H & M Mauritz India Pvt. Ltd., V. DCIT, Bangalore

ITA 282/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9487 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NAGESHWAR RAO MS NEERA MALHOT
• Keywords: Transfer pricing; International transaction; Working capital adjustments
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI S.K.YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER IT (TP) A NO.282(BANG) 2015 (ASSESSMENT YEAR 2010-11) M/S H & M MAURITZ INDIA PVT.LTD., NO.1102, 1104 AND 1105, 11 TH FLOOR, WORLD TRADE CENTRE, BANGALORE-560 055 NO.AABCH6109F APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BANGALORE RESPONDENT AND IT(TP)A NO.490(BANG)/2015 (ASSESSMENT YEAR 2010-11) (BY REVENUE) ASSESSEE BY: SHRI NAGESHWAR RAO, ADVOCATE REVENUE BY: MS. NEERA MALHOTRA, CIT DATE OF HEARING : 30-06-2016 DATE OF PRONOUNCEMENT: : 19-08-2016 O R D E R PER SHRI A.K.GARODIA, AM THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND T HE REVENUE WHICH ARE DIRECTED AGAINST THE ASSESSMENT ORDER PASSED BY THE AO ON 29-01- 2015 U/S 143(3) R.W.S.144C OF THE IT ACT, 1961, AS PER THE DIRECTIONS OF DRP. 2. THE GROUNDS RAISED BY THE ASSESSEE IN IT(TP)A NO.282(B)/2015 ARE AS UNDER; IT(TP)A NO.282 & 490/B/2015 2 B ASE D O N TH E FACTS AN D CI RC U MSTANCES OF T H E CASE A N D I N LAW , H&M MAU R ITZ INDIA PRI V ATE LIM I TED ( ' H&M I N DIA ' OR ' AP P E LL ANT ' OR ' THE COMPA N Y') RESPECTFU LL Y CRA V ES L EA V E TO PREFER AN A PPEAL AGA I NST T HE OR D ER P ASSE D BY D EPUTY COMM I SSIO N ER O F INCOME TAX , CIR C LE-3 ( 1) ( I ) ( ' T H E LE A R N ED ASSESS IN G OFF I CE R ' OR ' TH E AO ' ) , D A T ED 29 J AN U AR Y 2 0 1 5 FOR A Y 20 I 0 - 11 , UNDER SECTION 1 4 3 (3) READ W I T H SECTIO N 144C( 1 3) OF T H E IN COME TAX ACT , 196 1 (' ACT ') I N P U RSUANC E O F THE DIRECTION S I SSUED B Y DI S PU TE R ESO LU T I O N P A N E L ( ' DRP ' ) , B A N GALORE DATED 1 9 DECEMBER 2014 UNDER S E C TION I 44C(5 ) OF THE ACT ( ' THE IMPU GNED ORDER ' ) INTER-A L IA ON THE FOLLO W ING G R OUND S : IN THE FACT S AND CIRC U MSTA NC ES OF T H E CASE AND I N LAW : GENERA L GRO UN DS I. T H E I MPU G NED O RD E R A ND DI R E C T I O N S OF T HE HO N ' BL E DR P ARE BASED ON INCORRECT APPRECIATION OF FACTS AND WRONG INTER P RETATIO N OF L AW AN D THEREFORE , ARE BAD IN LAW . 2. T HE LEAR N ED AO / TRA N SFER P RICI N G OFFICER (' T P O ') HAS ERRE D IN ASSE S SING THE TOTAL INCO M E A T RS . 5 , 05 , 70 , 333 AS AGA IN ST T H E RET U R N E D INC O M E OF R S 2 , 76 , 94 , 194 AS COMPUTED B Y T H E A PPEL L ANT IN ITS RE TU RN OF INCO M E FOR A Y : 2010-11. 3. T H E L EA RN ED AO H AS ERRED I N L AW AND I N FAC T , I N DETERM IN ING A S U M OF R S 1 , 26 , 88 , 059 A S T H E B ALANCE TAX DE M AN D P AYA BL E BY T H E AP P E LL A N T . T R A N S F ER P RI CI NG RE L ATED GR O UND S - G E N ERA L . 4. T H E L EAR N ED DR P HAS ER R ED I N , L AW A ND FACTS , BY U P H O L DING THE STA N D OF LEARNED T P O AND TH E L EA RN ED AO OF N O T ACCE PT I N G T HE ECO N OM I C A N A L YSIS UN D E R TAKEN B Y T H E APPELLANT IN A C CO RD A N CE WIT H T H E P ROV I S I O N S OF T H E ACT READ W I T H T H E RU LES , A N D COND U CTING A FRESH ECONO M IC A N ALYS I S FOR THE DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION O F THE A PP E LL A N T A N D H O L DI N G THAT T H E APPEL L ANT ' S INTERNATIONAL TRANSACTION IS NOT AT ARM ' S LENGTH 5. THE L EAR N ED T P O I AO HAS ERRED , IN LAW AND IN FACTS , BY DETERMINING THE ARM ' S LENGTH M ARGIN ! P R ICE U S IN G O N LY F IN A N CIAL YEAR ( ' FY ' ) 2009 - 10 DATA WHICH WAS NOT AVAILABLE TO T H E A P PE L LA N T AT T H E TI M E OF COMP L Y I NG WITH THE TRANSFER PRICING DOCUMENTATION RE QU IREME N TS A ND THE L EA R NED DRP HAS ERRED IN U PHOLDING THE SAID ACTION O F THE TPO / AO . 