEN TAKEN INTO ACCOUNT THE CORRECT POSITION. WITHOUT PREJUDICE TO THE ARGUMEN T THAT DATAMATICS TECHNOLOGIES LTD., FOR THE ABOVE REASONS, SHOULD NOT BE INCLUDED AS A COMPARABLE AT ALL. THE ASSESSEE ALSO CONTENDS THAT IN ANY EVENT REVISED OP ERATING MARGIN TO COST RATIO IS 93.06 PER CENT WHICH WOULD HAVE BEEN TAKEN INTO ACC OUNT IN THE COMPUTATION OF MEAN PROFIT AND COMPARABLE ENTITIES. IN EFFECT, THUS, W E ARE ALSO CALLED UPON TO ADJUDICATE, SUBJECT TO ADMISSION OF THIS ADDITIONAL GROUND SO R AISED BY THE ASSESSEE, AS TO WHETHER OR NOT DATAMATICS TECHNOLOGIES LTD. SHOULD BE EXCLU DED FROM THE COMPARABLES. 6.1. A PERUSAL OF THE SAID ORDER FURTHER SHOWS THAT BEFORE THE ITAT THE ISSUE WAS AGITATED BY WAY OF AN ADDITIONAL GROUND. AS SUCH T HE GRIEVANCE HAD NOT BEEN POSED EITHER BEFORE THE TPO OR AT THE STAGE OF THE FIRST APPELLATE AUTHORITY AND WAS AGITATED FOR THE FIRST TIME BEFORE THE TRIBUNAL BY WAY OF TH E ADMISSION OF THE SAID ADDITIONAL GROUND IN ORDER TO SEEK EXCLUSION OF THE SAID COMPA RABLE. THE CLAIM OF THE ASSESSEE WAS SUPPORTED BY THE FOLLOWING ARGUMENTS:- 18. LEARNED COUNSEL THEN INVITED OUR ATTENTION TO THE F ACT THAT ONE OF THE COMPARABLES INCLUDED IN THE COMPUTATION OF MEAN PROFITS TO COMPARABLES UNITS IS OF DATA MATRIX TECHNOLOGIES LTD. IT WAS POINTED OUT THAT COMPANY DETAILS INCLUDING THE BALANCE SHEET OF THE SAID COMPARABLE WAS BEFORE THE LEARNED COMMISSI ONER AND THAT THE NET PROFIT TO COST RATIO INTEREST IN THE SAID CASE WAS AS HIGH AS 138 PER CENT. LEARNED COUNSEL SUBMITTED THAT WHE N A HIGH LOSS-MAKING UNIT IS TO BE ITA NO. 2604/DEL/12 11 IGNORED FOR THE PURPOSE OF COMPARABLE TO BE TAKEN INTO ACCOUNT FOR COMPUTATION OF MEAN PROFIT, ON THE SAME LOGIC, THE COMPANY SHOWING IN SUCH HIGH PROFIT AS 138 PER CENT OF OPERATING PROFIT TO COST SHOULD ALSO HE EXCLUDED. I T WAS SUBMITTED THAT AS EVIDENT FROM FINANCIAL STATEMENT OF THE SAID COMPANY AND THE DISCLOSURE MADE THEREIN BY WAY OF NOTES TO ACCO UNTS. DATA MATRIX TECHNOLOGIES LTD. HAD HUGE TRANSACTIONS WITH THE ASSOCIATED ENTERPRISES. IT WAS THE CASE OF THE ASSESSEE THAT O N ACCOUNT OF THESE INTRA ASSOCIATED ENTERPRISES TRANSACTIONS, THE COMPARABILITY OF DATA MATRIX TECHNOLOGIES LTD. IS ALSO VITIATED IN L AW. LEARNED COUNSEL DID ADMIT THAT DATAMATICS TECHNOLOGIES LTD. WAS INCLUDED IN TRANSFER PRICING STUDY GIVEN BY THE ASSESSEE HIM SELF BUT, ACCORDING TO HIM, IT CANNOT BE OPEN TO THE REVENUE AUTHORITIES TO BLOW HOT AND COLD AT THE SAME TIME. INASMUCH AS ONCE THE Y EXCLUDE A HIGH LOSS MAKING COMPARABLE THEY MUST ALSO EXCLUDE A HIGH PROFIT- MAKING