NOV INDIA P.LTD, NAVI MUMBAI V. CIT (A) 17, MUMBAI

ITA 2832/MUM/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8313 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: UDAL RAJ SINGH
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 64; 13

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL J BENCH MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2832/MUM/2015 (ASSESSMENT YEAR 2010-11) M/S NOV INDIA PVT. LTD. PLOT NO. R-497, T.T. C INDUSTRIAL AREA, MIDC, RABALE, NAVI MUMBAI-400701. P AN: AADCR4279E VS. DCIT RANGE- 8(2) MUMBAI. APPELLANT RESPONDENT APPELLANT BY : SHRI ARJIT CHAKRAVARTY WITH SHRI ABHISHEK TILAK (AR) RESPONDENT BY : SHRI UDAL RAJ SINGH (CIT-DR) DATE OF HEARING : 07.01.2020 DATE OF PRONOUNCEMEN T : 10.01.2020 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-17, MUMBAI [THE LD. CIT(A)] DA TED 13.02.2015, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASS ED UNDER SECTION 143(3) DATED 25.03.2013 FOR ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF SUPPORT SERVICES AND SALE OF SPARES. TH E ASSESSEE, WHILE FILING RETURN OF INCOME HAS REPORTED INTERNATIONAL TRANSAC TIONS WITH ITS ASSOCIATE ENTERPRISES (AE) OF RS. 5,68,26,271/- WITH REGARD T O PROVIDING BUSINESS SUPPORT SERVICES TO ITS AE. ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 2 3. THE VALUE OF THE INTERNATIONAL TRANSACTION WAS LESS THAN RS. 15 CRORES, THUS, NO REFERENCE WAS MADE TO TPO FOR COMPUTATION OF ALP . THE ASSESSEE, FOR BENCHMARKING ITS TRANSACTIONS WITH ITS AE ADOPTED T RANSACTIONAL NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD. ON THE BASIS OF 9 COMPARABLE COMPANIES SELECTED BY THE ASSESSEE, THE ASSESSEE HAS SHOWN MEAN MARGIN OF COMPARABLES AT 8.04% AGAINST THE ASS ESSEES PLI AT 12.37% AND CLAIMED THAT INTERNATIONAL TRANSACTION UNDER TH IS SEGMENT IS AT ALP. THE ASSESSING OFFICER AFTER CARRYING OUT ITS RESEARCH, REJECTED 2 COMPARABLES AND INCLUDED 5 NEW COMPARABLES AND ON THE BASIS OF 11 F INAL SET OF COMPARABLES, MADE THE BENCHMARKING OF THE INTERNATIONAL TRANSACT ION AND SUGGESTED THE UPWARD ADJUSTMENT OF RS. 19,967,880/- IN THE FOLLOW ING MANNER: OPERATING COST (A) RS. 54463937/- ARMS LENGTH MEAN MARGIN 41% ON COST ARMS LENGTH PRICE (B) = 141% OF (A) RS. 7,67,94,1 51/- REVENUES SHOWN IN INTERNATIONAL TRANSACTIONS (C) RS . 5,68,26,271/- SHORTFALL BEING ADJUSTMENT U/S 92CA (D) = (B) (C) 1,99,67,880/- 4. AGGRIEVED BY THE ADDITIONS IN THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). BESIDES CHALLENGING THE INCL USION/EXCLUSION OF COMPARABLES, THE ASSESSEE CHALLENGED THE PLI CALCUL ATED BY ASSESSING OFFICER AT 5.16% AGAINST THE PLI SHOWN BY ASSESSEE AT 12.37%, BY EXCLUDING VARIOUS OPERATING INCOME AND EXPENSES. THE LD. CIT( A) AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE DIRECTED THE ASSESSI NG OFFICER TO VERIFY THE MISTAKE IN COMPUTING PLI AND AFTER VERIFYING THE SA ME TO RECOMPUTE PLI IN ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 3 PARA-1.3.9 OF HIS ORDER. HOWEVER, THE EXCLUSION AND INCLUSION OF VARIOUS COMPARABLE WAS UPHELD. THUS, FURTHER AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE SUBMISSION OF LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 6. AT THE OUTSET OF HEARING, THE LD. AR OF THE ASSESSE E SUBMITS THAT GROUND NO.1 IS GENERAL IN NATURE, AND HE IS NOT PRESSING GROUND NO.2, 7, 8 & 11. CONSIDERING THE SUBMISSION OF LD. AR OF THE ASSESSE E, GROUND NO. 1, 2, 7, 8 & 11 ARE DISMISSED AS NOT PRESSED. 