6. T H E LEARNE D T P O / AO / DR P H AS ERRED , IN L AW AND FACTS , BY NOT MAKING SUITAB L E CO MP ARA BILI TY A DJU ST M ENTS TO ACCO U NT FOR D IFFERENCES IN RISK PROFILE S OF TH E APPELLANT AND T H E CO MP ARABLES . TRANSFER PRICING RELATED GROUND S - COMPARABLE S PECIFIC 7. T H E IMP U G N ED O R DER ERRED IN MAKING AN ADD I TIO N OF R S. 2 , 28 , 7 6 , 139 TO THE TOTAL INCOME OF T H E A PP E LL A N T O N ACCO UN T OF A D J U STME N T TO THE ARM ' S LE N GTH PRICE WITH RESPECT TO BU S INE S S S U P P O R T SERV I CES PROVI D ED BY THE A P PEL L ANT TO ITS ASSOCIATED E N TERPRISE. 8. THE L EARNED DR P E RR ED I N U P HO L DI N G THE I N C LU SION OF CERTAIN FUNCTIO N ALL Y DIFFERENT COMPA N IES AS CO M PA R A BL ES B ASED ON UNREASONABLE COMPARABILIT Y CRITERIA ADOPTED B Y THE T P O: IT(TP)A NO.282 & 490/B/2015 3 A PIT CO LTD , GLOBAL PRO C UR E M E NT C ON S ULTANTS LTD, QUADRANT C OMMUNICATION S LTD= T H E SAI D CO M P ARA B LES O U G H T TO BE REJECTE D AS COMPARABLES SINCE (A) THEY ARE FU N C T IO N A LL Y DIFFE R E NT F R O M THE A P P ELL A N T AS AP P A R E N T FRO M THE DESCRIPTION IN T H E A N N U A L R EPO R TS A ND ( B ) T H E HO N ' BL E DR P H AS NOT PRO P ERLY REFUTED THE DETA I LED CO N TE N T I O N S OF APPE LL A N T IN RES P ECT OF ER R O N EO U S I NCL U SION OF THE SAID COMPANIES AS CO M PA R A BLE S. 9. THE LEARNED DR P ERRED IN REJECT I NG CERTA I N VALID COMPA R ABLES CONSIDERED B Y THE APPELLANT IN THE COMPARA B I L ITY ANA L YSIS , B Y UP H O LDI NG THE APPROACH OF T P O IN APPL Y ING ARBITRAR Y FI LTERS. M A F O I GL O BAL S E RVI CES AND MA FOI MANA GE M E NT CO NSULT A NT S LTD . - ERRONEOUSLY REJECTED BASED ON DIFFERENT FINANCIAL YEAR E N DING F I LTER O VE R SEAS M A NP OWE R CO RPN . LTD . - ERRONEO U S L Y REJECTED BASED ON (A ) PECULIAR CIRCUMSTANCES I . E . , DEC L IN I NG SA L ES AND (B) T H E SAME BEING NOT D ISCUSSED L ADJUDICATED B Y T H E HON ' BLE D R P IN ITS DI R ECTIONS . INH O U SE PR O DU C TION S LTD , INDIA T O URI S M D EVE L O PM E NT CO RP O RATI O N LTD A ND I C R A MANA GE M E NT CO NSULTIN G S E R V I CE S LTD . - ERRONEOUSL Y REJECTED BASED ON PERCEIVED F UN CTIONA L DIFFERE N CE WHICH IS FACTUALL Y INCORRECT , SINCE THE T P O / DR P FAILED TO CONSIDER T H E INFO RMATIO N P E RT AI NI NG TO SEGMENTAL RES U LTS AND BUSINESS DESCRIPTION PROVIDED IN THE ANNUAL REPORTS OF T H E SAID CO M PANIES . ED C IL ( INDI A) LTD. - ERRONEOUSLY RE J ECTED BASED ON THE CONTENTION THAT REVENUE FROM SERV I CE WAS L ESS THAN 7 5% OF T H E TO T AL REVENUE , W H ICH IS FACT U ALL Y INCORRECT S INCE THE TPO FA IL ED TO CO N SI D ER TH E IN FOR MAT IO N P E R TAINING TO SEGME NT AL R ES UL TS AVA IL ABLE IN THE ANN U AL RE P O R T OF T H E SA I D CO MP A N Y . 