COMPANY. ACCORDING TO THE LEARNED COUNSEL F OR THE ASSESSEE, WHEN AN AUTHORITY IS EMPOWERED TO DO SOMETHING HE HAS A CORRESPONDING DUTY TO EXERCISE SUCH POWERS IN A FAIR WHEN CIRCUMSTANCES SO JUSTIFY OR WARRANT IT WAS SUBMITTED THAT THE POWERS OF THE CIT(A) ARE CO-TERMINUS TO THE POWERS OF THE ASSESSI NG OFFICER AND TPO AND ONCE THE CIT(A) HAD ALL RELEVANT DETAILS BEFORE HIM INCLUDING THE FACT THAT DATAMATICS TECHNOLOGIES LTD . HAD OVER 37 PER CENT INTRA ASSOCIATED TRANSFER PRICE TRANSACTIONS, IT WAS THE DUTY OF THE CIT(A) TO EXCLUDE DATAMATICS TECHNOLOGI ES LTD. FROM THE COMPARABLES. LEARNED COUNSEL ALSO SUBMITTED THAT ALL THE RELEVANT DETAILS ARE ALREADY ON RECORD INASMUCH AS RELEVANT ANNUAL ACCOUNT OF DATAMATICS TECHNOLOGIES LTD. FILED BEFORE THE CIT(A ). WE MUST ENTERTAIN THESE GRIEVANCES OF THE ASSESSEE ON MERITS. LEARNED COUNS EL FOR THE ASSESSEE RELIED UPON HON 'BLE SUPREME COURT JUDGMENT IN THE CASE OF NATIONAL THER MAL POWER CORPN. LTD. V. CLT [1998] 229 ITR 383 IN SUPPORT OF PRAYER FOR ADMISSION OF THE AFORESAID ADDITIONAL GROUND. WITHO UT PREJUDICE TO THE ABOVE ARGUMENTS, LEARNED COUNSEL SUBMITTED THAT THERE IS AN ARITHMETICAL DIFFERENCE IN THE COMPUTATION OF MEAN PROFIT WHICH ESCAPED THE ATTENTION OF THE ASSESSEE INASMUCH AS EXPENSES OF RS. 5.79 CRORES WERE NOT TAKEN INTO ACCOUNT WHILE COMPU TING THE OPERATING PROFITS. IT IS, THUS, PRAYED THAT THE SAME BE TAKEN INTO ACCOUNT NOW WHICH WILL BRING DOWN THE OPERATING PRO FIT TO COST RATIO FIGURE. 6.2. THE FOLLOWING PARAS OF THE SAID ORDER WOULD FURTHER SHOW THAT MORE OR LESS IDENTICAL ARGUMENTS ON BEHALF OF THE REVENUE WERE A DVANCED BEFORE THE SPECIAL BENCH. THESE ARE SET OUT IN PARA 21 OF THE SAID ORDER AND ARE REPRODUCED HEREUNDER:- ITA NO. 2604/DEL/12 12 21. SHRI S.D. KAPILA, LEARNED SPECIAL COUNSEL FOR THE ASSESSEE, VEHEMENTLY OPPOSES THE ADMISSION OF THE ADDITIONAL GROUND REGARDING EXCLUDING OF DATAMATICS TECHNOLOGIES LTD. AT THIS STAGE. HE SUBMITS THAT DATAMATICS TECHNOLOGIES LTD. WAS INCLUDED IN THE LIST OF COMPARABLE GIVEN BY THE ASSESSEE HIMSEL F, THEREFORE, THERE IS NO GOOD REASON FOR THE ASSESSEE TO BACK OUT FROM THE SAME. IN ALL FAIRNESS, HE DID ACCEPT THAT THE COMPUTATION OF OPERATING PROFITS OF DATAMATICS TECHNOLOGIES LTD. IS INDEED VITIATED INASMUCH AS OPERATING PROFITS OF 5.79 CRORES HAVE NOT BEEN T AKEN INTO ACCOUNT TO ARRIVE AT CORRECT FIGURE OF OPERATING PROFITS. AS A RESULT OF THIS ERROR, THE NET OPERATING PROFIT TO COST RATIO WHICH IS ACTUALLY 93.06 PER CENT AS AGAINST 138.46 PER CENT ADOPTED BY THE IPO. LEARNED SPECIAL