Dover India Private Ltd., Bangalore V. Assistant Commissioner of Income-tax,

ITA 326/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7190 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA; NIRUPAMA KOTRU
• Keywords: Business income; Transfer pricing; International transaction; Wholly owned subsidiary; Tangible material
• Section: 92C; 143(3); 92B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI , AM . / ITA NO. 326 /P U N/20 15 / ASSESSMENT YEAR : 20 1 0 - 11 DOVER INDIA PVT. LTD., BAGMANE LAUREL, 1 ST FLOOR, C' BLOCK, BAGMANE TECH PARK, C.V. RAMAN NAGAR, BANGALORE 560093 . / APPELLANT PAN: AA ACI3920N VS. THE DY . COMMISSIONER OF INCOME TAX , CIRCLE 1(2), PUNE . / RESPONDENT / APPELLANT BY : SHRI KISHORE PHADKE / RESPONDENT BY : MS. NIRUPAMA KOTRU, CIT AND MUKESH JHA, JCIT / DAT E OF HEARING : 0 3 . 1 1 . 201 7 / DATE OF PRONOUNCEMENT: 10 . 1 1 . 201 7 / ORDER PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF A C IT , CIRCLE 1(2), PUNE, DATED 30 .0 1 .201 4 RELATING TO ASSESSMENT YEAR 20 1 0 - 11 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. GENERAL GROUND THE HONBLE PUNE DRP ERRED IN LAW AND FACTS IN DIRECTING AND THE LEARNED D CIT CIRCLE 1(2) PUNE (AO') ERRED IN LAW AND ON FACTS IN MAKING THE ADDITIONS OF RS.1,06,25,577/ - TO THE TAXABLE INCOME OF THE ASSESSEE COMPANY. 2. DESIGN ENGINEERING SERVICES (TOTAL ADDITION RS.27,27,007/ - ) 2.1 THE HONBLE DRP PUNE HAS ERRED IN LAW AN D ON FACTS IN ACCEPTING AND THE LEARNED AO/TPO ERRED IN HOLDING THAT ALP FOR DESIGN ENGINEERING SERVICES SHOULD BE WORKED OUT BY CONSIDERING 28.62% MARGIN ON COSTS INSTEAD OF 10% MARGIN, LEADING TO AN ADDITION OF RS.27,27,007/ - . 2.2 THE HONBLE DRP PUNE H AS ERRED IN LAW AND ON FACTS IN ACCEPTING AND THE LEARNED AO/TPO ERRED IN HOLDING THAT ACCENTIA TECHNOLOGIES LIMITED & ROLTA LIMITED IS GOOD COMPARABLE FOR COMPARING WITH THE ASSESSEES DESIGN ENGINEERING SERVICES. 2.3. THE HONBLE DRP PUNE HAS ERRED IN L AW AND ON FACTS IN ACCEPTING AND THE LEARNED AO ERRED IN HOLDING THAT KLG SYSTEL LIMITED IS NOT A GOOD COMPARABLE FOR BENCHMARKING APPELLANT COMPANIES DESIGN ENGINEERING FUNCTION. 2.4 ALTERNATIVE AND WITHOUT PREJUDICE TO THE GROUND NO2.3 ABOVE, THE HONBL E DRP PUNE, TPO & AO ERRED IN LAW AND ON FACTS IN NOT APPRECIATING APPELLANTS REQUEST FOR CONSIDERING SEGMENTAL OP/TC MARGINS (13.69%) OF THE SAID EXTERNAL COMPARABLE INSTEAD ON COMPUTING THE OP/TC MARGIN ON IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRC UMSTANCES, BASIS (21.69%) . 3. MANUFACTURING FUNCTION (TOTAL ADDITION RS.78,98,570/) 3.1 THE HONBLE DRP PUNE HAS ERRED IN LAW AND ON FACTS IN ACCEPTING AND THE LEARNED AO/TPO ERRED IN CONCLUDING THAT ASSESSEE COMPANY SHOULD GET RS.78,98,570/ - AS A EXTRA SUPPORT PAYMENT FROM ITS AE COMPANY, AGAINST THE LOSSES INCURRED IN THE MANUFACTURING DIVISION OVER AND ABOVE SUPPORT PAYMENT RECEIVED OF RS.3.21 CRORES IN A.Y. 2010 - 11. 3.2 THE HONBLE DRP PUNE HAS ERRED IN LAW AND ON FACTS IN ACCEPTING AND THE LEARNED AO/TPO ERRED IN NOT GRANTING CARVE OUT AMOUNTING TO RS.1,39,52,668, FOR UNDERUTILIZATION OF CAPACITY IN MANUFACTURING DIVISION. 3.3 THE HONBLE DRP PUNE HAS ERRED IN LAW AND ON FACTS IN ACCEPTING AND THE LEARNED AO/TPO ERRED IN HOLDING THAT THE ASSESSEE C OMPANY CANNOT ALTERNATIVELY APPLY RESALE PRICE METHOD ( RPM) , FOR BENCHMARKING PURCHASE AND SALES TRANSACTIONS WITH ITS AE COMPANIES. 3.4 THE HONBLE DRP PUNE HAS ERRED IN LAW AND ON FACTS IN ACCEPTING AND THE LEARNED AO/TPO ERRED IN HOLDING THAT THE ASS ESSEE COMPANY CANNOT ALTERNATIVELY APPLY GROSS PROFIT MARGIN % AS PLI FOR BENCHMARKING PURCHASE AND SALES TRANSACTIONS WITH ITS AE COMPANIES UNDER TNMM. 3 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. 3.5 ALTERNATIVE AND WITHOUT PREJUDICE TO GROUND NO.3.1 TO 3.4 ABOVE, THE HONBLE DRP PUNE HAS ERRED IN LAW AND ON FACTS IN ACCEPTING AND THE LEARNED AO / TPO ERRED IN COMPUTING THE FINAL ADDITION AMOUNT IN MANUFACTURING FACTION, LOWER AUTHORITIES FAILED TO APPRECIATE THAT OP/OI MARGIN OF THE EXTERNAL COMPARABLES (OP/OI 6.36%) OUGHT TO HAVE BEEN APPLIED ON THE ACTUAL OPERATIONAL SALES OF RS.3.10 CRORES INSTEAD OF RS.6.36 CRORES (WHICH INCLUDES SUPPORT PAYMENT OF RS.3.21 CRORES) 4. THE HONBLE DRP PUNE AND LEARNED AO HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE RECEIPT OF SUPPORT PAYMENT AMOUNT ING TO RS.3.21 CRORES RECEIVED FROM ASSOCIATED ENTERPRISES IS CAPITAL IN NATURE AND HENCE NOT TAXABLE. 3. THE ASSESSEE HAS RAISED SEVERAL ISSUES AGAINST THE TP ADJUSTMENT MADE IN DESIGN ENGINEERING SERVICES AT RS.27,27,007/ - . THE SECOND ISSUE WHICH IS RA ISED IN THE PRESENT APPEAL IS WITH REGARD TO TRANSFER PRICING ADJUSTMENT MADE IN THE MANUFACTURING FUNCTION AT RS.78,98,570/ - . THE ASSESSEE HAS RAISED GROUNDS OF APPEAL NO.2 AND 3 IN THIS REGARD, RESPECTIVELY. 4. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSEE IS GENERAL IN NATURE, HENCE THE SAME IS DISMISSED. THE GROUND OF APPEAL NO.4 IS NOT PRESSED, HENCE THE SAME IS ALSO DISMISSED. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORT OF COMPUTER SOFTWARE AND O PERATED DIFFERENT DIVISIONS VIZ. OPW FUEL COMPONENTS, HEAIL TRAILER, DESTACO AND WILDEN PUMPS DIVISION AND SOFTWARE DIVISION AND OPW - FLUID TRANS FER DIVISION. THE ASSESSING OFFICER MADE REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA(1) OF THE ACT TO COMPUTE ARM'S LENGTH PRICE IN RELATION TO VARIOUS INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. THE TPO NOTED THAT THE ASSESSEE WAS WHOLLY OWNED SUBSIDIARY OF DOVER (SWITZERLAND) HOLDING LLC. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD UNDERTAKEN VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES WHICH ARE TABULATED UNDER PARA 4 AT 4 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. PAGE 2 OF THE TPOS ORDER. THE ASSESSEE HAD APPLIED THE TNMM METHOD IN BENCHMARKING ITS INTERNATIONAL TRANSACTIONS EXCEPT FOR PAYMENT OF INTEREST ON EXTERNAL COMMERCIAL BORROWINGS WHICH WERE BENCHMARKED ON THE BASIS OF CUP METHOD. THE TPO NOTED THAT THE TOTAL SALES OF ASSESSEE COMPANY WERE RS.26.59 CRORES AND THE ASSESSEE HAD ALSO SHOWN OTHER INCOME OF RS.4.28 CRORES. THE PROFIT BEFORE TAXATION WAS RS.2.69 CRORES, WHICH WORKED OUT TO 8.63% OF INCOME AND 10.21% ON THE NET SALES FOR THE YEAR UNDER CONSIDERATION. THE TP O ALSO NOTED THAT THE ASSESSEE HAD RECEIVED SUPPORT PAYMENT OF RS.3.53 CRORES FROM ITS ASSOCIATED ENTERPRISES WHICH WAS ACCOUNTED FOR AS OTHER INCOME IN ITS ACCOUNT. THE ASSESSEE HAD SELECTED EXTERNAL COMPARABLES AND USING THE MULTIPLE YEAR DATA IN ITS TP STUDY REPORT HAD CLAIMED THAT INTERNATIONAL TRANSACTIONS WERE AT ARM'S LENGTH PRICE. THE TPO THEREAFTER, CONSIDERED VARIOUS DIVISIONS OF THE ASSESSEES BUSINESS SEPARATELY AND ANALYZED THE FUNCTIONAL COMPARABILITY OF THE COMPANIES SELECTED BY THE ASSESSE E AND DURING THE TP PROCEEDINGS, SHOW CAUSED THE ASSESSEE WITH ITS NEW SET OF COMPARABLES IN EACH OF THE DIVISION. IN RESPECT OF SOFTWARE DIVISION, AFTER ALLOWING WORKING CAPITAL ADJUSTMENT, THE TPO A FTER COMPARING THE MARGIN DECLARED BY ASSESSEE WITH MAR GINS OF COMPARABLES FINALLY SELECTED, PROPOSED AN UPWARD ADJUSTMENT OF RS.2,07,52, 507/ - . 6. IN RESPECT OF DESIGN ENGINEERING SERVICES, THE TPO SELECTED FOUR COMPANIES AS FUNCTIONALLY COMPARABLE I.E. KLG SYSTEL LTD., MINDTREE CONSULTING LTD., ROLTA INDIA L TD. AND ACCENTIA TECHNOLOGIES LTD. THE SAID COMPARABLES WERE SELECTED IN VIEW OF DRPS ORDER IN ASSESSMENT YEARS 2008 - 09 AND 2007 - 08. THE PLI OF ASSESSEE AT OP/TC WORKED OUT TO 10% AND THE ARITHMETIC MEAN OF MARGINS OF COMPARABLES WORKED OUT TO 28.67% . THE TPO THUS, PROPOSED TP ADJUSTMENT OF RS.27,37,017/ - . 5 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. 7 . THE NEXT DIVISION WHICH WAS CONSIDERED BY THE TPO WAS THE MARKETING SUPPORT SERVICES AND AFTER SELECTION OF FINAL SET OF COMPARABLES, THE TP ADJUSTMENT OF RS.45,96,481/ - WAS PROPOSED BY THE TPO. 8 . THE NEXT SEGMENT CONSIDERED BY THE TPO WAS THE MANUFACTURING FUNCTION OF THE ASSESSEE. THE TPO NOTED THAT IN THE MANUFACTURING SEGMENT, THE ASSESSEE HAD UNADJUSTED MARGINS OF (NEGATIVE) OP/SALES OF ( - ) 6.00% AS COMPARED TO OP/SALES MARGINS OF EXTERNAL UNCONTROLLED COMPARABLES OF 6.50%. THE TPO NOTED THAT THE ASSESSEE HAD SHOWN LOSS EVEN AFTER IT HAD RECEIVED SUPPORT PAYMENT FROM ITS ASSOCIATED ENTERPRISES. THE SINGLE YEAR MARGINS OF COMPARABLES WORKED OUT TO 6.50% AS COMPARED TO ASSESSEES MARGIN AT ( - ) 6.00%. THE ASSESSEE IN REPLY, SUBMITTED THAT NO ADDITION SHOULD BE MADE AND EVEN IF IT IS MADE, THEN THE SAME SHOULD AMOUNT TO RS.37.93 LAKHS. THE FIRST PLEA OF ASSESSEE OF ALLOWING CAPACITY UTILIZATION AND CARVE OUT TO BE GIVEN AS PER LAST ASSESSMENT YEAR FOR CONSISTENT APPROACH WAS REJECTED. THE TPO WAS OF THE VIEW THAT WHERE THE FACTS OF THE YEAR WERE DIFFERENT, THERE WAS NO BAR IN TAKING SEPARATE STAND ON THE ISSUE. THE ASSESSEE DURING THE YEAR HAD RECEIVED SUPPORT PAYMENT WHICH WAS NOT MADE AVAI LABLE IN THE LAST ASSESSMENT YEAR AND IT WAS OBSERVED BY THE TPO THAT THE CAPACITY UTILIZATION WAS NOTHING BUT THE PAYMENT WHICH HAD BEEN RECEIVED BY THE ASSESSEE APROPOS ITS EFFORTS ON BEHALF OF THE ASSOCIATED ENTERPRISES. THE TPO HELD THAT EITHER THERE SHOULD BE NO ADJUSTMENT FOR CAPACITY UNDER - UTILIZATION AND ADJUSTMENT TO BE WORKED OUT FOLLOWING TNMM METHOD AS APPLIED BY THE ASSESSEE COMPANY OR THERE SHOULD BE CLAIM OF COMPENSATION FROM ASSOCIATED ENTERPRISES AS HAPPENED IN SUBSEQUENT YEAR. THE TPO AP PLYING THE TNMM METHOD AS MOST APPROPRIATE METHOD PROPOSED TP ADJUSTMENT OF RS.78,98,570/ - ON ACCOUNT OF NON RECEIPT OF SUPPORT PAYMENT TOWARDS MARKETING EXPENSES AND INITIAL START UP AVERAGE CHARGES. 6 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. 9 . IN RESPECT OF ISSUE OF RISK ADJUSTMENT, THE TPO H ELD THE ASSESSEE TO BE RISK BEARING ENTITY AND THE CONTENTION OF ASSESSEE THAT IT WAS RISK FREE ENTITY IN THE TRANSFER PRICING REPORT WAS HELD TO BE INCORRECT. HOWEVER, IN RESPECT OF RISK ANALYSIS OF EACH OF THE COMPARABLES IN C OMPARISON WITH RISK MATRIX OF ASSESSEE THOUGH THE TPO NOTES THAT THE AUDITOR HAD NOT CARRIED OUT SAID ANALYSIS BUT IN THE ABSENCE OF ANY FINDING ON THIS, HE WAS OF THE VIEW THAT THERE WAS NO DIFFERENCE IN RISK PROFILE OF THE ASSESSEE AND THE COMPARABLES. ACCORDINGLY, IT WAS HELD TH AT THERE WAS NO CASE FOR MAKING COMPARABILITY ADJUSTMENT ON ACCOUNT OF RISK. HE FURTHER EXAMINED THE CONTENTION OF ASSESSEE FOR RISK ADJUSTMENT AND NOTED THAT THE CLAIM OF ASSESSEE LACK S CRITICAL INFORMATION WHICH WAS PRE - REQUISITE TO EXAMINE THE VALIDITY OF CLAIM OF RISK ADJUSTMENT. HENCE, THE SAME WAS REJECTED. 10. THE ASSESSING OFFICER ISSUED DRAFT ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP), WHO GAVE CERTAIN DIRECTIONS TO THE ASSESSING OFF ICER / TPO. THE ASSESSING OFFICER IN THE FINAL ORDER PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT FIRST CONSIDERED THE GROUNDS OF OBJECTIONS RAISED BY THE ASSESSEE BEFORE THE DRP AND THE ORDER OF DRP GIVING DIRECTIONS. IN RESPECT OF SOFTWARE AC TIVITY, THE DRP GAVE CERTAIN DIRECTIONS TO THE ASSESSING OFFICER / TPO IN RESPECT OF VARIOUS COMPARABLE COMPANIES. THE ASSESSING OFFICER VIDE PARA 9 HOLDS THAT AFTER GIVING EFFECT TO THE DIRECTIONS OF THE DRP, THE MARGINS OF EXTERNAL COMPARABLES FOR SOFTW ARE DIVISION AND ALLOWING WORKING CAPITAL ADJUSTMENT, THEN WORKS OUT AT 18.86% AS AGAINST 13.86% SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER HELD THAT SINCE IT WAS WITHIN +/ - 5% RANGE AS ENVISAGED IN SECTION 92C(2) OF THE ACT, THE ADDITION MADE IS THUS, DELETED. 