7. GROUND NO.3 & 4 RELATES TO REJECTION/EXCLUSION OF C OMPARABLE COMPANY NAMELY FOI GLOBAL SERVICES ON THE GROUND OF ABNORMA L LOSSES AND OVERSEAS MANPOWER CORPORATION ON THE GROUND OF CONSISTENCE L OSS MAKING COMPANY. THE LD. AR OF THE ASSESSEE SUBMITS THAT LOSSES SUFF ERED BY COMPARABLE COMPANY CANNOT BE A GROUND FOR REJECTION; THE LOSSE S HAVE OCCURRED DUE TO GLOBAL SLOWDOWN THEREBY A GENERAL MARKET TREND IN T HE CONCERNED ASSESSMENT YEAR, WHICH CANNOT BE TERMED AS ABNORMAL . THE LD. AR SUBMITS THAT THE RELEVANT DATA IS AVAILABLE AT PAGE NO. 460 OF PAPER BOOK. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIE D UPON THE DECISION OF HONBLE DELHI HIGH COURT IN RAMPGREEN SOLUTIONS P. LTD. ITA NO. 102/2015. FOR OVERSEAS MANPOWER CORPORATION, THE LD . AR OF THE ASSESSEE SUBMITS THAT THIS COMPANY IS NOT PERSISTENTLY LOSS MAKING COMPANY. THIS ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 4 COMPANY HAS SHOWN A PROFIT IN A.Y. 2008-09 AND CANN OT BE SAID TO BE A PERSISTENTLY LOSS MAKING COMPANY. THE LD. AR FURTHE R SUBMITS THAT THREE YEAR LOSSES TO BE CONSIDERED FOR PERSISTENT LOSS MA KING FACTOR. IN SUPPORT OF HIS SUBMISSION, THE LD. AR RELIED UPON THE DECISION SANDVIK ASIA P. LTD. IN ITA NO. 1088/2015 (BOM. HIGH COURT). 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR SUBMITS THAT THE ASSESSING OFFICER HAS CLEARLY BROUGHT ON RECORD THAT FOI GLOBAL SUFFERED ABNORMAL LOSSES AND OVERSEAS MANPOWER CORPORATION WAS CONSISTENTLY LOSS MAKING C OMPANY. 9. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. IT IS UNDI SPUTED FACT THAT ASSESSEE ENGAGED IN PROVIDING BUSINESS SUPPORT SERVICES AND SALES OF SPARES. THE ASSESSEE PROVIDED BUSINESS SUPPORT SERVICES TO ITS AE FOR IMPORTING FINISHED GOODS AND RESALE. THE ASSESSEE IN ITS TP STUDY REPO RT BENCHMARKED ITS INTERNATIONAL TRANSACTION BY ADOPTING TRANSACTION N ET MARGIN METHOD (TNMM). THE METHOD ADOPTED BY ASSESSEE IS NOT DISPU TED BY ASSESSING OFFICER. THE ASSESSEE HAS SHOWN ITS PLI AT 12.37%. THE ASSESSEE SELECTED FOLLOWING 11 COMPARABLE WHICH ARE BROADLY IN SIMILA R NATURE OF BUSINESS. SR. NO. COMPARABLE COMPANIES OPERATING PROFIT % 1 ACCESS INDIA ADVISORS LTD. NC 2 ASIAN BUSINESS EXHIBITION AND CONFERENCES LTD. 5 8.11 3 EDCIL LTD. 7.41 ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 5 4 ICRA MANAGEMENT CONSULTING SERVICES LTD. 0.41 5 IDC LTD. 13.00 6 IN-HOUSE PRODUCTIONS LTD. 5.81 7 INDIA TOURISM DEVELOPMENT CORPORATION LTD. 1.41 8 MA FOI GLOBAL SERVICES (-43.35) 9 MA FOI MANAGEMENTS CONSULTANTS LTD. (-1.70) 10 OVERSEAS MANPOWER CORP. LTD. (-21.03) 11 TECHNICON CHEMIE LTD. NA ARITHMETIC MEAN 2.23% 10. THE ASSESSEE SELECTED FOI GLOBAL AS ONE OF THE COM PARABLE WHILE CARRYING OUT T.P. STUDY. HOWEVER, FOI GLOBAL WAS EXCLUDED BY ASSESSING OFFICER ON THE GROUND THAT THIS COMPARABLE COMPANY HAS SHOWN A BNORMAL LOSSES LEADING TO SKEWED RESULTS. THE LD. CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER THAT LOSS OF 0.54% IS ABNORMAL AND AFFIRMED THE EXCLUSION. THE LD. AR OF THE ASSESSEE VEHEMENTLY SUBMITTED THAT DUE TO GLOBAL SLOWDOWN AND GENERAL MARKET TREND IN THE RELEVANT ASSESSMENT YEA R, THE LOSSES INCURRED BY THAT COMPARABLE CANNOT TERMED AS ABNORMAL AND RELIE D UPON THE DECISION OF RAMPGREEN SOLUTIONS P. LTD. (SUPRA), WHEREIN IT WAS HELD THAT LOSSES SOLELY CANNOT BE A GROUND FOR REJECTION OF COMPARABLE. FUR THER, IN SANDVIK ASIA P. LTD. (SUPRA), THE HONBLE BOMBAY HIGH COURT HELD TH AT TO CONSIDER A PERSISTENT LOSS MAKING COMPANY THREE YEARS LOSSES T O BE CONSIDERED AS A PERSISTENT LOSS MAKING FACTOR. 