10. T H E L EA RN E D T PO A ND TH E LE A RN E D A O H AVE ERRE D BY W RON GLY COMPUTI N G T H E QUA N T U M OF T P A D J U ST M E NT S W HI L E G I V IN G EFF E CT TO T H E DIRECTIONS OF T H E DRP 11 . T HE L EA RN E D T P O / A O E RR E D IN N OT PR OVIDI N G T H E BAS I S OF A R R I VI N G AT THE REVISED TP A D J U STME NT AS PER T H E I MPU GNED ASSESSMENT O R DER P U RSUANT TO THE DIRECTIONS OF THE D R P , D ES PI TE SPECIF I C R EQ U EST B Y THE A P PELLANT IN THIS REGARD. O T H E R G R O UN DS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW: 12. T H E LEAR N E D A O ERRED IN LEVYING INTEREST OF R S . 49 , 12 , 458 AND R S . 4 , 132 UNDER S ECTION 234 8 A N D SECTIO N 234C OF THE ACT RESPECTIVELY ; 13. THE LEARNED AO E R RED IN IN I TIATING PENALT Y PROCEEDING S UNDER SECTION 2 71 ( 1 )( C ) O F THE ACT , SINCE T H E B ASIC CONDITIONS REQUIRED TO INITIATE PENALT Y PROCEEDINGS WERE NOT SATI S FIED IN THE APPE LLA NT ' S CASE . 14. AL L THE ABOVE G R O UN DS M AY B E CO N SIDERED I N DEPENDENT AND WITHOUT P R EJUDICE OF EACH OTHER . T HE A PP E LL A NT C R AVES L EAVE T O A DD , A LT E R , AME N D , VARY , OM I T OR SU B S TITU TE A N Y OF TH E AFO R ESAID GRO UND S OF A PP EA L AT A N Y TIME BEF O R E OR A T TH E T IM E OF H EA R I N G OF T H E APP E A L , SO AS TO E N A BL E T H E HON ' BL E T R IB UN A L TO D EC ID E O N T H E A PP E AL I N ACCORDA N CE WIT H TH E LAW . IT(TP)A NO.282 & 490/B/2015 4 3. SIMILARLY, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN IT(TP)A NO.490(B)/2015; 1. THE DIRECTIONS OF THE DRP ARE OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AS PER THE DIRECTIONS OF THE DRP, WHETHER WORKING CAPITAL ADJUSTMENTS CAN BE MADE ON THE BASIS OF ADVANCE REC EIVED FROM A ES IN ABSENCE OF DEBTORS AND INVENTORY IN THE CASE OF ASSESSEE FOR CALCULATING THE COST OF WORKING CAPITAL BUILT I N THE PROFIT MARGIN . 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE DRP IS NOT JUSTIFIED IN DIRECTING THE TPO TO ADJUST THE PROFIT MARGIN OF THE ASSESSEE FOR THE ENTIRE AMOUNT OF ADVANCES R ECEIVED FROM AE ON THE GROUND THAT THERE IS TIME VALUE FOR MONEY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP ERRED IN DIRECTING THE TPO/AO TO EXCLUDE THE COMPARABLES M/S HCCA BUSINESS SERVICES PV.LTD., & M/S TSR DARSHAW L TD., WITHOUT CONSIDERING THE FACTS DISCUSSED BY THE TPO FOR SELECTION OF THE COMPARABLES IN THE CASE OF ASSESSE E AND WITHOUT APPRECIATING THE FACT THAT THIS IS QUALIFYI NG ALL THE QUALITATIVE AND QUANTITATIVE FILTERS APPLIED BY THE TPO. 11. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE DIRECTIONS O F THE DRP IN SOFAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REV ERSED. 12. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 4. IT WAS SUBMITTED BY THE LD.AR OF THE ASSESSEE TH AT IT CAN BE SEEN THAT ON PAGE-18 & 19 OF THE TPOS ORDER, THE TPO HA S SELECTED SIX COMPARABLES HAVING AVERAGE MARGIN OF 27.74%. HE AL SO SUBMITTED THAT ON PAGE-3 OF THE TPOS ORDER, THE TPO HAS WORKED OUT A SSESSEES MARGIN PERCENTAGE AT 12.06%. OUT OF THESE SIX COMPARABLES , DRP HAS DIRECTED IT(TP)A NO.282 & 490/B/2015 5 THE AO/TPO TO EXCLUDE TWO COMPARABLES I.E. M/S HCCA BUSINESS SERVICES PVT. LTD., AND M/S TSR DARASHAW LTD., FOR WHICH THE REVENUE IS IN APPEAL AND THE ASSESSEE IN ITS APPEAL IS PLEADING FOR EXCL USION OF TWO MORE COMPARABLES I.E. M/S APTICO LTD., AND M/S GLOBAL PR OCUREMENT CONSULTANTS LTD., HE SUBMITTED THAT IF THE APPEAL OF THE ASSESSEE ON ACCOUNT OF