COUNSEL, HOWEVER, SUBMITS THAT TINK ERING WITH THE LOSS OF COMPARABLES AT THIS STAGE AND A FRESH DETERMINATION AS TO WHICH COMPARABLE BE ACCEPTED AND WHICH ONE SHOULD N OT BE ACCEPTED WILL LEAD TO REVISING THE TRANSFER PRICING ANALYSIS CONDUCTED BY THE ASSESSEE HIMSELF. HE SUBMITS THAT SUCH AN EX ERCISE WILL OPEN FLOODGATES OF UNCERTAINTY TO THE SETTLED ASSESSMENTS OF TRANSFER PRICING CASES. SHRI KAPILA ALSO SUBMITTED THAT THE ONUS WAS NOT ON THE ASSESSEE TO GIVE ALL THE RELEVANT DETAILS TO THE TPO, WHICH HE OBVIOUSLY AND ADMITTEDLY DID NOT DO NOR DID HE DO S O AT THE STAGE TO PROCEEDINGS BEFORE THE CIT(A). SHRI KAPILA SUBMITS THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT EVEN BEFORE T HE CIT(A), SUCH DETAILS WERE EVER FILED. AS REGARDS THE QUESTION OF INTRA ASSOCIATED ENTERPRISES TRANSACTION BEING INVOLVED I N THE TURNOVER OF THE DATAMATICS, SHRI KAPILA SUBMITS THAT THIS ISSUE WAS NEVER TAKEN UP BEFORE ANY OF THE AUTHORITIES BELOW. THE D ETAILS WERE ALSO NOT AVAILABLE IN THE PROWESS DATABASE AND HAVE COME TO THE LIGHT ONLY AS A RESULT OF DETAILED BALANCE SHEET OF DATAMATICS TECHNOLOGIES LTD. COMPANY FILED NOW BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, ACCORDING TO THE LEARNED SPECIAL COU NSEL, WE SHOULD NOT ENTERTAIN A GRIEVANCE REGARDING EXCLUSION OF DATAMATICS TECHNOLOGIES LTD. IN THE COMPARABLES WITHOUT PREJUD ICE TO THIS OPPOSITION LEARNED COUNSEL FAIRLY SUBMITS THAT IN THE EVENT, THE TRIBUNAL IS PLEASED TO ADMIT THIS GROUND OF APPEAL, THE MATTER CAN AT BEST BE REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF EXAMINING THE RELEVANT FACT REGA RDING DATAMATICS TECHNOLOGIES LTD. LEARNED COUNSEL FURTHER SUBMITS THAT IN CASE, WE ARE INCLINED TO REMIT THE MATTER TO THE FI LE OF THE ASSESSING OFFICER, HE HAS NO OBJECTION TO THE MATTER BEING RESTORED TO THE FILE OF THE ASSESSING OFFICER AS SUCH BUT AN EXERCI SE SHOULD BE FOR THE LIMITED PURPOSES OF EXAMINING SPECIFIC POINTS AS THE BENCH MAY DEEM FIT BUT IT SHOULD NOT BE FOR THE PURPOSES OF REVISITING THE ENTIRE TRANSFER PRICING ANALYSIS IT IS ALSO SUBMITTED THAT THE QUESTION AS TO WHAT FURTHER ADJUSTMENTS NEED TO BE MADE IN THE PROFITS SO AS TO ELIMINATE THE IMPACT OF VARIATIONS BETWEEN THE ITA NO. 2604/DEL/12 13 ASSESSEE AND THE COMPARABLES CANNOT BE ADDRESSED AT THIS STAGE AS IT WOULD AMOUNT TO REVISING ENTIRE TRANSFER PRICING STUDY, AND THAT TH E REMAND SHOULD BE CONFINED TO THE QUESTION AS TO WHETHER OR NOT A PARTICULAR COMPARAB LE CAN BE TAKEN INTO ACCOUNT OR NOT. 6.3. IT IS SEEN THAT CONSIDERING THE ARGUMENTS THE SPECIAL BENCH RESTORED