11. THEREFORE, CONSIDERING THE DECISION OF HONBLE DELH I HIGH COURT IN RAMPGREEN SOLUTIONS PVT. LTD. (SUPRA) AND HONBLE B OMBAY HIGH COURT IN ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 6 SANDVIK ASIA P. LTD. (SUPRA), WE DIRECT THE ASSESSI NG OFFICER TO INCLUDE FOI GLOBAL AND OVERSEAS MANPOWER CORPORATION IN FINAL S ET OF COMPARABLE. NO CONTRARY FACT OR LOW IS BROUGHT TO OUR NOTICE FOR N ON-INCLUSION OF THESE TWO COMPARABLES. IN THE RESULT, GROUND NO.3 & 4 ARE A LLOWED. 12. GROUND NO.5 & 6 RELATES TO EXCLUSION OF FIVE COMPAR ABLE INCLUDED BY ASSESSING OFFICER WHILE MAKING T.P. ADJUSTMENT. AGA INST THE INCLUSION OF CRISIL LTD ., THE LD. AR OF THE ASSESSEE SUBMITS THAT THE COMP ARABLE COMPANY IS FUNCTIONALLY DIFFERENT AND IS A GLOBALLY DIVERSI FIED ANALYTICAL COMPANY PROVIDING RATINGS AND RESEARCH SERVICES. IT IS INDI AS LARGEST RATING AGENCY. THE COMPANY HAS UNALLOCABLE EXPENSES OF RS. 3,82,87 ,229/-, THUS THIS COMPANY CANNOT BE TREATED AS A VALID COMPARABLE. TH E ASSETS EMPLOYED ARE HUGE-CANNOT BE COMPARED WITH THE ASSESSEE. THE COMP ANY HAS NET FIXED ASSETS (NFA) OF RS. 99,84,69,854/- WHEREAS THE ASSE SSEE HAS NFA OF RS. 12,11,800/-ONLY. THUS, THE COMPARABLE NET FIXED ASS ETS ARE 823 TIMES THAN THAT OF THE ASSESSEE THEREBY THE SAME CANNOT BE TRE ATED AS A VALID COMPARABLE. FURTHER, THE PERSONNEL EXPENSES ARE HUG E-CANNOT BE COMPARED WITH THE ASSESSEE. THIS COMPANY HAS PERSONNEL EXPEN SES OF RS. 1,98,90,45,470/- AS COMPARED TO THE ASSESSEE OF RS. 2,85,01,936/- ONLY, WHICH IS 69.8 TIMES MORE THAN THE ASSESSEE THEREBY, THE SAME CANNOT BE TREATED AS A VALID COMPARABLE. IN SUPPORT OF HIS SU BMISSION, THE LD. AR RELIED UPON THE DECISIONS OF TPG CAPITAL INDIA P. LTD. [20 17] 79 TAXMANN.COM 101 (MUM TRIB.), GENERAL ATLANTIC (P.) LTD. [2015] 64 T AXMANN.COM 423 (MUM ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 7 TRIB.), CISCO SYSTEMS (INDIA) P. LTD. [2014] 50 TAX MANN.COM 280 (BANG TRIB.), TPG CAPITAL INDIA P. LTD. IN ITA NO. 880/MU M/2013 (MUM TRIB), UBS SECURITIES INDIA P. LTD. IN ITA NO. 6451/MUM/20 11 (MUM TRIB.) AND CEVE FREIGHT INDIA P. LTD. IN ITA NO. 4956/DEL/2013 (DEL TRIB). 13. FOR EXCLUSION OF SUMEDHA FISCAL SERVICES LTD. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE COMPARABLE IS FUNCTIONALLY DIFFERE NT AND THE COMPANY PROVIDES CORPORATE SERVICES, INVESTMENT SERVICES AN D WEALTH MANAGEMENT SERVICES. THE COMPANY HAS INCOME FROM INVESTMENTS B ANKING AND CAPITAL MARKET OPERATIONS. THE ASSETS EMPLOYED BY THIS COMP ARABLE ARE HUGE AND CANNOT BE COMPARED WITH THE ASSESSEE. THE COMPANY H AS NET FIXED ASSETS OF RS. 4,81,86,676/- WHEREAS THE ASSESSEE HAS NFA O F RS. 12,11,800/-. THE COMPANYS NET FIXED ASSETS ARE 39 TIMES THAN THAT O F THE ASSESSEE THEREBY, THE SAME CANNOT BE TREATED AS A VALID COMPARABLE. I N SUPPORT OF HIS SUBMISSION, THE LD. AR RELIED UPON THE DECISIONS OF M/S GENERAL ATLANTIC P. LTD. ITA NO. 1019/MUM/2014 (MUM TRIB.), GOLDMAN SAC HS (I) SECURITIES P. LTD. IN ITA NO. 6912/MUM/2012 (MUM TRIB.), JP MO RGAN INDIA P. LTD. IN ITA NO. 880/MUM/2013 (MUM TRIB.), AVENUE ASIA AD VISORS P. LTD. IN ITA NO. 350/2016 (DEL. HC) AND XANDER ADVISORS INDI A P. LTD. IN ITA NO. 5840/DEL/2012 (DEL. TRIB.). 