11. IN RESPECT OF DESIGN ENGINEERING SERVICES, THE ASSESSING OFFICER WAS DIRECTED TO EXCLUDE KLG SYSTEL LTD. FROM FINAL LIST OF COMPARABLES AND THE SAME WAS SO EXCLUDED BY THE ASSESSING OFFICER. FURTHER, THE DRP DIRECTED THE ASSESSING 7 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. OFFICER TO ALLOW WORKING CAPITAL ADJUSTMENT OF 2.40% AS WORKED OUT BY THE TPO AND THE SAME WAS ALSO GRANTED AND THE FINAL ARM'S LENGTH PRICE MARGINS OF DESIGN ENGINEERING SEGMENT WAS WORKED OUT BY TAKING THREE COMPARABLES I.E. ACCENTIA TECHNOLOGIES LTD. , MINDTREE CO NSULTING LTD. AND ROLTA INDIA LTD. THE FINAL MARGINS OF COMPARABLES AFTER WORKING CAPITAL ADJUSTMENT WORKED OUT TO 28.62% AS AGAINST THE MARGINS SHOWN BY THE ASSESSEE AND THE ADDITION ON ACCOUNT OF ARM'S LENGTH PRICE WORKED OUT TO 27,27,007/ - . 12. IN RES PECT OF MARKETING SUPPORT SERVICES, FOLLOWING THE DIRECTIONS OF DRP, THE ASSESSING OFFICER HELD THAT NO ADDITION IS TO BE MADE TO THE SAID DIVISION. IN RESPECT OF MANUFACTURING ACTIVITY, THE ADDITION PROPOSED BY THE TPO AT RS. 78,98,570/ - WAS CONFIRMED IN THE HANDS OF ASSESSEE BY THE DRP AND HENCE, THE SAME WAS ADDED IN THE HANDS OF ASSESSEE. 13. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF ASSESSING OFFICER IN RESPECT OF ADDITION OF RS.27,27,007/ - IN DESIGN ENGINEERING SERVICES AND RS.78,98,570/ - IN MAN UFACTURING FUNCTION DIVISION. 14. THE FIRST ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO DESIGN ENGINEERING SERVICES, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF ASSESSING OFFICER/TPO/DRP IN HOLDING THAT ACCENTIA TECHNOLOGIES LTD. AND ROLTA INDIA LTD. WER E GOOD COMPARABLES WITH THE DESIGN ENGINEERING SERVICES SEGMENT OF THE ASSESSEE. THE ASSESSEE IS ALSO AGGRIEVED BY THE ORDER OF DRP IN HOLDING THAT KLG SYSTEL LTD. WAS NOT A GOOD COMPARABLE. IN RESPECT OF KLG SYSTEL LTD., AN ALTERNATE AND WITHOUT PREJUDI CE ISSUE WAS RAISED BY THE ASSESSEE THAT ONLY SEGMENTAL OP/ T C MARGINS AT RS.13.69% OF THE SAID EXTERNAL COMPARABLES WERE TO BE CONSIDERED INSTEAD OF COMPUTING OP/TC MARGIN ON TOTALITY BASIS AT 21.69%. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE FIRST OBJECTION OF ASSESSEE WAS 8 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. TO INCLUSION OF ROLTA INDIA LTD., WHICH HAD A DIFFERENT YEAR ENDING. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SAID CONCERN WAS EXCLUDED FROM THE FINAL LIST OF COMPARABLES ON ACCOUNT OF HAVING DIFFERENT YEAR ENDING. REFERENCE WAS MADE TO THE ORDER OF TRIBUNAL IN ASSESSMENT YEAR 2009 - 10 IN THIS REGARD. 15. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, ON THE OTHER HAND, RELIED ON THE ORDERS OF DRP AND THE ASSESSING OFFICER IN THIS REGARD. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH IS ARISING VIDE GROUND OF APPEAL NO.2 IS IN RESPECT OF EXCLUSION / INCLUSION OF CERTAIN CONCERNS IN THE FINAL LIST OF COMPARABLES. THE FIRST CONCERN WHICH IS OBJECTED TO BY THE ASSESSEE I.E. AGAINST ITS INCLUSION IS ROLTA INDIA LTD. ON THE PREMISE TH AT IT HAS DIFFERENT YEAR ENDING. THE YEAR ENDING OF ASSESSEES BUSINESS WAS 31.03.2010 AS AGAINST THE YEAR ENDING OF ROLTA INDIA LTD. ON 30.06.2009. THE PLEA OF ASSESSEE BEFORE US WAS THAT THE MARGINS OF SAID CONCERN WERE INCLUDED IN THE FINAL LIST OF MARGINS. 17. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10 IN ITA NO.411/PUN/20 14 AND VIDE ORDER DATED 19.04.2017, THE TRIBUNAL HELD AS UNDER: - 24. THE HONBLE BOMBAY HIGH COURT IN CIT VS. PTC SOFTWARE (I) PVT. LTD. IN INCOME TAX APPEAL NO.732/2014 VIDE JUDGMENT DATED 26.09.2016 HAVE HELD THAT WHERE THE CONCERN HAS DIFFERENT ACCOUNT ING PERIOD, THEN THE SAME CANNOT BE COMPARED AS COMPARABLE. THE HONBLE BOMBAY HIGH COURT HELD THAT AS PER PROVISIONS OF SECTION 10B(4) OF THE INCOME TAX RULES, 1962 CLEARLY MANDATES THAT THE DATA TO BE USED FOR COMPARABILITY ANALYSIS SHOULD BE OF THE SAM E FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTIONS WERE ENTERED INTO BY THE TESTED PARTY. IN VIEW THEREOF, IT HELD THAT WHERE A CONCERN HAS DIFFERENT ACCOUNTING PERIOD, THEN THE MARGINS OF SAID CONCERNS ARE NOT COMPARABLE. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT ROLTA INDIA LTD. HAVING DIFFERENT YEAR CLOSING THAN THE ASSESSEE BEFORE US CANNOT BE SELECTED AS COMPARABLE AND CONSEQUENTLY, DIRECT THE ASSESSING OFFICER TO EXCLUDE THE MARGINS OF THE SAID CONCERN FROM THE MEAN MARGINS OF COMPA RABLES. 9 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. 18. APPLYING THE SAID PROPOSITION TO THE ISSUE RAISED BEFORE US IN THE INSTANT ASSESSMENT YEAR, WE HOLD THAT ROLTA INDIA LTD. HAVING DIFFERENT ACCOUNTING PERIOD CANNOT BE SELECTED AS COMPARABLE AND HENCE, THE SAME IS DIRECTED TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. 19. NOW, COMING TO THE NEXT ISSUE OF CONCERN ACCENTIA TECHNOLOGIES LTD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID CONCERN WAS NEVER SELECTED AS COMPARABLE IN ANY OF THE EARLIER YEARS A ND IN ANY CASE, THE SAID CONCERN WAS HIGH END KPO SERVICE PROVIDER AND HENCE, WAS NOT COMPARABLE. IN THIS REGARD, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE TRIBUNAL IN ITO VS. SYSTIME GLOBAL SOLUTIONS LTD. (2017) 79 TAXMANN.COM 151 (PUNE - TRIB.) . 2 0. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF ASSESSING OFFICER AND DRP. 21. WE FIND THAT THE ISSUE OF EXCLUSION OF ACCENTIA TECHNOLOGIES LTD. FROM FINAL LIST OF COMPARABLES BEING HIGH END KPO SERVICE PROVIDER , AROSE BEFORE THE TRIBUNAL IN ITO VS. SYSTIME GLOBAL SOLUTIONS LTD. (SUPRA) AND FOLLOWING THE RATIO LAID DOWN IN M/S. APTARA TECHNOLOGIES PVT. LTD. VS. ACIT (2016) 72 TAXMANN.COM 352 (PUNE - TRIB.), THE TRIBUNAL HELD AS UNDER: - 12. THE ISSUE ARISING IN THE PRESENT APPEAL REGARDING EXCLUSION OF ACCENTIA TECHNOLOGIES LTD. FROM THE FINAL LIST OF COMPARABLES HAS BEEN ADJUDICATED BY THE TRIBUNAL IN M/S. APTARA TECHNOLOGIES PVT. LTD. VS. ACIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, IT WAS HELD AS UNDE R: - 12. THE FIRST CONTENTION OF THE ASSESSEE WAS WITH REGARD TO EXCLUSION OF MARGINS OF ACCENTIA TECHNOLOGIES LTD. FROM THE FINAL LIST OF COMPARABLES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID CONCERN WAS PICKED UP AS COMPARABLE BY THE TPO IN THE PRECEDING YEARS IN THE CASE OF ASSESSEE ITSELF AND THE TRIBUNAL VIDE ITS ORDERS DATED 02.02.2015 AND 29.04.2015 RESPECTIVELY HAD HELD THAT THE SAID CONCERN ACCENTIA TECHNOLOGIES LTD. WAS NOT COMPARABLE FOR THOSE YEARS DUE T O EXTRAORDINARY EVENTS. IN RESPECT OF EXTRAORDINARY EVENTS TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE 10 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. ASSESSEE POINTED OUT THAT THERE WAS ACQUISITION OF IQ GROUP OF COMPANIES IN THE UNITED KINGDOM AND IN THIS REGARD, OUR ATTENTION WAS DRAWN TO THE DIRECTORS REPORT OF THE SAID CONCERN, COPY OF WHICH IS PLACED AT PAGE 467 OF THE PAPER BOOK. FURTHER, THERE WAS AMALGAMATION OF ASSCENT INFOSERVE PVT. LTD. WITH THE COMPANY AS PER NOTINGS ON PAGE 472 OF PAPER B OOK. HENCE, THERE WAS THE CASE OF AMALGAMATION AND ACQUISITION, WHICH CONSTITUTED EXTRAORDINARY EVENTS TAKEN PLACE FOR THE YEAR UNDER CONSIDERATION. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2010 - 11, THE TRIBUNAL IN VARIOUS OTHER CASES HAVE HELD THAT ACCENTIA TECHNOLOGIES LTD. WAS NOT COMPARABLE TO ENTITIES ENGAGED IN ITES ACTIVITIES SINCE EVEN DURING THE YEAR UNDER CONSIDERATION, THE SAID ENTITY HAD EXTRAORDINARY EVENTS. IN THIS REGARD, RELIANCE WAS PLACED ON FOLLOWING DECISIONS: - A. TECHBOOKS INTERNATIONAL PVT. LTD. VS. DCIT (ITA NO.240/DEL/2015) B. XCHANGING TECHNOLOGY SERVICES INDIA PVT. LTD. VS. DCIT (ITA NO.1222/DEL/2015 C. AMBA RESEARCH (INDIA) PVT. LTD. VS. DCI T (ITA NO.286/BANG.2015 D. COGNIZANT TECHNOLOGIES SERVICES PVT. LTD. VS. DCIT (ITA NO.459/HYD/2015 13. UNDER THE TRANSFER PRICING PROVISIONS, WHILE BENCHMARKING THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES, AN ENDEAVOUR IS TO DETERMINE THE ARM'S LENGTH PRICE OF SAID TRANSACTIONS AND FOR THAT PURPOSE, COMPARISON IS MADE TO THE MARGINS OF UNRELATED PARTIES, WHICH ARE FUNCTIONALLY SIMILAR TO THE ASSESSEE. WHILE BENCHMARKING THE INTERNATIONAL TRANSACTION, AN ENDEA VOUR IS TO BE MADE TO SELECT SUCH CONCERNS WHICH ARE FUNCTIONALLY SIMILAR AND THE MARGINS OF THE SAID CONCERNS ARE THEN, TO BE APPLIED IN ORDER TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION UNDERTAKEN. THE ASSESSEE BEFORE US WAS ENG AGED IN PROVIDING ITES SERVICES AND WHILE BENCHMARKING INTERNATIONAL TRANSACTION OF THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES, THE TPO HAD SELECTED ACCENTIA TECHNOLOGIES LTD. AS FUNCTIONALLY SIMILAR AND HAD INCLUDED THE MARGINS OF SAID CONCERN IN ORDER T O WORK OUT THE ARITHMETIC MEAN OF FINAL SET OF COMPARABLES. 14. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 IN ITA NO.2235/PN/2012, ORDER DATED 02.02.2015 HAD HELD THAT THE SAID CONCERN COULD NOT BE CONSIDERED AS COMPARAB LE BECAUSE OF CERTAIN EXTRAORDINARY EVENTS. THE SAID RATIO WAS ALSO APPLIED IN ASSESSEES OWN CASE WHILE BENCHMARKING THE INTERNATIONAL TRANSACTION OF ASSESSEE WITH ITS ASSOCIATE ENTERPRISES IN ASSESSMENT YEAR 2009 - 10 IN ITA NO.267/PN/2014, ORDER DATED 29 .04.2015. THE TRIBUNAL VIDE ORDER DATED 02.02.2015 HAD HELD THAT THE CONCERN ACCENTIA TECHNOLOGIES LTD. COULD NOT BE INCLUDED IN THE FINAL SET OF COMPARABLES HOLDING AS UNDER: - 13. NEXT, ASSESSEE HAD CONTENDED THAT ACCENTIA TECHNOLOGIES LTD. HAS BEEN WRO NGLY INCLUDED BY THE TPO AS A COMPARABLE CONCERN. AS PER THE ASSESSEE, THE SAID CONCERN WAS ENGAGED IN FUNCTIONALLY DIFFERENT ACTIVITIES. IT WAS POINTED OUT THAT THE SAID CONCERN IS ENGAGED IN PROVIDING MEDICAL TRANSACTION, BILLING AND CODING SERVICES, A PPLICATION DEVELOPMENT & CUSTOMIZATION (SEGMENTAL DATA NOT AVAILABLE). MOREOVER, IT WAS CONTENDED THAT THE SALES/TURNOVER OF THE SAID CONCERN WAS MORE THAN RS.50 CRORES FOR THE YEAR UNDER CONSIDERATION WHICH DID NOT MEET WITH TURNOVER FILTER 11 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. APPLIED BY TH E ASSESSEE. ON THIS POINT, IT WAS POINTED OUT THAT THE ASSESSEE HAD SELECTED SALES/TURNOVER FILTER OF 1 - 50 CRORES I.E. ANY CONCERNS HAVING A TURNOVER EXCEEDING RS.50 CRORES WERE EXCLUDED. THIRDLY, IT WAS POINTED OUT THAT THE ACTIVITIES OF THE SAID CONCER N WERE NOT COMPARABLE TO THE ACTIVITIES OF THE ASSESSEE. 14. THE TPO HAS NOTED THE AFORESAID OBJECTIONS OF THE ASSESSEE IN PARA 18.1 OF HIS ORDER AND HAS REJECTED THE SAME BY MERELY NOTICING THAT 75% OF THE REVENUE/INCOME OF THE SAID CONCERN IS FROM ITES AND THEREFORE IT IS TO BE CONSIDERED AS A COMPARABLE. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS PUT - FORTH BEFORE THE TPO IN ORDER TO JUSTIFY EXCLUSION OF THE SAID CONCERN FROM THE LIST OF COMPARABLES. IN PARTICUL ARLY, IT HAS BEEN POINTED OUT THAT FOR THE VERY SAME ASSESSMENT YEAR, THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. VS. ITO, (2013) 38 TAXMANN.COM 55 (BANG.) HAS EXCLUDED THE SAID CONCERN FROM THE LIST OF C OMPARABLES IN A SIMILAR SITUATION FOLLOWING THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMITED VS. DCIT, (2013) 32 TAXMANN.COM 21 (HYD.). 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRESENTATIVE FOR THE ASSESSEE AND ALSO THE STAND OF THE REVENUE AS EMERGING FROM THE ORDER OF THE TPO. IN OUR VIEW, THE RATIO LAID DOWN BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS (INDIA) PRIVATE LIMITED (SUP RA) AND BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SYMPHONY MARKETING SOLUTIONS INDIA PVT. LTD. (SUPRA) IS SQUARELY APPLICABLE TO THE PRESENT CASE ALSO. THE AFORESAID BENCHES OF THE TRIBUNAL FOUND THAT DURING THE YEAR UNDER CONSIDERATION THERE WERE EXTRAORDINARY EVENTS THAT TOOK PLACE IN THE SAID CONCERN WHICH WARRANTED EXCLUSION OF THIS COMPANY AS A COMPARABLE. WE THEREFORE HOLD THAT THE SAID CONCERN CANNOT BE CONSIDERED AS A COMPARABLE. 