THE ISSUE TO THE TPO TO CONSIDER ON FACTS THE OBJECTION OF THE A SSESSEE IN THE LIGHT OF THE DIRECTIONS GIVEN BY THE SPECIAL BENCH. IT IS A MATTER OF RECO RD THAT THE SAID DECISION WAS CHALLENGED BEFORE THE HONBLE HIGH COURT BY THE REVE NUE AND IT IS WORTHWHILE REPRODUCING FROM THE SAID ORDER HOW THE ISSUE WAS A DDRESSED BY THE REVENUE AND CONSIDERED BY THE HONBLE HIGH COURT. FOR THE SAID PURPOSE WE REPRODUCE FROM THE SAID DECISION. CONSIDERING THE ARGUMENT THE ISSUE W AS CONSIDERED IN THE FOLLOWING MANNER:- 3. WE HAVE HEARD THE COUNSEL FOR THE REVENUE. 4. THE ISSUE INVOLVED IN THIS CASE IS WHETHER T HE TRIBUNAL WAS JUSTIFIED IN ENTERTAINING THE ADDITIONAL GROUND FOR EXCLUSION OF M/S DATAMATICS TECHNOLOGIES AS COMPARABLE AND REMANDING THE CASE T O THE ASSESSING OFFICER WHEREBY IT HAD DIRECTED THAT THE ASSESSEE SHALL BE ENTITLED TO PRODUCE ALL RELEVANT MATERIAL FOR DETERMINATION OF PROPER ARMS LENGTH PRICE AND SHALL CO- OPEARATE FOR EXPEDITIOUS DISPOSAL OF THE MATTER. 5. ON A QUERY BEING PUT TO THE LEARNED COUNSEL FOR THE REVENUE AS TO WHAT HAS HAPPENDED BEFORE THE ASSESSING OFFICER AFTER THE RE MAND, SHE CANDIDLY ADMITTED THAT THE ORDER HAS BEEN PASSED IN FAVOUR OF THE ASS ESSEE ON 11.1.2010 AND HAS PRODUCED A COPY OF THE SAID ORDER PASSED UNDER SECT ION 92CA(3) OF THE ACT. 6. IN VIEW OF THE OBSERVATIONS OF THE TRIBUNAL WHEREBY AN OPPORTUNITY WAS PROVIDED TO THE ASSESSEE TO PRODUCE MATERIAL BEFORE THE ASSESSING OFFICER AND THE FACT THAT AFTER THE REMAND AND CONSIDERATION OF THE MATERIAL PRODUCED BY THE ASSESSEE IN TERMS OF THE ORDER OF THE TRIBUNAL, AN ORDER IN FAVOUR OF THE ASSESSEE HAS BEEN PASSED, NO QUESTION OF LAW MUCH LESS A SUB STANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR CONSIDERATION OF THIS COU RT. ACCORDINGLY, THE PRESENT APPEAL IS DISMISSED. 6.4. IN THE AFORE-MENTIONED PECULIAR FACTS AND CIRC UMSTANCES, IT IS SEEN THAT IN THE FACTS OF THE PRESENT PROCEEDINGS, THE INCLUSIO N OF DATAMATICS TECHNOLOGIES LIMITED HAS BEEN OBJECTED TO BY THE ASSESSEE BEFORE THE CI T(A) SUPPORTED BY FINANCIAL DOCUMENTS OBTAINED BY THE ASSESSEE FROM T HE PUBLIC DOMAIN BY WAY OF ITA NO. 2604/DEL/12 14 WHICH IT SOUGHT TO ESTABLISH THAT IT HAS SIGNIFICAN T RELATED PARTY TRANSACTION. THESE CALCULATIONS HAVE NOT BEEN OPPOSED BY THE REVENUE W HICH WERE AVAILABLE BEFORE THE CIT(A) AS WELL AS HEAVILY RELIED UPON BEFORE US . THE CALCULATIONS HAVE NOT BEEN DISPUTED EITHER IN THE REMAND REPORT NOR BY TH E LD. CIT DR BEFORE US WHO HAS ARGUED PRINCIPALLY ON THE LINES THAT IT IS A FU NCTIONAL COMPARABLE OFFERED BY THE