14. FOR EXCLUSION OF BRESCON CORPORATE ADVISORS P. LTD ., THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS COMPARABLE IS FUNCTIONAL LY DIFFERENT. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE COMPANY HA S MAINTAINED A HIGH ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 8 RECALL VALUE IN THE FIELD OF FINANCIAL RESTRUCTURIN G. THE INCOME OF THE COMPANY IS FROM FEE BASED FINANCIAL SERVICES I.E. , DEBIT RESOLUTION AND DEBT SYNDICATION. THE LD. AR OF THE ASSESSEE SUBMIT S THAT THE COMPANY DOES NOT HAVE SEGMENTAL INFORMATION. IN SUPPORT OF HIS S UBMISSION, THE LD. AR RELIED UPON THE DECISIONS OF TPG GLOBAL INDIA P. LT D. IN ITA NO. 880/MUM/2013 (MUM TRIB.), GOLDMAN SACHS (I) SECURIT IES P. LTD. IN ITA NO. 6912/MUM/2012 (MUM TRIB.), AVENUE ASIA ADVISORS P. LTD. IN ITA NO. 350/2016 (DEL. HC), DE SHAW INDIA ADVISORY SERV ICES P. LTD. IN ITA NO. 1681/MUM/2014 (MUM TRIB.), M/S BLACKSTONE ADVIS ORS INDIA PVT. IN ITA NO. 1582/MUM/2014 (MUM TRIB.), SAXO INDIA P. LT D. IN ITA NO. 682/MUM/2016 (DEL HC) AND CASHEDGE INDIA P. LTD. IN ITA NO. 279/2016 (DEL HC). 15. FOR EXCLUSION OF ICRA ONLINE LIMITED. , THE LD. AR OF THE ASSESSEE SUBMITS THAT THIS COMPARABLE/COMPANY IS FUNCTIONALL Y DIFFERENT AND INTO THREE LINES OF BUSINESS I.E. OUTSOURCED SERVICES, I NFORMATION SERVICES AND SOFTWARE PRODUCTS & SERVICES. THE LD. AR SUBMITS TH AT NO SEGMENTAL INFORMATION IS AVAILABLE. THE ASSETS EMPLOYED ARE H UGE-CANNOT BE COMPARED. THE LD. AR FURTHER SUBMITS THAT THE COMPANY HAS NFA OF RS. 99,84,69,854/- WHEREAS THE ASSESSEE HAS NFA OF RS. 12,11,800/- ONL Y. THE COMPANYS NET FIXED ASSETS ARE 823 TIMES THAN THAT OF THE ASSESSE E THEREBY, THE SAME CANNOT BE TREATED AS A VALID COMPARABLE. IN SUPPORT OF HIS SUBMISSION, THE LD. AR RELIED UPON THE DECISIONS OF AGM INDIA ADVISORS P. LTD. [2016] 70 ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 9 TAXMANN.COM 219 (MUM TRIB.), ARISAIG PARTNERS (INDI A) P. LTD. IN ITA NO. 840/MUM/2015 (MUM TRIB.), MOUNT KELLECT CAPITAL MAN AGEMENT INDIA P. LTD. IN ITA NO. 887/MUM/2015 (MUM TRIB.), M/S SPARK LES DHANDHO ADVISORS P. LTD. IN ITA NO. 1047/MUM/2015, SAXO IND IA P. LTD. IN ITA NO. 682/2016 (DEL. HC) AND CASHEDGE INDIA P. LTD. IN IT A NO. 279/2016 (DEL HC). THE LD. AR SUBMITS THAT NO SEGMENTAL INFORMATI ON-COMPARABLE TO BE EXCLUDED. 16. FOR EXCLUSION OF FUTURA CAPITAL INVESTMENT ADVISORS LTD., THE LD. AR OF THE ASSESSEE SUBMITS THAT THE COMPANY IS IN THE BUS INESS OF INVESTMENT ADVISORY. THE INCOME FROM OPERATIONS OF THE COMPANY IS FROM INVESTMENT ADVISORY FEES. IN SUPPORT OF HIS SUBMISSION, THE LD . AR RELIED UPON THE DECISION OF NEW SILK ROUTE ADVISORS PVT. LTD. IN IT A NO. 1327/MUM/2014 (MUM TRIB.). 