15. FURTHER, SIMILAR PROPOSITION HAS BEEN LAID DOWN BY DIFFERENT BENCHES OF TRIBUNAL WHILE DECIDING THE APPEALS RELATING TO ASSESSMENT YEAR 2010 - 11 AND IT HAS BEEN HELD THAT BECAUSE OF EXTRAORDINARY EVENTS DURING THE YEAR, THE CONCERN ACCENTIA TECHNOLOGIES LTD. WAS NOT COMPARABLE TO THE ENTITIES ENGAGED IN IT ES. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT ACCENTIA TECHNOLOGIES LTD. IS TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. 13. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN M/S. APTARA TECHNOLOGIES PVT. LTD. VS. ACIT (SUPRA) AND SINCE THE CONCERN ACCENTIA TECHNOLOGIES LTD. WAS ENGAGED IN KPO SEGMENT AND ALSO BECAUSE OF EXTRAORDINARY EVENT DURING THE YEAR, IS TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES. ACCORDINGLY, WE HOLD SO. 22. FOLLOWI N G THE SAME PARITY OF REASONING, WE HOLD THAT ON THE GROUND THE SELECTED CONCERN I.E. ACCENTIA TECHNOLOGIES LTD. WAS ENGAGED IN KPO SERVICES, THEN THE MARGINS OF SAME CANNOT BE COMPARED WITH THE MARGINS OF ASSESSEE BEING FUNCTIONALLY DIFFERENT. ACCORDINGLY , WE HOLD SO AND DIRECT THE ASSESSING OFFICER / TPO TO EXCLUDE ACCENTIA TECHNOLOGIES LTD. FROM FINAL LIST OF COMPARABLES. 12 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. 23. THE NEXT ISSUE WHICH HAS BEEN RAISED IN THE DESIGN ENGINEERING SERVICES BY THE ASSESSEE IS WITH REGARD TO SELECTION OF KLG SYSTEL LTD. THE TPO HAD SELECTED THE SAID CONCERN BUT THE SAME WAS DIRECTED TO BE EXCLUDED BY THE DRP, HENCE, THE ASSESSING OFFICER DID NOT INCLUDE THE SAME IN THE FINAL SET OF COMPARABLES. 24. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FIRST OF ALL POINTED OUT THAT THE SAID CONCERN I.E. KLG SYSTEL LTD. WAS SELECTED AS COMPARABLE IN EARLIER YEARS AND THE MARGINS OF SEGMENTAL PROFITS WERE APPLIED AS DIRECTED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2009 - 10. THE TRIBUNAL VIDE PARA 25 HELD AS UNDER: - 25. ANOTHER ISSUE WHICH HAS BEEN RAISED BY THE ASSESSEE WITH REGARD TO DESIGN ENGINEERING SERVICES DIVISION IS THAT WHILE SELECTING THE KLG SYSTEL LTD., THE TPO HAS ERRED IN NOT APPLYING THE SEGMENTAL PROFITS OF THE SAID CONCERN WHILE BENC HMARKING THE INTERNATIONAL TRANSACTIONS. WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT THE MARGINS OF THE SAID CONCERNS WHICH ARE FUNCTIONALLY COMPARABLE ARE TO BE SELECTED AND APPLIED AND IN CASE ANY CONCERN IS ENGAGED IN VARIOUS ACTIVITIES, THEN THE SE GMENTAL DETAILS OF THE ACTIVITY, WHICH IS FUNCTIONALLY COMPARABLE TO THE ASSESSEE ARE TO BE APPLIED IN ORDER TO WORK OUT THE MARGINS OF THE SAID CONCERN. ACCORDINGLY, WE HOLD SO AND DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE MARGINS OF KLG SYSTEL LTD. THE GROUND OF APPEAL NO.2.3 IS THUS, ALLOWED. 25. FOLLOWING THE SAME PARITY OF REASONING, WE DIRECT THE ASSESSING OFFICER / TPO TO APPLY SEGMENTAL DETAILS OF ACTIVITY WHICH IS FUNCTIONALLY COMPARABLE TO THE ASSESSEE IN ORDER TO WORK OUT THE MARGINS OF S AID CONCERN. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER / TPO TO RE - COMPUTE THE MARGINS OF KLG SYSTEL LTD. AND INCLUDE THE SAME IN FINAL LIST OF COMPARABLES. 26. BEFORE PARTING, WE MAY ALSO REFER TO THE PLEA RAISED BY THE ASSESSEE DURING THE COURSE OF HEARING I.E. IN RESPECT OF CONCERN NEILSOFT LTD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD POINTED OUT THAT FOR THE PAST FOUR YEARS, THE SAID CONCERN WAS BEING INCLUDED AS BEING FUNCTIONALLY COMPARABLE TO THE ASSESSEE. HOWEVER , THE SAID CONCERN WAS EXCLUDED BECAUSE OF ITS NEGATIVE MARGINS DURING THE YEAR AT ( - ) 4.97%. THE FIRST POINT WHICH WAS RAISED 13 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE SAID CONCERN WAS NOT PERSISTENT LOSS MAKING CONCERN AS IN ALL THE EARLIER YEARS , T HE SAID CONCERN HAD SHOWN PROFITS. FURTHER, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. WELSPUM ZUCCHI TEXTILES LTD. (2017) 77 TAXMANN.C OM 137 (BOM), WHEREIN IT HAS BEEN HELD THAT THE CONCERNS WHICH WERE SELECTED AS COMPARABLE FOR EARLIER YEARS COULD NOT BE EXCLUDED ON THE GROUND THAT THEY WERE NOT COMPARABLE ONLY BECAUSE OF LOSSES IN THE SAID ASSESSMENT YEARS. THE HONBLE BOMBAY HIGH COU RT FURTHER HELD THAT THE ENQUIRY OUGHT TO HAVE BEEN DONE BY THE REVENUE WHETHER LOSS WAS SYMPTOM OF REFERENCE POINTS MENTIONED IN RULE 10B(2) OF THE INCOME TAX RULES, 1962 MAKING IT NON COMPARABLE. 27. ON THE PERUSAL OF RECORD AND COMPARABLE CHART SUBMI TTED BY THE ASSESSEE DURING THE COURSE OF HEARING, WE FIND THAT NEILSOFT LTD. WAS SELECTED AS COMPARABLE IN ASSESSMENT YEAR 2007 - 08, WHEREIN ITS MARGINS WERE 8.1%; THEN IN ASSESSMENT YEAR 2008 - 09 WITH MARGIN OF 2.42% AND IN ASSESSMENT YEAR 2009 - 10 WITH MAR GIN OF 8.40% . DURING THE YEAR UNDER CONSIDERATION, THE SAID CONCERN HAS SHOWN NEGATIVE MARGINS I.E. ( - ) 4.97% , BECAUSE OF THE SAME, THE ASSESSING OFFICER/TPO HAS EXCLUDED THE SAID CONCERN FROM FINAL LIST OF COMPARABLES. IT IS NOT CASE OF REVENUE AUTHORIT IES THAT THE SAID CONCERN IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE IN THE INSTANT ASSESSMENT YEAR. IN THE ABSENCE OF ANY FINDING IN THIS REGARD, THE NEXT ASPECT WHICH HAS TO BE CONSIDERED IS WHETHER THE CONCERN NEILSOFT LTD. WAS PERSISTENT LOSS MAKI NG CONCERN. HOWEVER, FROM THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT IN ALL THE EARLIER YEARS, WHEREIN THE SAID CONCERN WAS SELECTED AS COMPARABLE AND ITS MARGINS WERE APPLIED AS PART OF FINAL SET OF COMPARABLES, THE SAID CONCERN WAS SHOWING PROFITS AND ONLY IN THIS YEAR IT HAD SHOWN MARGINAL LOSS; HENCE THERE IS NO MERIT IN EXCLUDING THE SAID CONCERN FROM THE FINAL SET OF COMPARABLES IN THE INSTANT ASSESSMENT YEAR ON THE GROUND THAT IT HAS SHOWN 14 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. LOSSES. IN THE ABSENCE OF REVENUE ESTABLISHING THAT TH E SAID CONCERN WAS PERSISTENT LOSS MAKING CONCERN, MERELY BECAUSE THE SAID CONCERN DURING THE YEAR HAD SHOWN LOSSES, THE MARGINS OF THE SAID CONCERN COULD NOT BE EXCLUDED. ACCORDINGLY, WE HOLD SO AND DIRECT THE ASSESSING OFFICER TO INCLUDE THE MARGINS OF SAID CONCERN IN ORDER TO BENCHMARK INTERNATIONAL TRANSACTIONS OF DESIGN ENGINEERING SERVICES DIVISION OF ASSESSEE. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 2 8 . NOW, COMING TO THE NEXT ISSUE I.E. THE MANUFACTURING DIVISION. THE ASSESSEE HAD SOUGHT CARVE OUT FOR CAPACITY UNDER - UTILIZATION DURING THE YEAR UNDER CONSIDERATION. THE TPO WAS OF THE VIEW THAT SINCE THE SUPPORT PAYMENT WAS RECEIVED FROM ASSOCIATED ENTERPRISES AT RS.3,16,47,207/ - , NO ADJUSTMENT ON ACCOUNT OF CAPACITY UND ER - UTILIZATION IS TO BE ALLOWED IN THE HANDS OF ASSESSEE AND IN ANY CASE, THE REMUNERATION FOR SUPPORT PAYMENT SHOULD HAVE BEEN ASKED FOR FROM THE ASSOCIATED ENTERPRISES. THE CASE OF ASSESSEE ON THE OTHER HAND, IS THAT ADMITTEDLY, THERE IS CAPACITY UNDER - UTILIZATION FOR WHICH CARVE OUT SHOULD BE AFFORDED IN THE HANDS OF ASSESSEE . I N RESPECT OF SUPPORT PAYMENT RECEIVED FROM THE ASSOCIATED ENTERPRISES , T HE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE SAID WAS VOLUNTARY PAYMENT MAD E BY THE ASSOCIATED ENTERPRISES AND THE ASSESSEE WAS NOT IN A POSITION TO ASK FOR FURTHER SUPPORT PAYMENT. HE FURTHER STATED THAT SINCE THE SUPPORT GIVEN BY THE ASSOCIATED ENTERPRISES WAS GRATUITOUS , IT WAS NOT WITHIN THE POWER OF TPO TO MAKE AFORESAID AD JUSTMENT IN THE HANDS OF ASSESSEE. HE FURTHER POINTED OUT THAT WHILE DECIDING SIMILAR ISSUE IN THE PRECEDING YEAR WHEN NO GRATUITOUS PAYMENT WAS RECEIVED FROM THE ASSOCIATED ENTERPRISES, THE TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE IN TURN, RELYING ON THE R ATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. WIRLPOOL (2016) 129 DTR 169 (BOM). HE FURTHER STATED THAT THE ISSUE WHICH NEEDS TO BE ADJUDICATED IN THE PRESENT APPEAL IS VIDE GROUND OF APPEAL NO.3.1. THE GROUND OF 15 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. APPEAL NO.3.2 TO 3.4 ARE NOT PRESSED AND THE GROUND OF APPEAL NO.3.5 WOULD BECOME ACADEMIC. 2 9 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF DRP/ASSESSING OFFICER/TPO. 30 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE I SSUE WHICH IS ARISING IN THE PRESENT APPEAL BY WAY OF GROUND OF APPEAL NO.3.1 IS AGAINST NON - ALLOWANCE OF CAPACITY UNDER - UTILIZATION BY THE ASSESSING OFFICER IN THE MANUFACTURING DIVISION OF THE ASSESSEE. THE PLEA OF ASSESSEE WAS THAT SINCE IT HAS NOT UTI LIZED ITS CAPACITY TO THE MAXIMUM, ADJUSTMENT ON ACCOUNT OF CAPACITY UNDER - UTILIZATION SHOULD BE ALLOWED TO THE ASSESSEE. THE UNIT OF ASSESSEE WAS ESTABLISHED IN ASSESSMENT YEAR 2008 - 09 AND OPERATED FOR THREE MONTHS. THE ASSESSEE WAS 100% CAPTIVE SERVICE PROVIDER TO ITS ASSOCIATED ENTERPRISES. DURING THE YEAR UNDER CONSIDERATION, IN THE MANUFACTURING UNIT, THE ASSESSEE WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS BY USING TNMM METHOD HAD SOUGHT ADJUSTMENT ON ACCOUNT OF CAPACITY UNDER - UTILIZATION AT RS. 1 ,39,52,668/ - . THE ASSESSEE HAD CLAIMED SIMILAR CARVE OUT IN ASSESSMENT YEAR 2008 - 09 AT RS.1,17,58,754/ - WHICH WAS ALLOWED TO THE ASSESSEE BY THE ASSESSING OFFICER / TPO. FURTHER, IN ASSESSMENT YEAR 2009 - 10, THE ASSESSEE HAD SOUGHT CARVE OUT OF RS.1,61,09 ,646/ - WHICH WAS NOT ALLOWED BY THE TPO ON THE GROUND THAT IN THE SUCCEEDING YEAR I.E. IN THE YEAR UNDER APPEAL, THE ASSOCIATED ENTERPRISES HAD GIVEN COMPENSATION TO THE ASSESSEE FOR UNDER - UTILIZATION. THE TPO WAS OF THE VIEW THAT SIMILAR COMPENSATION SHO ULD BE GIVEN IN ASSESSMENT YEAR 2009 - 10. THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL AGAINST NON - ALLOWANCE OF CAPACITY UNDER - UTILIZATION. THE TRIBUNAL IN ITA NO.411/PUN /2014, RELATING TO ASSESSMENT YEAR 2009 - 10, VIDE ORDER DATED 19.04.2017 FIRST DEC IDED THE ISSUE OF NON RECEIPT OF SUPPORT PAYMENT FROM ASSOCIATED ENTERPRISES AND WHETHER ANY ADDITION COULD BE 16 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. MADE IN THIS REGARD VIDE PARAS 10 TO 13. THEREAFTER, THE TRIBUNAL VIDE PARA 14 DECIDED THE ISSUE OF ALLOWABILITY OF ADJUSTMENT ON ACCOUNT OF CAP ACITY UNDER - UTILIZ ATION. THE RELEVANT PARAS IN THE ORDER OF TRIBUNAL READ AS UNDER: - 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED BY WAY OF GROUND OF APPEAL NO.2 IS IN RELATION TO THE APPLICATION OF TRANSFER PRICING P ROVISIONS TO THE MANUFACTURING DIVISION OF THE ASSESSEE, WHEREIN THE ASSESSEE WAS MANUFACTURING SPECIALIZED HIGH PRECISION PRODUCTS. THE MANUFACTURING UNIT WAS ESTABLISHED IN THE ASSESSMENT YEAR 2008 - 09 AND OPERATED FOR THREE MONTHS. THE TOTAL SALES OF T HE GOODS MANUFACTURED WERE FOR DOMESTIC MARKET, EXCEPT TO THE EXTENT OF 10%. HOWEVER, SOURCING FOR THE MANUFACTURING WAS FROM THE ASSOCIATE ENTERPRISES. THE ASSESSEE WAS 100% CAPTIVE SERVICE PROVIDER TO ITS ASSOCIATE ENTERPRISES. DURING THE YEAR UNDER C ONSIDERATION, IN THE MANUFACTURING UNIT, THE ASSESSEE HAD UNADJUSTED MARGINS OF OP/SALES AT ( - ) 68.59%. WHILE BENCHMARKING ITS INTERNATIONAL TRANSACTIONS BY USING TNMM METHOD AS MOST APPROPRIATE METHOD, THE ASSESSEE IN THE TP STUDY REPORT WORKED OUT THE A DJUSTMENT ON ACCOUNT OF CAPACITY UNDER - UTILIZATION AT RS.1,61,09,646/ - . SIMILAR ADJUSTMENT OF UNDER - UTILIZATION OF CAPACITY WAS CARVED OUT AND ALLOWED TO THE ASSESSEE BY THE ASSESSING OFFICER IN THE PRECEDING YEAR. SINCE THIS WAS THE FIRST COMPLETE YEAR OF OPERATION AND THE MANUFACTURING UNIT WAS IN THE NASCENT STAGE, THE ASSESSEE INCURRED LOSSES AND ASKED FOR AFORESAID