EXCLUSION OF THESE TWO COMPARABLES IS AL LOWED AND THE APPEAL OF THE REVENUE AGAINST EXCLUSION OF TWO COMPARABLES BY THE DRP IS DISMISSED THEN THERE WILL BE TWO REMAINING COMPARAB LES I.E. M/S CYBER MEDIA RESEARCH LTD.14.85% AND M/S QUADRANT COMMUNIC ATIONS LTD., 13.11% THE AVERAGE AROUND 14% AS AGAINST THE PROFIT MARGIN OF THE ASSESSEE COMPANY OF 12.06% THEN NO TP ADJUSTMENT IS REQUIRED TO BE MADE. 5. REGARDING EXCLUSION OF THESE TWO COMPARABLES FOR WHICH THE EXCLUSION IS BEING REQUESTED BY THE ASSESSEE, RELIA NCE WAS PLACED ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S ADIDAS T ECHNICAL SERVICES PVT.LTD., VS DCIT IN ITA NO.1233(DEL.)/2015 DATED 1 5-02-2016. HE SUBMITTED A COPY OF THE TRIBUNAL ORDER AND DRAWN OU R ATTENTION TO PARA- 8.3 OF THIS TRIBUNAL ORDER AS PER WHICH IT WAS HELD BY THE TRIBUNAL IN THAT CASE THAT BOTH THESE COMPANIES ARE FUNCTIONALLY DIS SIMILAR AND THEREFORE, SHOULD BE EXCLUDED FROM THE LIST OF FINAL COMPARABL ES. 6. REGARDING FUNCTIONAL PROFILE, HE SUBMITTED THAT IN THAT CASE, IT IS NOTED BY THE TRIBUNAL IN PARA-2.2 OF THE TRIBUNAL O RDER THAT THE ASSESSEE IS RENDERING BUSINESS SUPPORT SERVICES TO AE. REGA RDING THE FUNCTIONAL PROFILE OF THE PRESENT ASSESSEE, HE SUBMITTED THAT IT IS NOTED BY THE TPO ON IT(TP)A NO.282 & 490/B/2015 6 PAGE-1 OF HIS ORDER THAT THE ASSESSEE COMPANY IS AC TING AS FACILITATOR BETWEEN INDIAN MANUFACTURER AND ASSOCIATED ENTERPRI SES AND THEREFORE, THE FUNCTIONAL PROFILE OF BOTH ARE SIMILAR AND HENC E, THIS TRIBUNAL ORDER SHOULD BE FOLLOWED IN THE PRESENT CASE AND IT SHOUL D BE HELD THAT THESE TWO COMPANIES ARE REQUIRED TO BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES. 7. REGARDING TWO COMPARABLES OF WHICH EXCLUSION IS DIRECTED BY DRP, HE PLACED RELIANCE ON THE TRIBUNAL ORDER RENDERED I N THE CASE OF M/S ELI LILLY & CO., (INDIA) PVT.LTD.,VS ACIT IN ITA NO788( DEL.)/2015 DATED 24-11- 2015. HE SUBMITTED A COPY OF THE TRIBUNAL ORDER AND POINTED OUT THAT IN THAT CASE ALSO, THE ISSUE IN DISPUTE WAS IN RESPECT OF PROVIDING OF BUSINESS SUPPORT SERVICES AS NOTED BY THE TRIBUNAL IN PARA-1 8 OF THE TRIBUNAL ORDER. HE FURTHER SUBMITTED THAT IN PARA-24 OF TH E TRIBUNAL ORDER, IT IS NOTED BY THE TRIBUNAL IN THAT CASE ALSO THAT TWO CO MPANIES I.E. M/S HCCA BUSINESS SERVICES PVT. LTD., AND M/S TSR DARASHAW L TD. WERE BROUGHT IN BY THE TPO AS COMPARABLE COMPANIES. THEREAFTER, H E HAS DRAWN OUR ATTENTION TO PARA-44 OF THE TRIBUNAL ORDER AS PER W HICH IT WAS HELD BY THE TRIBUNAL THAT M/S TSR DARASHAW LTD., IS NOT FUNCTI ONALLY COMPARABLE AND THEREFORE, THE TRIBUNAL DIRECTED TO EXCLUDE THI S COMPANY FROM THE LIST OF FINAL COMPARABLES. 8. REGARDING THE SECOND COMPANY I.E. M/S HCCA BUSIN ESS SERVICES PVT.LTD., (SUPRA), HE FAIRLY CONCEDED THAT AS PER P ARA-46 OF THIS TRIBUNAL ORDER, THE ISSUE REGARDING EXCLUSION OF THIS COMPAN Y WAS KEPT OPEN BY THE TRIBUNAL. HE SUBMITTED THAT IN THE PRESENT CASE ALS O, EVEN IF IT IS HELD THAT IT(TP)A NO.282 & 490/B/2015 7 ONE COMPANY I.E. M/S HCCA BUSINESS SERVICES PVT. LT D., IS ACCEPTED AS A GOOD COMPARABLE, THEN ALSO THE AVERAGE PROFIT MARGI N OF REMAINING 3 COMPARABLES I.E. M/S CYBER MEDIA RESEARCH LTD., 14. 85%, M/S HCCA BUSINESS SERVICES PVT.LTD., 20.05% AND M/S QUADRANT COMMUNICATIONS LTD., 13.11% WILL BE 16% ONLY AS AGAINST PROFIT MAR GIN OF THE ASSESSEE COMPANY OF 12.06% WHICH IS WITHIN +=5% RANGE AND TH EREFORE, NO TP ADJUSTMENT CAN BE MADE IN THAT SITUATION ALSO. 9. THE LD. DR OF THE REVENUE SUPPORTED THE ORDER O F THE AO/TPO. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT AS PER PARA-13 OF THE TPOS ORDER, HE HAS CONSIDERED SIX C OMPANIES AS GOOD COMPARABLES HAVING AVERAGE PROFIT OF 27.74%. ON P AGE-3 OF THE TPOS ORDER, THE ASSESSEES PROFIT MARGIN HAS BEEN NOTED AS 12.06%. NOW AS PER ARGUMENTS OF THE LD. AR OF THE ASSESSEE, TWO CO MPANIES M/S APTICO LTD., (SUPRA) AND M/S GLOBAL PROCUREMENT CONSULTANT S LTD., (SUPRA) SHOULD BE EXCLUDED FROM THE LIST OF FINAL COMPARABL ES ON THE BASIS OF FUNCTIONAL DISSIMILARITY IN VIEW OF THE TRIBUNAL OR DER RENDERED IN THE CASE OF M/S ADIDAS TECHNICAL SERVICES PVT.LTD., (SUPRA) . 11. THE LD. DR OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT CASE AND IN THAT CASE I.E. OF M/S ADIDAS TECHNICAL SERVICES PVT.LTD., (SUPRA). PARA-8.3 OF THIS TRIBU NAL ORDER IS REPRODUCED BELOW. THE TRIBUNAL IN THAT CASE HELD TO EXCLUDE THREE COMPANIES I.E. M/S APTICO LTD., M/S GLOBAL PROCUREMENT CONSULTANTS LTD ., AND M/S TSR DARASHAW LTD., IT(TP)A NO.282 & 490/B/2015 8 8.3. WE FIRST TAKE UP THE CASE OF APITCO LTD., (A) APITCO LTD.:- APITCO LTD. IS A PUBLIC SECTOR UNDERTAKING PROVIDING VARIOUS SUPPORT SERVICES FOR THE DEVELOPM ENT OF TOURISM INDUSTRY. LATER THE FUNCTIONAL PROFILE OF THE COMPANY HAD UNDERGONE A CHANGE, AND IT IS NOW ENGAGED IN PR OVIDING TECHNICAL CONSULTANCY RELATING TO ASSET RECONSTRUCT ION COMPANIES, MANAGEMENT SERVICES, MICRO ENTERPRISE DEVELOPMENT, SKILL DEVELOPMENT ETC. THIS IS A GOVE RNMENT COMPANY. THE FACT THAT ITS OPERATIONS ARE MAINLY B ASED ON THE POLICY REQUIREMENTS OF THE GOVERNMENT AND THE F ACT THAT IT IS A PREFERRED COMPANY OF THE GOVERNMENT OF INDIA F OR ENTRUSTMENT OF WORKS, CANNOT BE IGNORED. BE IT AS IT MAY, IN OUR CONSIDERED OPINION, THE FUNCTIONAL PROFILE OF T HIS COMPANY IS DIFFERENT FROM THAT OF THE ASSESSEE COMPANY AND HENCE THE SAME SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES WHILE COMPUTING THE ALP. (B) GLOBAL PROCUREMENT CONSULTANTS LTD.:- THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FUNCTIONAL PROFILE OF THE COMPANY IS DIFFERENT AND THAT GLOBAL PROCUREMENT CONSULTANTS LTD. IS MERELY RENDERING SE RVICES TO GOVERNMENT BODIES AND INTERNATIONAL ORGANISATIONS. IT WAS FURTHER SUBMITTED THAT IT IS ENGAGED IN PROVIDI NG VARIED SERVICES IN CONSULTANCY SEGMENT WHICH ARE AS FOLLOW S. (A) BID SUPPORT SERVICES; (B) PERFORMANCE REVIEW; (C) VALUATION ASSIGNMENTS; (D) FINANCIAL ADVISORY SERVICES AND OTHER ASSIGNMEN TS. IT WAS FURTHER ARGUED THAT NO SEGMENTAL DETAILS ARE AVAILABLE AND HENCE IT CANNOT BE TAKEN AS A COMPARABLE. TH E LD.D.R. IT(TP)A NO.282 & 490/B/2015 9 SUBMITTED THAT THIS COMPARABLE COMPANY AS A CLIE NTS REPRESENTATIVE IN TAKING ON THE TOTAL RESPONSIBI LITY OF PROCUREMENT BY PROVIDING THE COMPREHENSIVE RANGE OF PROCUREMENT RELATED ADVISORY SERVICES AT INTER-ALLI ED ACTIVITIES FOR PROJECTS IN INDIA AND ABROAD AND HENCE IS FUNCT IONAL COMPARABLE. THE ITAT DELHI I-2 BENCH IN THE CASE OF INTERNATIONAL SOS SERVICES LTD. VS. DCIT IN ITA 1631/DEL/2014 ORDER DT. 8.12.2015, AT PARA 4 HAS HE LD AS FOLLOWS. 