17. IN ALTERNATIVE SUBMISSION, THE LD. AR OF THE ASSESS EE SUBMITS THAT THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE FOR THE FIRST TIME VIDE NOTICE DATED 20.03.2013 FOR DETERMINATION OF ALP AND PROPO SED ADJUSTMENT OF RS. 1.99 CRORE TO THE ALP OF INTERNATIONAL TRANSACTION. THE ASSESSEE FILED ITS REPLY DATED 22.03.2013. THE ASSESSING OFFICER HAS E XTRACTED THE CONTENTS OF REPLY IN PARA-5.5 OF THE ASSESSMENT ORDER. NO PROPE R AND FAIR OPPORTUNITY WAS GIVEN ON EXCLUSION AND INCLUSION OF VARIOUS COM PARABLE AND NO MATERIAL WITH REGARD TO INCLUSION OF VARIOUS COMPARABLE WAS PROVIDED TO THE ASSESSEE. THE ASSESSMENT ORDER WAS PASSED ON 25.03.2013. THE ASSESSMENT ORDER WAS ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 10 PASSED HURRIEDLY. THE ASSESSING OFFICER ALSO RECOMP UTED/CALCULATED PLI OF ASSESSEE WITHOUT GIVING ANY SHOW-CAUSE NOTICE AND E XCLUDED VARIOUS OPERATING INCOME AND OPERATING EXPENSES. 18. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT THE AS SESSING OFFICER HAS GIVEN DETAILED REASONING WHILE INCLUDING FIVE COMPARABLE WHICH ARE COMPARABLE WITH THE ASSESSEE. THE TWO COMPARABLE EXCLUDED BY A SSESSING OFFICER WAS NOT A VALID COMPARABLE AS THERE WAS ABNORMAL LOSSES IN BOTH THE COMPANIES. ON RECOMPUTATION OF PLI BY ASSESSING OFFICER IN EXC LUDING VARIOUS OPERATING INCOME AND EXPENSES, THE LD. DR SUBMITS T HAT THE LD. CIT(A) HAS ALREADY DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE PLI. 19. IN THE REJOINDER SUBMISSION, THE LD. AR OF THE ASSE SSEE SUBMITS THAT THE DIRECTION GIVEN BY LD. CIT(A) IN PARA-1.3.9 IS NOT SPECIFIC AND PRAYED TO PASS APPROPRIATE DIRECTION TO THE ASSESSING OFFICER FOR RECOMPUTATION OF PLI. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON VARIOUS CASE LAW RELIED BY LD. REPRESENTATIVE OF THE PARTIE S. SO FAR AS EXCLUSION OF CRISIL LTD . IS CONCERNED. THE LD. AR OF THE ASSESSEE SUBMITTE D THAT THIS COMPARABLE IS FUNCTIONALLY DIFFERENT BEING A GLOBAL LY DIVERSIFIED ANALYTICAL COMPANY PROVIDING RATING AND RESEARCH SERVICES BEIN G INDIAS LARGEST RATING AGENCY. THIS COMPARABLE WAS INCLUDED BY ASSESSING O FFICER ON THE GROUND THAT ASSESSEE OMITTED TO CONSIDER OTHER COMPARABLE DEALING IN SIMILAR NATURE ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 11 OF BUSINESS SUPPORT SERVICES AND INCLUDED BY TREATI NG IT AS A VALID COMPARABLE. BEFORE LD. CIT(A), THE ASSESSEE OBJECTE D ABOUT THE INCLUSION OF THIS COMPARABLE ON THE GROUND OF FUNCTIONAL DISSIMI LARITY. THE LD. CIT(A) HAS NOT GIVEN ANY FINDING WHILE SUSTAINING THE INCL USION OF THIS COMPARABLE. WE HAVE NOTED THAT MUMBAI TRIBUNAL IN TPG CAPITAL I NDIA (P.) LTD. WHILE CONSIDERING THE COMPARABILITY OF CRISIL LTD. WITH T HE ASSESSEE ENGAGED IN PROVIDING SUB-INVESTMENT ADVISORY SERVICES AND MARK ET RESEARCH AND STATISTICAL DATA TO ITS HOLDING COMPANY, HELD THAT THIS COMPARABLE IS FUNCTIONALLY DIFFERENT HAVING RPT OF MORE THAN 25% AND DIRECTED TO EXCLUDE THIS COMPARABLE. WE HAVE NOTED THAT THE MUMBAI BENC H OF TRIBUNAL IN TPG CAPITAL INDIA PVT LTD VS DCIT (ITA NO. 7594/MUM/201 4) EXCLUDED THIS COMPARABLE ON THE GROUND THAT RPT OF THIS COMPARABL E IS MORE THAN 25%. FURTHER, BY MAKING RELIANCE ON VARIOUS DECISIONS OF TRIBUNAL INCLUDING IN IIM ASSET ADVISORS LTD (ITA NO. 5173/MUM/2012) IT W AS HELD THIS COMPARABLE THE ADVISORY SEGMENT OF THIS COMPARABLE COMPRISE INTERNATIONAL ADVISORY AND RISK MANAGEMENT PRACTICE. CONSIDERING THE DECISION OF CO- ORDINATE BENCH AS