ASSESSEE ITSELF WHO IS THE BEST JUDGE OF ITS AF FAIRS AS SUCH SHOULD NOT NOW BE ALLOWED TO ARGUE THE EXCLUSION OF THE SAID COMPARAB LE. WE HAVE GIVEN OUR UTMOST CONSIDERATION TO THE RIVAL STAND OF THE PART IES AND THE JUDICIAL PRECEDENTS RELIED UPON. CONSIDERING THE SAME IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE ARGUMENTS OF THE REVE NUE JUSTIFYING THE EXCLUSION AND IGNORING OF THE DATA IN THE PUBLIC DOMAIN. NO D OUBT THE ASSESSEE IS THE BEST JUDGE OF ITS AFFAIRS AS SUCH IS IN A BETTER POSITI ON THEN THE REVENUE TO ADDRESS WHETHER A PARTICULAR COMPARABLE IS A FUNCTIONAL COM PARABLE OR NOT. HOWEVER THIS FACT CANNOT BE THE REASON FOR TAKING INTO CONSIDERA TION A COMPARABLE WHICH ADMITTED WAS NOT A COMPARABLE AS PER RULE 10B (2) O F THE INCOME TAX RULES. IN THE FACTS OF THE PRESENT CASE, IT IS SEEN THE ASSES SEE DOES NOT DISPUTE THE FUNCTIONAL COMPARABILITY OF THE SAID COMPARABLE AND ONLY SEEKS TO EXCLUDE THE SAID COMPARABLE ON THE GROUND THAT IT HAD SIGNIFICANT RE LATED PARTY TRANSACTION. TAKING INTO CONSIDERATION, THE CASE LAW ON THE ISSUE NAMEL Y SONY INDIA LTD.; ADP PVT. LTD.; GLOBAL LOGIC INDIA PVT. LTD. WHEREIN WITH 15% AND 25% RELATED PARTY TRANSACTIONS RESPECTIVELY WERE HELD TO BE ACCEPTABL E WHICH POSITION HAS BEEN AFFIRMED IN THE ORDER OF THE CO-ORDINATE BENCH IN T HE CASE OF HAPEG LLOYD GLOBAL SERVICES WHEREIN ALSO RELATED PARTY TRANSACTION TO THE EXTENT OF 25% HAS BEEN HELD AS COMPARABLE BY NECESSARY IMPLICATION THE RELATED PARTY TRANSACTION BEYOND THIS THRESHOLD HAS TO BE EXCLUDED. IN THE FACTS OF THE PRESENT CASE, WHEN ADMITTEDLY THE RELATED PARTY TRANSACTION ARE I.E 36% THESE TO OUR MIND GOING BY THE JUDICIAL PRECEDENT IS SIGNIFICANTLY HIGHER THAN WHAT HAS BEE N CONSIDERED COMPARABLE AS ITA NO. 2604/DEL/12 15 SUCH HAS TO BE EXCLUDED. CONSEQUENTLY EVEN THOUGH THE SAID COMPARABLE WAS PROPOSED BY THE ASSESSEE ON ACCOUNT OF THESE PECULI AR FACTS, WE HOLD THAT THE COMPARABLE BECOMES AN INCOMPARABLE ON THE FACTS OF THE YEAR UNDER CONSIDERATION BECAUSE OF RELATED PARTY TRANSACTIONS . WE MAY FURTHER ELABORATE THAT WHEN THE ASSESSEE IS ABLE TO ESTABLISH THE EXI STENCE OF EXTRAORDINARY CIRCUMSTANCES IN THE CASE OF A FUNCTIONAL COMPARABL E THEN IT CANNOT BE BARRED TO DO SO ON THE SPECIOUS PLEA THAT THE COMPARABLE WAS PROPOSED BY THE ASSESSEE ITSELF. WE ARE OF THE FIRM VIEW THAT A COMPARABLE CAN BE TAKEN AS A COMPARABLE PURELY AND SIMPLY FOR THE REASON THAT IS A COMPARAB LE AND IT CANNOT BE DECLARED TO BE A COMPARABLE BY A JUDICIAL ORDER ONLY ON THE GROUND THAT IT HAS BEEN OFFERED AS A COMPARABLE