4. GLOBAL PROCUREMENT CONSULTANT LIMITED : 12.6 THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THIS IS AN 100% GOVERNMENT OWNED COMPANY AS IT IS PROM OTED BY EXIM BANK. HE VEHEMENTLY CONTENDED THAT FUNCTIONA LLY, THIS COMPANY IS NOT A COMPARABLE, AS IT WORKS WITH IN THE FIELD OF POWER, WATER RESOURCES, TRANSPORTATION INDUSTRY SUCH AS ECONOMIC, TEXTILE, MINING, CEMENT, LEATHER, HEALTH EDUCATION, ENVIRONMENT, INFOTECH ETC. THE PITH AND SUBSTANCE OF THE SUBMISSION ARE THAT THE AREAS IN WHICH THIS COMPANY PROVIDES SUPPORT SERVICES IS TOTALLY DIFFERENT FROM THE TYPE OF SUPPORT SERVICES PROVIDED BY THE ASSESSEE. HE PLACE D RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LIMITED VS. CIT, ITA NO. 1 02/2015 JUDGMENT DATED 10/08/2015 FOR THE PROPOSITION THAT FUNCTIONALLY DISSIMILAR COMPANIES CANNOT BE TAKEN A S COMPARABLES. HE POINTED OUT THAT DECISION OF THE S PL. BENCH OF THE TRIBUNAL IN THE CASE OF GLOBAL INDIA PVT. LI MITED HAS BEEN OVERRULED BY THE HONBLE DELHI HIGH COURT IN I TA NO. 7466/M/11 JUDGMENT DATED 07/03/2004. 12.7 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTH ER HAND, POINTED OUT THAT GLOBAL PROCUREMENT LIMITED IS NOT A 100% GOVERNMENT OF INDIA OWNED COMPANY AND THAT IT IS BEING IT(TP)A NO.282 & 490/B/2015 10 PROMOTED BY EXPORT IMPORT BANK OF INDIA, AS A PRIVA TE SECTOR COMPANY IN PARTNERSHIP WITH LEADING CORPORATE GROUPS LIKE MECON, ICCI, TCE CONSULTING ENGINEERS LTD. ETC . SHE SUBMITTED THAT THE FUNCTIONAL PROFILE IS THAT OF SP ECIALIZED SUPPORT SERVICES, WHICH REQUIRED HIGH PROFILE SKIL L AND TIMELY DELIVERY OF QUALITY SERVICES, WHICH IS COMPARABLE W ITH THE FUNCTIONAL PROFILE OF THE ASSESSEE. 12.8 ON A CAREFUL CONSIDERATION OF THESE ARGUMENTS, WE ARE OF THE CONSIDERED OPINION THAT THIS COMPANY SHOULD BE TAKEN AS A COMPARABLE FOR THE FOLLOWING REASONS: A) THIS IS NOT A 100% GOVERNMENT OWNED COMPANY AS CLAIMED BY THE ASSESSEE. UNDER THE HEAD CORPORA TE SYNERGY IT IS STATED THAT THIS COMPANY IS CO-PROM OTED BY THE EXPORT IMPORT BANK OF INDIA AS PRIVATE SECTOR COMPA NY ALONG WITH A NUMBER OF OTHER PRIVATE COMPANIES. B) THE FUNCTIONAL PROFILE OF THIS COMPANY IS RENDE RING OF HIGHLY SPECIALIZED PROCUREMENT SUPPORT SERVICES. THE Q UALITY OF SERVICE, THE SKILLS ARE COMPARABLE WITH THE QUALI TY AND SKILL OF SUPPORT SERVICES PROVIDED BY THE ASSESSEE, THOUG H IN FUNCTIONALLY DIFFERENT AREAS. AS THE LD. COUNSEL F OR THE ASSESSEE HAS ACCEPTED BEFORE US THAT COMPARABLE COM PANIES RENDERING SERVICES IN THE SAME FIELD AS THAT OF THE ASSESSEE COMPANY CANNOT BE FOUND COMPANIES RENDERING SUPPORT SERVICES IN OTHER FIELDS HAVE TO BE TAKEN AS COMPAR ABLES. C) WE HAVE ALSO PERUSED THE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF RAMPGREEN SOLUTIONS PVT. LTD.(SUPRA). THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE IS BASED ON THE PROPOSITIONS LAID DOWN IN THIS CASE LAW. IF ON SUCH AN ARGUMENT, THE COMPARABLE GLOBAL PROCUREMENT CONSULTING LIMITED IS EXCLUDED, THEN ALL THE OTHER COMPARABLES CITED BY THE ASSESSEE AS WELL AS THE LD .TPO HAVE TO BE EXCLUDED ON THE SAME PRINCIPLE. THIS WILL L EAVE US WITH NO OTHER COMPARABLE. THE ASSESSEE CANNOT ADVANCE IT(TP)A NO.282 & 490/B/2015 11 CONTRADICTORY ARGUMENTS. AS IT HAS BEEN ACCEPTED B Y BOTH THE PARTIES BEFORE US THAT, COMPANIES HAVING A BROAD FUNCTIONAL PROFILE OF RENDERING SKILLED PROFESSIONAL SUPPOR T SERVICES, SHOULD BE TAKEN AS COMPARABLE COMPANIES, THE PROPOS ITION LAID DOWN IN RAMPGREEN SOLUTIONS PVT. LTD.