REFERRED ABOVE, THIS COMPARABLE H AS TO BE EXCLUDED FROM THE LIST OF COMPARABLE SELECTED BY TPO. 21. NOW TURNING TO THE EXCLUSION/CONSIDERING OF BRESCON CORPORATE ADVISOR . THIS COMPARABLE WAS INCLUDED BY ASSESSING OFFICER O N THE GROUND THAT ASSESSEE OMITTED TO INCLUDE/CONSIDER OTHER COMPANY DEALING IN SIMILAR SUPPORT SERVICES. THE ASSESSEE OBJECTED FOR INCLUSI ON OF THIS COMPARABLE ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 12 BEFORE THE LD. CIT(A). HOWEVER, NO SPECIFIC FINDING FOR AFFIRMING THE INCLUSION OF THIS COMPARABLE WAS GIVEN BY LD. CIT(A ). BEFORE US, THE LD. AR VEHEMENTLY SUBMITTED THAT NO SEGMENTAL INFORMATION IS AVAILABLE. THIS COMPARABLE MAINTAINED A HIGH RECALL VALUE IN THE FI ELD OF FINANCIAL RESTRUCTURING AS PER THE DATA AVAILABLE ON PAGE NO. 394 OF THE PAPER BOOK AND RELIED ON VARIOUS CASE LAWS. THE CO-ORDINATE BE NCH OF TRIBUNAL IN TPG CAPITAL INDIA P. LTD. WHILE CONSIDERING THE COMPARA BILITY OF THIS COMPARABLE WITH NON-BINDING INVESTMENT ADVISORY SERVICES AND P ROVIDING STATISTICAL DATA TO ITS HOLDING COMPANY EXCLUDED THIS COMPARABLE ON THE GROUND THAT THIS COMPARABLE COMPANY IS A LEADING PLAYER IN SPECIAL S ITUATION ADVISORY AND INVESTMENT SERVICES. IT ASSIST IN RECAPITALIZATION, MERGER, MERGER AND ACQUISITION, INFUSION OF PRIVATE EQUITY AND DIRECT INVESTMENT AND THUS, FUNCTIONALLY NOT COMPARABLE WITH INVESTMENT ADVISOR Y. THEREFORE, CONSIDERING THE DECISION OF TRIBUNAL, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THIS COMPARABLE FROM FINAL SET OF COMPARABL E. 22. SO FAR AS SUMEDHA FISCAL SERVICES LTD. IS CONCERNED THIS COMPARABLE WAS INCLUDED BY ASSESSING OFFICER ON THE GROUND THAT AS SESSEE OMITTED TO INCLUDE/CONSIDER OTHER COMPANY DEALING IN SIMILAR S UPPORT SERVICES. THE ASSESSEE OBJECTED FOR INCLUSION OF THIS COMPARABLE BEFORE THE LD. CIT(A). HOWEVER, NO SPECIFIC FINDING FOR AFFIRMING THE INCL USION OF THIS COMPARABLE WAS GIVEN BY LD. CIT(A). AS NOTED ABOVE, THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THIS COMPARABLE COMPANY IS F UNCTIONAL DIFFERENT AND ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 13 IS A FRONT RANKING FINANCIAL COMPANY. THIS COMPANY PROVIDES CORPORATE SERVICES, INVESTMENT SERVICES, WEALTH MANAGEMENT SE RVICES AND HAS SHOWN INCOME FROM INVESTMENT BANKING AND CAPITAL MARKET O PERATION. THE ASSET EMPLOYED BY THIS COMPARABLE ARE HUGE I.E. RS. 4.81 CRORE, HOWEVER IN ASSESSEES NET FIXED ASSETS ARE ONLY RS. 12.11 LAKH S. WE HAVE NOTED THAT CO- ORDINATE BENCH OF MUMBAI TRIBUNAL IN JP MORGAN ADVI SORS INDIA PVT. LTD. VS. DCIT (SUPRA) WHILE COMPARING WITH NON-BINDING I NVESTMENT ADVISORY SERVICES PROVIDED BY THAT ASSESSEE HELD THAT SUMEDH A FISCAL SERVICES LTD. IS ENGAGED IN PROVIDING MERCHANT BANKING ACIDITIES. TH E OPERATION OF THIS COMPARABLE INVOLVED LOAN SYNDICATION AND PROJECT CO NSULTANCY SERVICES AND DIRECTED FOR REJECTION FROM COMPARABLE. FURTHER, IN GENERAL ATLANTIC PVT. LTD. VS. DCIT (SUPRA) THIS COMPARABLE WAS REJECTED ON THE GROUND THAT THIS COMPANY HAS EXPERTISE IN ANALYZING AND ADVISING ON VARIOUS BUSINESS AND FINANCIAL MODELS. THE INVESTMENT SERVICES PROVIDED BY THIS COMPANY ARE IN THE FIELD OF STOCK BROKING, DEPOSITORY SERVICES, CO MMODITY BROKING, CURRENCY DERIVATIVE, BROKING AND CORPORATE SERVICES , FINANCIAL RESTRUCTURING, MERCHANT BANKING AND MERGER AND TAKE OVER. CONSIDER ING THE DECISION OF TRIBUNAL, WE FIND THAT HIS COMPARABLE COMPANY IS NO T COMPARABLE WITH THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO EXCLUD E THIS COMPARABLE FROM FINAL SET OF COMPARABLE. 