BY A PARTY TO THE PROCEEDINGS IGNOR ING THE ARGUMENTS THAT IT WAS OFFERED ON A MISTAKEN BELIEF OF LAW OR FACTS. LAW TO OUR MINDS HAS TO BE APPLIED TO THE FACTS AND CIRCUMSTANCES AS THEY ARE AND IT D OES NOT DEPEND ON THE ADMISSION OR WAIVER EITHER OF THE ASSESSEE OR THE R EVENUE. NO CASE LAW IS REQUIRED TO APPRECIATE A COMMON LAW PRINCIPLE OF JU DICIAL DUTY OF RENDERING SUBSTANTIAL JUSTICE FOR WHICH PURPOSES THE QUASI JU DICIAL BODIES AND TRIBUNALS ARE CREATED. WHAT CANNOT PATENTLY AND ADMITTEDLY BE T AKEN AS A COMPARABLE UNDER THE PROVISION OF THE ACT CANNOT BECAME A COMPARABLE JUST BECAUSE OF THE ADMISSION OF THE ASSESSEE WHICH ON FACTS IS DEMONST RATED TO BE BASED ON INCORRECT AWARENESS OF FACTS. ONCE A PLEA IS RAISED, WHICH PRIMA FACIE APPEARS TO BE BONA FIDE AND IS SUPPORTED BY FACTS, THE SAME NECESSARIL Y NEEDS TO BE CONSIDERED, IF IT IS HELD TO THE CONTRARY THEN THE VERY PURPOSE OF HAVIN G APPELLATE FORUM WOULD BE DEFEATED AS SUFFOCATING SUCH PLEAS ON THE MERE REA SONING THAT IT WAS PROPOSED AS A FUNCTIONAL COMPARABLE BY THE PARTY WHO NOW SEEKS ITS EXCLUSION WOULD BE AGAINST THE VERY ETHOS OF A JUDICIAL RESPONSIBILITY . WHENEVER THE COMPARABILITY OF A COMPARABLE COMPANY IS CALLED INTO QUESTION THEN I T IS THE DUTY OF THE COURT TO APPLY ITS MIND AND COME TO A CONCLUSION AND THE COU RT CANNOT SHY AWAY FROM ITS ITA NO. 2604/DEL/12 16 RESPONSIBILITY TO CONSIDER THE MERITS OF THE ARGUME NTS ADVANCED ON THE SPECIOUS PLEA THAT THE COMPARABLE WAS OFFERED BY THE ASSESSE E. 7. ACCORDINGLY IN VIEW OF THE ABOVE DETAILED REASON ING AND CONSIDERING THE ARGUMENTS ADVANCED ON THE LIMITED ISSUE OF EXCLUSIO N OF DATAMATICS TECHNOLOGY LTD WE HOLD THAT THE SAID COMPARABLE HAS TO BE EXCL UDED AS THE SAID COMPARABLE THOUGH OFFERED BY THE ASSESSEE AS A FUNCTIONAL COMP ARABLE BECOMES A TAINTED COMPARABLE AS SUCH HAS TO BE EXCLUDED AS A COMPARAB LE DUE TO A VERY HIGH PERCENTAGE OF SIGNIFICANT RELATED PARTY TRANSACTION OF AB OUT 36% WHICH CALCULATIONS HAVE NOT BEEN ASSAILED BY THE REVENUE. GROUND NO. 5 AS SUCH IS ALLOWED. THE REMAINING GROUNDS ARE DISMISSED AS NO ARGUMENTS WERE ADVANCED BY THE LD. AR AS ARGUMENTS WERE CONFINED TO ONLY GROUND NO. 5. THE ISSUE AS SUCH IS RESTORED TO THE TPO WITH THE DIRECTION TO C ALCULATE THE ALP EXCLUDING DAMATATICS TECHNOLOGY LTD AS A COMPARABLE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH DECEMBER 2013. SD/- SD/- (R.S. SYAL) (DIVA SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED: 10/12/2013 *AMIT KUMAR/R.NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 2604/DEL/12 17