(SUPRA), CANNO T BE APPLIED TO THE FACTS OF THE CASE ON HAND. IN VIEW O F THE ABOVE DISCUSSION. WE ARE OF THE CONSIDERED OPINION THAT G LOBAL PROCUREMENT CONSULTING LIMITED HAS RIGHTLY BE TAKEN AS THE COMPARABLE BY THE TPO. HENCE WE DISMISS THIS ARGUME NT OF THE ASSESSEE. CONSISTENT WITH THE VIEW TAKEN THERE IN, WE AGREE WITH THE LD.TPO THAT THIS COMPANY HAS TO BE TAKEN AS FUNCTIONALLY COMPARABLE. BUT THIS COMPANY IS ALSO UNDERTAKING MANY OTHER ACTIVITIES SUCH AS VALUATION ETC. THE ISSUE FOR CONSIDERATION WOULD BE AS TO WHETHER SEGMENTAL DATA IS AVAILABLE. IF SUCH DATA IS AVAI LABLE THEN THE COMPANY HAS TO BE TAKEN AS A COMPARABLE. AS T HE ARGUMENT OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT THERE ARE NO SEGMENTAL RESULTS AVAILABLE, THIS COMPANY IS DIRECTED TO BE EXCLUDED AS A COMPARABLE. (C) QUIPPO VALUERS AND AUCTIONEERS PRIVATE LIMITED :- (QVAPL) THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THA T THIS COMPARABLE NEEDS TO BE REJECTED FOR THE REASON THAT THE FUNCTIONAL PROFILE IS DIFFERENT FROM THE ASSESSEE C OMPANY AS THE COMPANY IS ENGAGED IN PROVIDING ASSET MANAGEMEN T SERVICES AS AN AUCTIONEER AND VALUER FO R CONSTRUCTION EQUIPMENT, EARTH MOVING MACHINERIES, COMMERCIAL VEHICLES AND OTHER ASSETS. IT WAS FURTHER SUBMITTED THAT T HE ANNUAL REPORT OF THE COMPARABLE IS NOT AVAILABLE IN THE PU BLIC DOMAIN FOR QUANTITATIVE ANALYSIS. THE LD.D.R. SUBMITS T HAT THIS COMPANY IS FUNCTIONALLY COMPARABLE AS IT IS PROVIDI NG LARGE GAMUT OF SERVICES INCLUDING ALLIED BUSINESS SERVICE S TO ITS IT(TP)A NO.282 & 490/B/2015 12 CLIENTS. HE FURTHER SUBMITTED THAT THE COMPANY ALS O QUALIFIES THE QUANTITATIVE FILTERS. ON PERUSAL OF RIVAL CONTENTIONS, WE FIND THAT THE FUNCTIONAL PROFILE OF THE COMPANY QUIPPO VALUERS AN D AUCTIONEERS P.LTD. IS NOT SIMILAR TO THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY. WHEN A COMPANY IS PROVIDING ASSET MANAGEMENT SERVICES AS AN AUCTIONEER AND IS ALSO UNDERTAKING VALUATION OF CONSTRUCTION EQUIPMENT, EARTH MOVING MACHINERIES ETC. AND WHEN SEGMENTAL DAT A IS NOT AVAILABLE, THIS COMPANY HAS TO BE, IN OUR OP INION, EXCLUDED FROM THE LIST OF COMPARABLES. (D) TSR DARASHAW LTD.:- THE TPO INCLUDED THIS COMPANY ON THE GROUND THAT THE COMPANY IS PROVIDING BUSINESS O UT SOURCING SERVICES TO CLIENTS IN INDIA. THESE SERVIC ES ARE PROVIDED TO LOCAL CLIENTS AND NOT THE FOREIGN CLIEN TS AND HENCE THEY ARE NOT SIMILAR TO ITES SERVICES. THE TPO OBSE RVED THAT ITES COMPANIES HAVE THE ADVANTAGE OF LOCATION SA VINGS, WHILE THE BUSINESS SERVICE COMPANIES DO NOT HAVE ADVANTAGE. SINCE IN THIS CASE THE SERVICES ARE PRE DOMINANTLY PROVIDED IN INDIA, THE COMPANY IS A CORRECT COMPAR ABLE. HE ALSO HELD THAT THE ASSESSEE HAD NOT GONE INTO THE V ERTICALS OR HIGH END OR LOW END DISTINCTIONS WHILE SELECTING TH E COMPARABLES AND HAS SELECTED COMPANIES OPERATING IN VARIOUS VERTICALS. THE TPO HAS ALSO SELECTED COMPAR ABLES WHICH ARE BROADLY ENGAGED IN THE FIELD OF MARKETING SUPPORT SERVICES WHICH HAS SIMILAR TO THE SERVICES PROVIDED BY THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT THE COMPANY IS NOT FUNCTIONALLY COMPARABLE. IT IS CONTENDED THAT THERE CAN BE NO COMPARISON BETWEEN A SPECIFIC PAY ROLL SERVICE RENDERED AND MARKETING SUPPORT SER VICE PROVIDED. IT WAS CONTENDED THAT TSR DARASHAW LTD. IS A IT(TP)A NO.282 & 490/B/2015 13 BROKING AND INVESTMENT BANKING HOUSE AND AS 57.4% O F