23. ICRA ONLINE. THIS COMPARABLE WAS INCLUDED BY ASSESSING OFFICER ON THE GROUND THAT ASSESSEE OMITTED TO INCLUDE/CONSIDER OT HER COMPANY DEALING IN ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 14 SIMILAR SUPPORT SERVICES. THE ASSESSEE OBJECTED FOR INCLUSION OF THIS COMPARABLE BEFORE THE LD. CIT(A). HOWEVER, NO SPECI FIC FINDING FOR AFFIRMING THE INCLUSION OF THIS COMPARABLE WAS GIVE N BY LD. CIT(A). THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THIS COMP ARABLE COMPANY IS INTO THREE LINE OF BUSINESS; OUTSOURCE SERVICES, INFORMA TION SERVICES AND SOFTWARE PRODUCT. NO SEGMENTAL INFORMATION IS AVAILABLE. ASS ET EMPLOYED BY THIS COMPANY ARE HUGE COMPARATIVE TO THE ASSESSEE. WE HA VE NOTED THAT CO- ORDINATE BENCH OF TRIBUNAL IN AGM INDIA ADVISOR P. LTD. VS. DCIT (SUPRA) HELD THAT THIS COMPARABLE IS ENGAGED IN MERCHANT BA NKING ACTIVITIES AND CANNOT BE ACCEPTED AS A VALID COMPARABLE TO A COMPA NY PROVIDING NON- BINDING INVESTMENT ADVISORY SERVICES. CONSIDERING T HE DECISION OF TRIBUNAL WHEREIN THIS COMPARABLE COMPANY WAS HELD TO BE NOT COMPARABLE WITH A COMPANY PROVIDING NON-BINDING INVESTMENT ADVISORY S ERVICES. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THIS COM PARABLE FROM FINAL SET OF COMPARABLE. 24. FUTURE CAPITAL INVESTMENT ADVISORS LTD. THIS COMPARABLE WAS INCLUDED BY ASSESSING OFFICER ON THE GROUND THAT ASSESSEE OM ITTED TO INCLUDE/CONSIDER OTHER COMPANY DEALING IN SIMILAR S UPPORT SERVICES. THE ASSESSEE OBJECTED FOR INCLUSION OF THIS COMPARABLE BEFORE THE LD. CIT(A). HOWEVER, NO SPECIFIC FINDING FOR AFFIRMING THE INCL USION OF THIS COMPARABLE WAS GIVEN BY LD. CIT(A). THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THIS COMPARABLE COMPANY IS FUNCTIONALLY DIFFERENT A ND IS IN THE BUSINESS OF ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 15 INVESTMENT ADVISORY. WE HAVE NOTED THAT CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN NEW SILK ADVISOR LTD. VS. DCIT (SUPRA) WHILE CONSIDERING THE COMPARABILITY OF ASSESSEE ENGAGED IN RESEARCH ADVIS ORY, INVESTMENT OPPORTUNITIES, INVESTIGATING POTENTIAL INVESTMENT, DISINVESTMENT AND REINVESTMENT AND WAS ACCEPTED AS A COMPARABLE. FURT HER, IN INDIA DIVISION INVESTMENT ADVISORS LTD. (PREDECESSOR OF FUTURE CAP ITAL INVESTMENT), THIS COMPARABLE WAS HELD TO BE ENGAGED IN THE BUSINESS O F ASSET MANAGEMENT COMPANY AND THE MAIN OBJECT OF ASSESSEE WAS TO PROV IDE FINANCE INVESTMENT ADVISORY, FACILITATING SERVICES INCLUDING IDENTIFIC ATION OF INVESTMENT OPPORTUNITIES, CONDUCTING ANALYSIS AND ASSESSMENT F OR PROVIDING INVESTMENT RECOMMENDATIONS AND CONSULTANCY SERVICES. CONSIDERI NG THE AFORESAID DECISION OF CO-ORDINATE BENCH, WE ARE OF THE VIEW T HAT THIS COMPARABLE COMPANY IS NOT FUNCTIONALLY SIMILAR WITH THE ASSESS EE AND IS NOT A GOOD COMPARABLE. HENCE, WE DIRECT THE ASSESSING OFFICER TO EXCLUDE THIS COMPARABLE FROM FINAL SET OF COMPARABLE. IN THE RES ULT, GROUND NO.5 & 6 OF THE APPEAL ARE ALLOWED. 25. GROUND NO. 9 & 10 RELATES TO COMPUTATION OF OPERATI NG MARGIN OF COMPARABLE AND ASSESSEE. THE LD. AR OF THE ASSESSEE SUBMITS THAT ASSESSEE DETERMINED ITS PLI ON THE BASIS OF OP/OC AND SHOWN ITS PLI AT 12.37%. THE PLI OF COMPARABLE WAS AT 8.04%. THE ASSESSING OFFIC ER RECOMPUTED THE PLI BY TAKING VIEW THAT THE ASSESSEE HAS NOT EXCLUD ED NON-OPERATING INCOME AND ARRIVED AT PLI AT 5.16%. SIMILARLY, PLI OF COMP ARABLE WAS ALSO ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 16 RECOMPUTED. THE ASSESSING OFFICER HAS NOT GIVEN ANY SHOW-CAUSE OR OPPORTUNITY BEFORE DISTURBING/RECOMPUTATION OF PLI OF ASSESSEE AND THE COMPARABLE. THE ASSESSEE DURING THE FIRST APPELLATE STAGE RAISED SPECIFIC GROUND OF APPEAL. THOUGH, THE LD. CIT(A) DIRECTED T HE ASSESSING OFFICER TO RECOMPUTE PLI. NO SPECIFIC DIRECTION WAS GIVEN BY L D. CIT(A) FOR EXCLUSION OR INCLUSION OF VARIOUS OPERATING INCOME OR OPERATI NG EXPENSES. THE LD. AR OF THE ASSESSEE SUBMITS THAT BAD-DEBT, SUNDRY BALAN CES WRITTEN BACK, FOREIGN EXCHANGES GAVE, PROVISION FOR BAD-DEBTS ARE OPERATI NG IN NATURE AND THE EXPENSES DISALLOWED IS NON-OPERATING. THE LD. AR OF THE ASSESSEE ALSO FURNISHED A CHART FOR HIS RELIANCE ON VARIOUS DECIS IONS AND WOULD SUBMIT THAT A CLEAR CUT DIRECTION FOR COMPUTATION OF PLI MAY BE GIVEN TO THE ASSESSING OFFICER. 26. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUBMI TS THAT THE LD. CIT(A) HAS ALREADY CONSIDERED THE ISSUE AND HAS DIRECTED T HE ASSESSING OFFICER FOR CALCULATION OF ALLEGED ERROR IN COMPUTING PLI. 27. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE ORDERS OF LOWER AUTHORITIES. WE HAVE NOTED THAT BEF ORE RE-COMPUTING THE PLI OF ASSESSEE AS WELL AS OF COMPARABLE, NO SHOW-CAUSE NOTICE WAS GIVEN BY ASSESSING OFFICER. THE LD. CIT(A) DESPITE ACCEPTING THE ERRORS HAS NOT GIVEN SPECIFIC DIRECTION TO THE ASSESSING OFFICER FOR EXC LUSION/INCLUSION OF VARIOUS OPERATING INCOME OR EXPENSES FOR CALCULATION OF PLI . THEREFORE, CONSIDERING THE SUBMISSION OF ASSESSEE AND THE FACT THAT WE HAV E DIRECTED THE ASSESSING ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 17 OFFICER TO INCLUDE TWO COMPARABLE AND EXCLUDE FIVE COMPARABLE FROM FINAL SET OF COMPARABLE. THEREFORE, WE DIRECT THE ASSESSI NG OFFICER THAT BEFORE COMPUTING ALP ON THE BASIS OF FINAL SET OF COMPARAB LE TO RE-EXAMINE THE PLI OF ASSESSEE AND COMPARABLE AND RECOMPUTE THE SA ME IN ACCORDANCE WITH LAW. NEEDLESS TO DIRECT THAT BEFORE COMPUTING THE P LI OF ASSESSEE AND THE COMPARABLES COMPANY, THE ASSESSING OFFICER SHALL GR ANT OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIREC TED TO PROVIDE COMPLETE DETAILS AND SUBSTANTIATE ITS CONTENTION WITH REGARD TO OPERATING PROFIT AND EXPENSES. THE ASSESSING OFFICER IS FURTHER DIRECTED THAT IN CASE THERE IS VARIANCE IN OPINION ON ACCOUNT OF VARIOUS COMPONENT OF INCOME AND EXPENDITURE, THE ASSESSING OFFICER SHALL PASS A REA SONED ORDER. IN THE RESULT, THESE GROUNDS OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSE. 28. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/ 01/2020. SD/- SD/ - R.C. SHARMA PAWAN SINGH ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATE: 10.01.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR J BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITA NO. 2832 MUM 2015-M/S NOV INDIA PVT. LTD. 18 ITAT, MUMBAI