ADJUSTMENTS. DURING THE SUCCEEDING YEAR I.E. ASSESSMENT YEAR 2010 - 11, THERE WERE ALSO LOSSES. THE TPO NOTED THAT IN THE SUCCEEDING YEAR , THE ASSOCIATE ENTERPRISES HAD GIVEN COMPENSATION TO THE ASSESSEE FOR UNDER - UTILIZATION. THE TPO WAS OF THE VIEW THAT SIMILAR ADJUSTMENT SHOULD HAVE BEEN ALLOWED BY THE ASSOCIATE ENTERPRISES FOR THE YEAR UNDER CONSIDERATION ALSO. REJECTING THE PLEA OF A SSESSEE TO ALLOW CAPACITY UNDER - UTILIZATION ADJUSTMENT, THE TPO WAS OF THE VIEW THAT ON USING EXTENDED CUP METHOD FOR VALUATION OF SUPPORT PAYMENTS, THE ASSESSEE SHOULD HAVE RECEIVED SUM OF RS.1,65,23,053/ - ON ACCOUNT OF SUPPORT PAYMENTS TOWARDS MARKETING EXPENSES AND INITIAL START - UP OVERHEAD CHARGES. HENCE, TP ADJUSTMENT ON ACCOUNT OF NON - RECEIPT OF SAID SUPPORT PAYMENTS TOWARDS MARKETING EXPENSES AND INITIAL START - UP OVERHEAD CHARGES AT RS.1.65 CRORES WAS MADE IN THE HANDS OF ASSESSEE. THERE ARE TWO IS SUES ARISING IN THE PRESENT GROUND OF APPEAL AS TO WHETHER THE ASSESSEE IS ENTITLED TO THE ADJUSTMENT FOR CAPACITY UNDER - UTILIZATION AND IN THE ALTERNATE, WHETHER TP ADJUSTMENT COULD BE MADE ON ACCOUNT OF NON - RECEIPT OF SUPPORT PAYMENTS FROM THE ASSOCIATE ENTERPRISES I.E. ADJUSTMENT MADE ON ACCOUNT OF AN ARRANGEMENT WHICH DOES NOT EXIST. 11. FIRST, TAKING UP THE ALTERNATE BASIS FOR MAKING THE ADJUSTMENT BY THE TPO, REFERENCE IS MADE TO THE PROVISIONS OF SECTION 92B OF THE ACT, WHICH DEFINES INTERNATIONAL TRANSACTION. AS PER SECTION 92B(1) OF THE ACT, INTERNATIONAL TRANSACTION MEANS A TRANSACTION BETWEEN TWO OR MORE ASSOCIATE ENTERPRISES, EITHER OR BOTH OF WHOM ARE NON - RESIDENT, IN THE NATURE OF PURCHASE, SALE OR LEASE OR TANGIBLE OR INTANGIBLE PROPERTY O R PROVISION OF SERVICES OR LENDING OR BORROWING MONEY OR ANY OTHER TRANSACTIONS HAVING THE BEARING ON PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISE. FURTHER, IT SHALL ALSO INCLUDE MUTUAL AGREEMENT OR AN ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATE ENT ERPRISES FOR THE ALLOCATION OR APPORTIONMENT OR ANY OTHER CONTRIBUTION TO, ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WITH THE BENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANY ONE OR MORE OF SUCH ENTERPRISES. IN OTHER WORDS , THE TERM INTERNATIONAL TRANSACTION INCLUDES AN EXISTING UNDERSTANDING OR CONTRACT BETWEEN TWO OR MORE PERSONS WHO ARE ASSOCIATE ENTERPRISES. SUB - SECTION (2) TO SECTION 92B OF THE ACT TALKS OF TRANSACTION ENTERED INTO BY AN ENTERPRISE WITH A PERSON OTHER THAN ASSOCIATE ENTERPRISES, WHICH WOULD BE DEEMED TO BE AN INTERNATIONAL TRANSACTION ENTERED INTO BETWEEN TWO ASSOCIATE ENTERPRISES, IF THERE EXISTED PRIOR AGREEMENT IN RELATION TO RELEVANT TRANSACTIONS, ETC. EXPLANATION UNDER SECTION 92B OF THE ACT CLAR IFIES THAT THE EXPRESSION INTERNATIONAL TRANSACTION WOULD INCLUDE VARIOUS TRANSACTION OF 17 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. PURCHASE, SALE, TRANSFER OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY, CAPITAL FINANCING, BORROWING, LENDING, ETC. AND PROVISION OF SERVICES INCLUDING DIFFERENT TYPE S OF SERVICES; AND TRANSACTION OF BUSINESS RESTRUCTURING OR REORGANIZATION, ETC. IN OTHER WORDS, SECTION 92B OF THE ACT COVERS SUCH TRANSACTIONS WHICH ACTUALLY EXIST BETWEEN TWO ASSOCIATE ENTERPRISES. NONE OF THE LIMBS OF SECTION 92B OF THE ACT OR EXPLAN ATION DEFINING THE EXPRESSION INTERNATIONAL TRANSACTION TALKS OF ANY HYPOTHETICAL TRANSACTION AND IN THE ABSENCE OF THE SAME, TPO CANNOT PRE - SUPPOSE AN INTERNATIONAL TRANSACTION BETWEEN THE ASSESSEE AND ITS ASSOCIATE ENTERPRISES AND THE DETERMINATION OF TP ADJUSTMENT ON ACCOUNT THEREOF. ADMITTEDLY, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD NOT RECEIVED ANY SUPPORT PAYMENTS TOWARDS ITS MARKETING EXPENSES OR THE INITIAL START - UP OVERHEAD CHARGES. THERE WAS NO AGREEMENT BETWEEN THE PARTIES TO P AY ANY SUCH SUPPORT PAYMENTS OR TO RECEIVE THE SAME. IN THE ABSENCE OF THE SAME, ADDITION MADE ON THE BASIS OF NON - EXISTING AGREEMENT, BY THE TPO, DOES NOT STAND. THE TPO HAD PRE - SUPPOSED THE SAID TRANSACTION SINCE SUCH SUPPORT PAYMENT WAS PROVIDED BY TH E ASSOCIATE ENTERPRISES TO THE ASSESSEE IN THE SUCCEEDING YEAR. HOWEVER, IN THE INSTANT ASSESSMENT YEAR, NO SUCH SUPPORT PAYMENT WAS PROVIDED BY THE ASSOCIATE ENTERPRISES TO THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THERE IS NO MERIT IN THE ORDER OF TPO IN MAKING TP ADJUSTMENT ON ACCOUNT OF NON - RECEIPT OF SUPPORT PAYMENT AT RS.1.65 CRORES. 12. THE HONBLE HIGH COURT OF DELHI IN MARUTI SUZUKI INDIA LTD. & ANR. VS. CIT & ANR. (2015) 129 DTR 25 (DEL) HELD THAT IN THE ABSENCE OF REVENUE DEMONSTRATING EXISTENCE OF INTERNATIONAL TRANSACTION, ONLY ON ACCOUNT OF QUANTUM OF AMP EXPENDITURE BY A CONCERN, COULD NOT PRE - SUPPOSE THE EXISTENCE OF INTERNATIONAL TRANSACTIONS. THE HONBLE HIGH COURT OF DELHI FURTHER HELD THAT THERE WAS NO CORRESPONDING MACHINERY PROVISION IN CHAPTER X THAT ENABLE THE ASSESSING OFFICER TO DETERMINE WHAT SHOULD BE FAIR COMPENSATION AND INDIAN ENTITY WOULD BE ENTITLED TO IF IT WAS FOUND THAT THERE WAS AN INTERNATIONAL TRANSACTION IN THAT REGARD. APPLYING THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. B.C. SRINIVASA SETTY (1979) 128 ITR 294 (SC) AND PNB FINANCE LTD. VS. CIT (2008) 307 ITR 75 (SC), IN THE ABSENCE OF ANY MACHINERY PROVISION, BRINGING IMAGINED INTERNATIONAL TRANSACTION TO TAX WAS FRAUGHT WITH DANGER OF INVALIDATIO N. THE HONBLE HIGH COURT DELHI HELD THAT IN ASSESSEES CASE, IN THE ABSENCE OF THERE BEING INTERNATIONAL TRANSACTION INVOLVING AMP SPEND WITH ASCERTAINABLE PRICE, NEITHER SUBSTANTIVE NOR MACHINERY PROVISIONS OF CHAPTER X CANNOT BE APPLICABLE TO TRANSFER PRICING ADJUSTMENT EXERCISE. THE QUESTION OF TPO MAKING ANY TRANSFER PRICING ADJUSTMENT IN RESPECT OF TRANSACTION UNDER CHAPTER X DID NOT