ITS INCOME IS FROM THE SHARE REGISTRY SERVICES SEGMENT AND HENCE NOT A COMPARABLE. RELIANCE IS PLACED ON THE FOLLOW ING DECISIONS. I. MICROSOFT CORPORATION P.LTD. VS. DCIT IN ITA NO.5766/DEL/2011; II. PREMIER EXPLORATION SERVICES P.LTD . VS. ITO IN ITA NO.4935/DEL/2011. IN OUR CONSIDERED OPINION TSR DARASHAW LTD. C ANNOT BE TAKEN AS A COMPARABLE AS 57.4% OF ITS INCOME IS F ROM SHARE REGISTRY SERVICES SEGMENT. THIS SHOWS THE FUNCTIONA L PROFILE OF THE ASSESSEE IS DIFFERENT. IN THE CASE OF MISCROSOFT CORPORATION LTD. ( SUPRA) AT PARA 1 THE TRIBUNAL HAS HELD AS FOLLOWS. COMING TO THE MERITS OF COMPARABILITY, WE FIND THA T THIS COMPANY HAS THREE SEGMENTS, WHICH INTER ALIA INCL UDE: PAY ROLL AND TRUST FUND ACTIVITY (PAY ROLL). IT I S THIS SEGMENT WHICH HAS BEEN CONSIDERED BY THE ASSESSEE AS COMPARABLE. THIS COMPANY ON AN OVERVIEW IS A BROKING AND INVESTMENT BANKING HOUSE. ITS OTHER SEGMENTS ARE : REGISTRAR AND TRANSFER AGENT ACTIVITY (R&D) AND RECORDS MANAGEMENT ACTIVITY (RECORDS). THE SEGMENT OF PA Y ROLL WAS CONSIDERED BY THE ASSESSEE AS COMPARABLE IN I TS TP STUDY REPORT AND THE SAME IS NOW ASSAILED. UNDER THE PAY ROLL SEGMENT, THIS COMPANY UNDERTAKES PAY ROL L AND EMPLOYEE TRUST FUND ADMINISTRATION AND MA NAGEMENT. WHEN WE COMPARE THE NATURE OF PAY ROLL ACTIVITY UND ERTAKEN BY THIS COMPANY WITH THE MARKETING SUPPORT SERVICES RE NDERED BY THE ASSESSEE TO ITS AES, WE FIND THAT BOTH ARE W AY APART IT(TP)A NO.282 & 490/B/2015 14 FROM EACH OTHER. THERE CAN BE NO LOGICAL COMPARIS ON BETWEEN A SPECIFIC PAY ROLL SERVICES RENDERED BY A CO MPANY TO ITS CLIENTS WITH THE MARKETING SUPPORT SERVICES RENDE RED BY THE ASSESSEE TO ITS AES. THIS COMPANY IS, THEREFORE, D IRECTED TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CASE, W E DIRECT THE AO/TPO TO EXCLUDE THIS COMPARABLE. 12. RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, AN D THE ABSENCE OF ANY DIFFERENCE IN FACTS HAVING BEEN POINTED OUT BY THE LD. DR OF THE REVENUE, WE DIRECT THE AO/TPO TO EXCLUDE THESE THRE E COMPANIES I.E. M/S APTICO LTD., M/S GLOBAL PROCUREMENT CONSULTANTS LTD ., AND M/S TSR DARASHAW LTD. FROM THE LIST OF FINAL COMPARABLES AN D SINCE, THE AVERAGE PROFIT OF THE REMAINING THREE COMPARABLE I.E. M/S C YBER MEDIA RESEARCH LTD.,14.85%, M/S HCCA BUSINESS SERVICES PVT. LTD., 20.05% AND M/S QUADRANT COMMUNICATIONS LTD., 1.11% IS AROUND 16% W HICH IS WITHIN += 5% RANGE OF THE ASSESSEES PROFIT MARGIN OF 12.06%, NO TP ADJUSTMENT IS REQUIRED TO BE MADE. WE HOLD ACCORDINGLY. 13. IN VIEW OF THE ABOVE, NO OTHER GROUND IN ANY O F THESE TWO APPEALS REQUIRES ANY SPECIFIC ADJUDICATION BECAUSE, THE SAME WILL BE OF ACADEMIC INTEREST ONLY. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED BECAUSE WE HAVE REVERSED THE ORDER OF THE DRP REGAR DING EXCLUSION OF M/S HCCA BUSINESS SERVICES PVT.LTD. AND THE APPEAL OF THE ASSESEE IS ALLOWED. IT(TP)A NO.282 & 490/B/2015 15 15. IN THE COMBINED RESULT, THE APPEAL OF THE REVE NUE IS PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (S.K.YADAV) SD/- (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 19.08.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE IT(TP)A NO.282 & 490/B/2015 16 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DR AFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADIN G THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER 10 10