ARISE. THE HONBLE HIGH COURT HELD AS UNDER: - 75. THERE IS NO CORRESPONDING 'MACHINERY PROVISION IN CHAPTER X WHI CH ENABLES AN AO TO DETERMINE WHAT SHOULD BE THE FAIR 'COMPENSATION' AN INDIAN ENTITY WOULD BE ENTITLED TO IF IT IS FOUND THAT THERE IS AN INTERNATIONAL TRANSACTION IN THAT REGARD. IN PRACTICAL TERMS, ABSENT A CLEAR STATUTORY GUIDANCE, THIS MAY ENCOUNTER F URTHER DIFFICULTIES. THE STRENGTH OF A BRAND, WHICH COULD BE PRODUCT SPECIFIC, MAY BE IMPACTED BY NUMEROUS OTHER IMPONDERABLES NOT LIMITED TO THE NATURE OF THE INDUSTRY, THE GEOGRAPHICAL PECULIARITIES, ECONOMIC TRENDS BOTH INTERNATIONAL AND DOMESTIC, THE C ONSUMPTION PATTERNS, MARKET BEHAVIOUR AND SO ON. A SIMPLISTIC APPROACH USING ONE OF THE MODES SIMILAR TO THE ONES CONTEMPLATED BY SECTION 92C MAY NOT ONLY BE LEGALLY IMPERMISSIBLE BUT WILL LEND ITSELF TO ARBITRARINESS. WHAT IS THEN NEEDED IS A CLEAR STATUT ORY SCHEME ENCAPSULATING THE LEGISLATIVE POLICY AND MANDATE WHICH PROVIDES THE NECESSARY CHECKS AGAINST ARBITRARINESS WHILE AT THE SAME TIME ADDRESSING THE APPREHENSION OF TAX AVOIDANCE. 13. THE HONBLE HIGH COURT OF DELHI IN CIT VS. WHIRLPOOL OF INDIA L TD. (2016) 129 DTR 169 (DEL) HAS HELD THAT REVENUE WAS UNABLE TO DEMONSTRATE ANY TANGIBLE MATERIAL TO EFFECT THAT THERE WAS INTERNATIONAL TRANSACTION INVOLVING AMP EXPENSES BETWEEN ASSESSEE AND ITS ASSOCIATE ENTERPRISES. IN THE ABSENCE OF FIRST STEP, 18 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. QUES TION OF DETERMINING THE ALP OF SUCH TRANSACTION COULD NOT ARISE. IN ABSENCE OF MACHINERY PROVISION IT WOULD BE HAZARDOUS FOR ANY TPO TO PROCEED TO DETERMINE ALP OF SUCH TRANSACTION SINCE BLT HAD BEEN NEGATIVED BY COURT AS VALID METHOD OF DETERMINING EXIST ENCE OF INTERNATIONAL TRANSACTION AND THEREAFTER ITS ALP. FOLLOWING THE SAID PRECEDENT, WE DELETE THE ADDITION MADE OF RS.1.65 CRORES ON ACCOUNT OF TP ADJUSTMENT. FURTHER, WE ALSO HOLD THAT THERE IS NO MERIT IN THE ORDER OF TPO IN SUPPOSING A TRANSACTION WHICH DOES NOT EXIST AND IN ANY CASE, IF THERE IS A PRESUMPTION OF SUPPORT PAYMENTS FROM THE ASSOCIATE ENTERPRISES TO ASSESSEE, IT DOES NOT GET COVERED BY THE DEFINITION OF INTERNATIONAL TRANSACTION AND ACCORDINGLY, IT IS BEYOND THE SCOPE OF THE TPO TO MA KE ANY ADJUSTMENT IN THIS REGARD. 14. NOW, COMING TO THE SECOND LIMB OF SAID ADDITION, UNDOUBTEDLY, THE UNIT OF ASSESSEE WAS A CAPTIVE SERVICE PROVIDER BUT IT WAS IN THE INITIAL STAGE OF SETTING UP OF ITS MANUFACTURING UNIT AND HAD SUFFERED LOSSES. IN TH E FIRST YEAR, WHEN IT OPERATED ONLY FOR THREE MONTHS, THE ASSESSEE ASKED FOR ADJUSTMENT ON ACCOUNT OF CAPACITY UNDER - UTILIZATION AND THE SAME WAS ALLOWED BY THE ASSESSING OFFICER/TPO WHILE APPLYING THE TNMM METHOD, AS APPLIED BY THE ASSESSEE. HOWEVER, SIM ILAR EXERCISE CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION I.E. AFTER SELECTING THE TNMM METHOD AS THE MOST APPROPRIATE METHOD, THE ASSESSEE HAD MADE ADJUSTMENT ON ACCOUNT OF CAPACITY UNDER - UTILIZATION, WHILE BENCHMARKING ITS INTERNATION AL TRANSACTION VIS - - VIS THE MARGINS EARNED BY THE COMPARABLES, WHICH WAS REJECTED BY THE TPO. WE FIND MERIT IN THE CLAIM OF ASSESSEE AS THIS WAS THE FIRST COMPLETE YEAR OF OPERATION. ACCORDINGLY, THE ASSESSEE IS ENTITLED TO THE ADJUSTMENT ON ACCOUNT OF CAPACITY UNDER - UTILIZATION. THE PUNE BENCH OF TRIBUNAL IN TASTY BITE EATABLES LTD. (2015) 59 TAXMANN.COM 437 (PUNE - TRIB) HAS ALREADY ALLOWED SIMILAR ADJUSTMENT AND ACCORDINGLY, WE HOLD THAT THE SAME IS TO BE ALLOWED IN THE HANDS OF ASSESSEE. ACCORDINGL Y, WE DELETE THE PROPOSED ADDITION ON ACCOUNT OF NON - ALLOWABLE ADJUSTMENT FOR CAPACITY UNDER - UTILIZATION AT RS.1.44 CRORES. WE ALSO DELETE THE TP ADJUSTMENT MADE ON ACCOUNT OF NON - RECEIPT OF SUPPORT PAYMENTS AT RS.1.65 CRORES. 3 1 . NOW, COMING TO THE FAC TS OF THE PRESENT CASE IN THE YEAR UNDER CONSIDERATION THOUGH THE ASSESSEE HAD RECEIVED SUPPORT PAYMENTS FROM ITS ASSOCIATED ENTERPRISES AT RS.3.16 CRORES BUT IT HAD STILL SUFFERED LOSSES BECAUSE OF UNDER - UTILIZATION OF THE CAPACITY. THE ASSESSEE WANTED C ARVE OUT ON ACCOUNT OF CAPACITY UNDER - UTILIZATION. FOLLOWING THE SAME PARITY OF REASONING AS IN ASSESSMENT YEAR 2009 - 10, WE HOLD THAT THE ASSESSEE IS ENTITLED TO SAID CARVE OUT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CAPACITY UNDER - UTI LIZATION IN THE HANDS OF ASSESSEE. SECONDLY, WE ALSO HOLD THAT THERE IS NO MERIT IN THE ORDERS OF TPO / ASSESSING OFFICER IN HOLDING THAT SUPPORT PAYMENTS RECEIVED FROM ASSOCIATED ENTERPRISES SHOULD HAVE BEEN TO THE EXTENT OF UNDER - UTILIZATION OF CAPACITY . APPLYING THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. WIRLPOOL ( SUPRA) , WE REVERSE THE FINDINGS OF ASSESSING OFFICER / TPO IN THIS REGARD AND DELETE THE ADDITION MADE IN THE HANDS OF ASSESSEE IN THE MANUFACTURING SEGMENT AT 19 ITA NO. 326 /P U N/201 5 DOVER INDIA PVT. LTD. RS.78,98,5 70/ - . CONSEQUENTLY, THE GROUND OF APPEAL NO.3.1 RAISED BY THE ASSESSEE IS ALLOWED. THE GROUNDS OF APPEAL NO.3.2 TO 3.4 ARE NOT PRESSED AND HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. THE ISSUE RAISED VIDE GROUND OF APPEAL NO.3.5 WAS AN ALTERNATE TO TH E EARLIER GROUNDS OF APPEAL AND THE SAME DOES NOT SURVIVE. ACCORDINGLY, WE ALSO DISMISS THE GROUND OF APPEAL NO.1 BEING GENERAL AND GROUND OF APPEAL NO.4 BEING NOT PRESSED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 3 2 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 10 TH DAY OF NOVEM BER , 201 7 . SD/ - SD/ - ( ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 10 TH NOVEM BER , 201 7 . GCVSR / COPY OF THE O RDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DRP , PUNE ; 4. THE DIT (TP/IT), PUNE ; 5. THE DR B , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , //TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE