ACIT, New Delhi V. Mrs. Seema Bansal, New Delhi

ITA 3288/DEL/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6772 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 26-06-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 27-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Source of fund; Question of law; Working capital adjustments; Right to appeal; Commercial expediency; Capital expenditure; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 260A; 40(a)(ia); 250; 144C; 251; 44BB; 208; 192; 73; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.3288/DEL/2012 ASSESSMENT YEAR: 2006-07 CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) PRIVATE LIMITED, SUITE 101, THE OBEROI DR. ZAKIR HUSSAIN MARG, NEW DELHI PAN-AABCC4609G VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1), NEW DELHI (APPELLANT) (RESPONDENT) C.O. NO.309/DEL/2015 (IN ITA NO.3288/DEL/2013) ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1), NEW DELHI VS. CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) PRIVATE LIMITED, SUITE 101, THE OBEROI DR. ZAKIR HUSSAIN MARG, NEW DELHI PAN-AABCC4609G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAYANK AGRAWAL, ADV. & SHRI ATUL NINAWAT, ADV. REVENUE BY : SHRI T.M. SHIVAKUMAR, CIT (DR) DATE OF HEARING : 06/12/2016 DATE OF PRONOUNCEMENT : 09/02/2017 2 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 O R D E R PER S.V. MEHROTRA, A.M : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1), NEW DELHI, DATED 29 TH JUNE, 2010 PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2006-0 7. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED ITS RETURN DECLARING TOTAL INCOME OF RS. 5,16,49,317/-. THE AS SESSMENT HAD BEEN COMPLETED UNDER SECTION 143(3) R.W.S. 144C OF THE I NCOME TAX ACT ON 29 TH JUNE, 2010 AT AN INCOME OF RS. 172,756,150/- AFTER MAKING THE FOLLOWING ADDITIONS :- I) ADDITION ON ACCOUNT OF ARMS LENGTH PRICE U/S 92 CA(3) RS. 86819937/- II) DISALLOWANCE U/S 36(1)(II) RS. 29593000/- III) DISALLOWANCE OF SEVERANCE COST RS. 3510000/ - IV) DISALLOWANCE U/S 40(A)(IA) RS. 770973/- V) INCOME TAX DEBITED TO THE P/L ACCOUNT RS. 2239 35/- VI) DISALLOWANCE OUT OF STAFF WELFARE EXPENSES RS . 130000/- VII) DEPRECIATION ON COMPUTER ACCESSORIES RS. 58 986/- 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT( A) AGAINST THE AFOREMENTIONED ADDITION AND THE TRIBUNAL VIDE ITS O RDER DATED 18 TH MARCH, 2011 IN ITA NO. 3717/DEL/2010 RESTORED THE MATTER T O THE FILE OF THE 3 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 AO/DRP ON ISSUES OF ARMS LENGTH PRICE, DISALLOWANC E UNDER SECTION 36(1)(II) AND SEVERANCE COST. ACCORDINGLY, LEARNED DRP VIDE ITS ORDER DATED 4 TH MARCH, 2013 DECIDED THE MATTER. AFTER CONSIDERING THE DIRECTIONS OF LEARNED DRP, THE TPO VIDE HIS ORDER DATED 8 TH FEBRUARY, 2013 RECALCULATED THE INCOME OF ASSESSEE TO BE ENHANCED BY RS. 4,17,6 7,171/-. AS REGARDS THE OTHER TWO ISSUES OF ADDITION OF RS. 35,10,000/- ON ACCOUNT OF SEVERANCE COST AND DISALLOWANCE UNDER SECTION 36(1)(II) AMOUNTING TO RS. 2,95,93,000/-, LEARNED DRP UPHELD THE ADDITION MADE BY AO. ACCORDI NGLY, ASSESSING OFFICER DETERMINED THE REVISED INCOME OF RS. 12,77, 03,384/- AS UNDER:- I) INCOME ASSESSED U/S 143(3) R.W.S. 144C VIDE ORDER DT. 29. 06.2010 RS. 172756150/- LESS: ADDITION ON ACCOUNT OF ALP U/S 92CA(3) RS. 86819937 RS. 85936213 AS COMPUTED VIDE ORDER DT. 29.06.2010 RS. 41767171 ADD. ALP AS PER TPOS ORDER DT. RS. 127703384 REVISED INCOME ROUNDED OFF RS. 127703380/- 4. BEING AGGRIEVED WITH THE ASSESSMENT ORDER, THE A SSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON FOLLOWING GROUNDS:- 1. THE ORDER PASSED BY THE LEARNED ASSESSIN G OFFICER (HEREINAFTER REFERRED AS 'LD. AO') UNDER SECTION 254 / 143(3) READ WITH S ECTION 144C OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED AS 'THE ACT') IS BAD IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. AO AS WELL AS THE LEARNED TRANSFE R PRICING OFFICER ('TPO') AND THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAVE E RRED IN LAW AS WELL AS FACTS OF THE CASE IN NOT ACCEPTING THE ARM'S LENGTH PRICE ('ALP') DETERMINED BY THE APPELLANT. 4 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 3. THE LD. AO / TPO / DRP HAVE ACTED MECHANI CALLY AND PASSED THE ORDER IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND AND WITHOUT UNDERSTANDING THE INTRICACIES OF THE INTERNATIONAL TRANSACTIONS UNDER TAKEN BY THE APPELLANT. 4. THE LD. AO / TPO / DRP HAVE ERRED IN DETE RMINING THE ALP ON THE BASIS OF DATA FOR FINANCIAL YEAR 2005-06 ONLY AND IGNORIN G THE DATA FOR TWO PRIOR FINANCIAL YEARS I.E. FY 2003-04 AND FY 2004-05. 5. THE LD. AO / TPO / DRP HAVE ERRED IN INTR ODUCING BRESCON CORPORATE ADVISORS LIMITED AND ICDS SECURITIES LIMITED AS COM PARABLES FOR DETERMINING ALP IN THE CASE OF THE APPELLANT. 6. THE LD. AO / TPO / DRP HAVE ERRED IN ACCE PTING COMPANIES WITH EXCEPTIONALLY HIGH MARGINS AS COMPARABLES. 7. THE LD. AO / TPO HAVE ERRED IN INCLUDING INCOME OF NON-OPERATING NATURE (LIKE INTEREST INCOME, DIVIDEND INCOME, INCOME FROM SALE OF SHARES, INCOME FROM CAPITAL MARKET OPERATIONS, PROFIT ON SALE OF INVEST MENTS ETC.) WHILE COMPUTING THE OPERATING INCOME FOR THE PURPOSE OF DETERMINING THE OPERATING MARGIN OF KJMC GLOBAL (MARKET) INDIA LTD., KHANDWALA SECURITIES LT D AND SUMEDHA FISCAL SERVICE LTD, AT THE TIME OF MAKING THE WORKING CAPI TAL ADJUSTMENTS (PURSUANT TO THE ORDER OF THE HON'BLE DRP). 8. THE LD. AO / TPO / DRP HAVE ERRED IN CONS IDERING THE AMOUNTS REIMBURSED BY ITS ASSOCIATED ENTERPRISES (PAYMENTS MADE BY THE APPELLANT ON BEHALF OF ITS ASSOCIATED ENTERPRISES WHICH WERE SUB SEQUENTLY REIMBURSED BY THE ASSOCIATED ENTERPRISES) AS PART OF OPERATING EXPENS ES AND THE CORRESPONDING REIMBURSEMENT AS PART OF OPERATING REVENUE OF THE A PPELLANT WHILE DETERMINING ALP. 9. THE LD. AO / TPO / DRP HAVE ERRED IN NOT ALLOWING THE BENEFIT OF + 5% AS PROVIDED BY PROVISO TO SECTION 92C(2) OF THE ACT. 10. THE LD. AO / DRP HAVE ERRED IN DISALLOWING THE BONUS AMOUNTING TO RS. 29,593,000 PAID BY THE APPELLANT TO ITS EMPLOYEES ( WHO ARE ALSO SHAREHOLDERS OF THE APPELLANT) U/S 36(L)(II) OF THE ACT BY HOLDING THAT THE SAME WOULD HAVE BEEN PAYABLE BY WAY OF DIVIDEND. THE LD. AO HAS IGNORED THE FACT THAT THE RATIO OF BONUS PAID BY THE APPELLANT IS DIFFERENT FROM THE R ATIO OF THE SHAREHOLDING OF THE SHAREHOLDERS EMPLOYEE AND THUS, BONUS PAID CANNOT B E DISALLOWED U/S 36(L)(II) OF THE ACT. 11. THE LD. AO / DRP HAVE ERRED IN DISALLOWING THE SEVERANCE COST AMOUNTING TO RS. 3,510,000 PAID BY THE APPELLANT TO AN EMPLOY EE AT THE TIME OF SEVERANCE. THE LD. AO ERRED IN HOLDING THAT THERE IS NO JUSTIF ICATION OF PAYING SUCH AMOUNT AS SEVERANCE IGNORING THE FACT THAT THE AMOUNT WAS PAID TO AN EMPLOYEE (HAVING NO BENEFICIAL INTEREST IN THE BUSINESS OF THE APPEL LANT) BASED ON BUSINESS EXIGENCIES KEEPING IN MIND THE BEST PRACTICE FOLLOW ED IN THE INDUSTRY. 12 . THE LD. AO HAS ERRED IN NOT DELETING THE ADD ITIONS IGNORING THE RELIEF PROVIDED BY THE HON'BLE INCOME TAX APPELLATE TRIBUN AL IN ITS ORDER DATED MARCH 18, 2011 ON THE FOLLOWING GROUNDS:- DISALLOWANCE U/S 40(A)(IA) FOR PAYMENT TO HUNT EXECUTIVE 5 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 DISALLOWANCE U/S 40(A)(IA) FOR PAYMENT TO AUDITORS DISALLOWANCE OF STAFF WELFARE EXPENSES INCURRE D BY THE APPELLANT DISALLOWANCE OF DEPRECIATION ON COMPUTER ACCES SORIES DISALLOWANCE U/S 40(A)(IA) FOR PAYMENTS TO BAN SAL PRINTING PRESS AS OUT OF THE TOTAL PAYMENTS OF RS. 222,748, THE APPELLANT DI D NOT CLAIMED RS. 155,379 AS EXPENSES IN ITS P&L ACCOUNT. 13. THE LD. AO HAS ERRED IN NOT REDUCING THE O PERATING COSTS INCURRED BY THE APPELLANT BY THE AMOUNT OF DISALLOWANCES (BONUS, SE VERANCE COSTS ETC.) MADE BY HIM WHILE COMPUTING THE ARM'S LENGTH PRICE FOR THE INTERNATIONAL TRANSACTION. 14. THE ABOVE GROUNDS OF APPEALS ARE INDEPENDE NT AND WITHOUT PREJUDICE TO ONE ANOTHER. 15. THE APPELLANT CRAVES LEAVE TO ADD / WITHDR AW OR AMEND ANY GROUND OF APPEAL AT THE TIME OF HEARING. 5. THE DEPARTMENT FILED A CROSS OBJECTION ON 19.11. 2015. AS PER THE DEFECT NOTICE ISSUED BY THE REGISTRY, THE SAME WAS BELATED BY 879 DAYS. THE DEPARTMENT HAS FILED A CONDONATION PETITION DATED 2 7 TH APRIL, 2016, WHICH IS REPRODUCED HEREINBELOW: TO , / THE ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL 6 TH FLOOR, LOK NAYAK BHAWAN, KHAN MARKET, NEW DELHI. SIR, SUB: HEARING IN THE CASE OF M/S CHRYSCAPITAL INDI A LTD., ITA NO.3288/DEL/ 13 FOR AY 2006-07 - REGARDING- KINDLY REFER TO THE APPEAL FILED BY THE ASSESSEE I. E. M/S CHRIS CAPITAL INDIA PVT. LTD. BEFORE THE ITAT FOR AY 2006-07 ITA NO.3288/DEL-13 ON THE SUBJECT CITED ABOVE. IN THIS CONNECTION, IT IS SUBMITTED THAT THE DEPART MENT HAD FILED CROSS OBJECTIONS IN THIS CASE ON 19.11.2015 BELATEDLY, TH E DELAY IN FILING THE GROSS OBJECTION WAS ON ACCOUNT OF THE FOLLOWING REASON:- 'THAT IN SOME OF THE CASES ARGUED BY DEPARTMENT BE FORE HON'BLE TRIBUNAL ON THE ISSUE OF COMPARABLES, THE ASSESSEE HAD CHALLENGED THE COMPARABLES INCLUDED BY THE TPO BEFORE THE HON'BLE TRIBUNAL. THE COMPARABLES WITH HIGH MARGINS HAVE INVARIABLY BEEN ASSAILED BY THE 6 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 ASSESSEES ON THE GROUND OF FUNCTIONAL DIS-SIMILARITY, ETC. HOWEVER, IT IS ALSO SEEN THAT THE COMPARABLES (INCLUDED BY ASSESSEE) HA VING LOW MARGINS ALSO SUFFER FROM FUNCTIONAL DIS-SIMILAIRTY OR OTHER CHAR ACTERISTICS AS FOUND IN COMPARABLES WITH HIGH MARGIN. IN THE PAST IN OTHER CASES (E.G. M/S AVENUE ASIA LTD. ITA NO.6638/DEL-2013) HON'BLE TRIBUNAL, D URING THE COURSE OF HEARING STATED THAT DEPARTMENT CANNOT CHALLENGE THE COMPARABLES ACCEPTED BY THE TPO WHEN THE REVENUE IS NOT IN APPEAL. THE J UDGEMENT IN THIS CASE WAS PASSED IN JANUARY, 2016. THEREFORE, IT WAS REALIZED THAT REVENUE WOULD HAVE TO FILE A CROSS OBJECTION TO SEEK JUSTICE. IN VIEW OF THIS, IT WAS DECIDED THAT ON SUCH ISSUES DEPARTMENT NEEDS TO FILE OBJECTION. IN VIEW OF THIS APPEAL HAS BEEN FI LED LATE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES IT IS, THEREFORE, HUMBLY REQUESTED TO YOUR HONOUR KINDLY CONDONE THE DELAY I N FILING THE APPEAL LATE. KINDLY ACKNOWLEDGE RECEIPT, YOURS FAITHFULLY, SD/- DY. COMMISSIONER OF INCOME TAX CIRCLE-6(L), NEW DELHI 6. AT THE OUTSET, LEARNED COUNSEL SUBMITTED THAT TH E CROSS OBJECTION FILED BY THE DEPARTMENT IS NOT MAINTAINABLE. HE REFERRED TO PAGE 16 OF THE PAPER BOOK WHEREIN THE DRPS DIRECTION DATED 04.03.2013 I S CONTAINED TO POINT OUT THAT BOTH ROUND OF PROCEEDINGS WERE FOR THE PER IOD PRIOR TO JULY, 2012 WHEN DEPARTMENT HAD NO RIGHT TO FILE APPEAL/CROSS O BJECTION AGAINST DRPS DIRECTION. LEARNED COUNSEL REFERRED TO SECTION 253( 2A) INSERTED BY THE FINANCE ACT, 2012 W.E.F. 1.7.2012 AND LATER ON AMEN DED BY THE FINANCE (NO.2) ACT, 2014, W.R.E.F. 1.6.2013 WHICH READS AS UNDER :- S.253.(1) 2) (2A) THE PRINCIPAL COMMISSIONER OR COMMISSIONER MA Y, IF HE OBJECTS TO ANY DIRECTION ISSUED BY THE DISPUTE RESOLUTION P ANEL UNDER SUB-SECTION (5) OF SECTION 144C IN RESPECT OF ANY OBJECTION FIL ED ON OR AFTER THE 1ST DAY 7 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 OF JULY, 2012, BY THE ASSESSEE UNDER SUB-SECTION (2 ) OF SECTION 144C IN PURSUANCE OF WHICH THE ASSESSING OFFICER HAS PASSED AN ORDER COMPLETING THE ASSESSMENT OR REASSESSMENT, DIRECT THE ASSESSIN G OFFICER TO APPEAL TO THE APPELLATE TRIBUNAL AGAINST THE ORDER. 7. HE POINTED OUT THAT THIS SECTION ONLY ENTITLES T HE DEPARTMENT TO FILE OBJECTIONS AGAINST LEARNED DRPS DIRECTION BUT PRIO R TO JULY, 2012, THERE WAS NO SUCH POWER WITH THE DEPARTMENT TO FILE APPEAL AG AINST DRPS DIRECTION AND, THEREFORE, THERE WAS NO QUESTION OF FILING CRO SS OBJECTION BY THE DEPARTMENT. HE POINTED OUT THAT THE OBJECTIONS WERE FILED BY THE ASSESSEE BEFORE 01 ST JULY, 2012 AS IS EVIDENT FROM PAGE 16 OF PAPER BOO K. LEARNED COUNSEL RELIED ON THE DECISION OF ITAT DELHI BENCHE S IN THE CASE OF TREND MICRO INDIA PVT. LTD VS. DCIT, CIRCLE-25(2), NEW DE LHI IN ITA NO. 1585/DEL/2015 FOR THE ASSESSMENT YEAR 2010-11, WHER EIN, THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS UNDER: HAVING DEALT WITH THE COMPARABILITY OF THE ABOVE R EFERRED THREE COMPANIES, WE CONSIDER IT SIGNIFICANT TO DEAL WITH A CONTENTION R AISED ON BEHALF OF THE REVENUE WITH GREAT VEHEMENCE. IN ALL, TOTAL NINE COMPANIES WERE TAKEN BY THE TPO AS COMPARABLE. INITIALLY, THE ASSESSEE OBJECTED TO THE INCLUSION OF FIVE COMPANIES OUT OF SUCH NINE, BUT LATER ON, SUCH CLAIM WAS RESTRICT ED TO THREE COMPANIES, WHICH WE HAVE DISCUSSED HEREINBEFORE. THE LD. DR CONTENDED T HAT IF THE FIVE/THREE COMPANIES CHALLENGED BY THE ASSESSEE HAVING HIGHER PROFIT RATE ARE TO BE EXCLUDED FOR ANY REASON, THEN THE REMAINING FOUR CO MPANIES HAVING LOW PROFIT RATE SHOULD ALSO BE ELIMINATED DUE TO THEIR FUNCTIO NAL DISSIMILARITIES. HE TRIED TO ACCENTUATE ON THE FUNCTIONAL DISSIMILARITIES OF THE REMAINING FOUR COMPANIES. ITA NO.1585/DEL/2015 16 11. IN THIS REGARD, THE PRIMARY QUESTION WHICH FALLS FOR OUR CONSIDERATION IS: `CAN THE DR ARGUE FOR THE EXCLUSI ON OF SOME COMPANIES, WHICH WERE TREATED BY THE AO/TPO AS COMPARABLE? IN OUR C ONSIDERED OPINION, THE ANSWER TO THIS QUESTION CAN BE GIVEN IN NEGATIVE AL ONE. IT IS UNDERSTANDABLE THAT WHEN CIT(A) HAS DECIDED SOME POINT IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, THE AO IS FULLY EMPOWERED TO ASSAIL THE CO RRECTNESS OF SUCH A DECISION IN AN APPEAL BEFORE THE TRIBUNAL. SIMILARLY, WHEN A N ASSESSMENT ORDER IS PASSED U/S 143(3) READ WITH SECTION 144C OF THE ACT, THE A O CAN BE AGGRIEVED AGAINST 8 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 THE DIRECTION GIVEN BY THE DRP. IN SUCH CASES OF GR UDGE, THE AO CAN APPROACH THE TRIBUNAL FOR AN APPROPRIATE RELIEF, WHEREVER AN D TO THE EXTENT THE LAW PERMITS. THE UNDERLYING IDEA BEHIND THESE SITUATIONS IS THAT THE AO IS DISSATISFIED WITH REVERSAL OF HIS VIEW EITHER BY THE CIT(A) OR THE DR P, AS THE CASE MAY BE, WHICH HE WANTS TO BE RESTORED. BUT, THE AO IN OUR CONSIDE RED OPINION, CAN UNDER NO CIRCUMSTANCE BE AGGRIEVED WITH HIS OWN VIEW TAKEN I N THE ASSESSMENT ORDER INDEPENDENT OF ANY EXTERNAL INFLUENCE OF THE DRP ET C. IT GOES WITHOUT SAYING THAT IN ALL THE APPEALS FILED BY THE ASSESSEE AGAINST TH E FINAL ORDER PASSED BY THE AO U/S ITA NO.1585/DEL/2015 17 143(3) READ WITH SECTIO N 144C OF THE ACT, THE RESPONDENT IS ALWAYS THE AO. IN OTHER WORDS, THE DR REPRESENTS THE AO IN AN APPEAL BEFORE THE TRIBUNAL. TAKING UP AN ISSUE FOR ARGUMENT BY THE DR BEFORE THE TRIBUNAL MEANS TAKING UP THE ISSUE BY THE AO THROUG H THE DR. IF WE ALLOW THE DR TO ARGUE THAT THE DECISION TAKEN BY THE AO/TPO WAS WRONG AND CERTAIN COMPANIES INCLUDED BY THE TPO HIMSELF SHOULD BE DEL ETED, IT WOULD MEAN THAT THE AO IS CHALLENGING THE CORRECTNESS OF HIS OWN DECISI ON THROUGH THE DR BEFORE THE TRIBUNAL, WHICH IS ILLOGICAL. 12. THE ABOVE SITUATI ON NEEDS TO BE SEEN IN CONTRADISTINCTION TO A SITUATION IN WHICH AN APPEAL HAS BEEN FILED BY THE ASSESSEE AND HE CONTENDS THAT SOME COMPANY WAS WRONGLY INCLU DED BY IT IN THE LIST OF COMPARABLES, WHOSE COMPARABILITY SHOULD BE EXAMINED BY THE TRIBUNAL. IN SUCH A SITUATION, THE TRIBUNAL CAN DIRECT THE AO/TPO TO EX AMINE THE CORRECTNESS OF THE ASSESSEES CLAIM. THE SPECIAL BENCH OF THE TRIBUNAL IN DCIT VS. QUARK SYSTEMS PVT. LTD. (2010) 132 TTJ (CHD) (SB) 1 HAS HELD THAT A COMPANY WHICH WAS INCLUDED BY THE ASSESSEE AND ALSO BY THE TPO IN THE LIST OF COMPARABLES AT THE TIME OF COMPUTING ALP, CAN BE TAKEN UP ITA NO.1585/ DEL/2015 18 FOR CONSIDERATION BY THE TRIBUNAL, IF THE ASSESSEE PROV ES THAT THE SAME WAS WRONGLY INCLUDED. THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IS IN THE BACKGROUND OF THE FACTS AS PER WHICH THE APPEAL WAS FILED BY THE ASSESSEE AND DURING THE HEARING OF SUCH AN APPEAL, AN ARGUMENT WAS TAKEN BY THE ASS ESSEE ABOUT THE INADVERTENT INCLUSION OF A COMPANY AS COMPARABLE. ON THE OTHER HAND, WE ARE CONFRONTED WITH A SITUATION IN WHICH THE DEPARTMENT, WITHOUT H AVING ANY RIGHT TO FILE AN APPEAL (AS WOULD BE SEEN INFRA) AGAINST THE INTENTI ONAL ACTION OF THE AO/TPO IN CONSIDERING SOME COMPANIES AS COMPARABLE, IS CONTES TING SUCH INCLUSION AND ASKING FOR THEIR EXCLUSION TO THE PREJUDICE OF THE ASSESSEE. 13. NOW WE ESPOUSE THE QUESTION IF THE DEPARTMENT HAS ANY RIGHT TO FIL E APPEAL AGAINST THE INDEPENDENT FREE DECISION OF THE AO/TPO IN WRONGLY DECIDING A POINT AGAINST THE REVENUE OR BY CONSIDERING SOME COMPANIES AS COMPARA BLE IN THE TRANSFER PRICING ANALYSIS, WHICH ARE IN FACT NOT COMPARABLE. AT THIS STAGE, IT IS RELEVANT TO MENTION THAT THE INSTITUTION OF THE DRP CAME INTO BEING BY MEANS OF INSERTION OF SECTION 144C BY THE FINANCE (NO. 2) ACT, 2009 W.R.E.F. 1.4. 2009. AS PER THIS ITA NO.1585/DEL/2015 19 SECTION, AN ASSESSEE WHO IS DIS SATISFIED WITH A DRAFT ORDER CAN APPROACH THE DRP FOR NECESSARY RELIEF. SUCH A R ELIEF CAN BE ALLOWED BY GIVING DIRECTION UNDER SUB-SECTION (5) OF THIS SECT ION. SUB-SECTION (13) OF SECTION 144C PROVIDES THAT THE AO IS OBLIGED TO PASS A FINA L ASSESSMENT ORDER IN CONFORMITY WITH THE DIRECTION GIVEN BY THE DRP. THI S SHOWS THAT THE DIRECTION TENDERED BY THE DRP IS BINDING ON THE AO NOTWITHSTA NDING THE AOS RESERVATIONS ON IT. THE FINANCE ACT, 2012 INSERTED SUB-SECTION ( 2A) TO SECTION 253 W.E.F. 1.7.2012 PROVIDING THAT : `THE PRINCIPAL COMMISSION ER OR COMMISSIONER MAY, IF HE OBJECTS TO ANY DIRECTION ISSUED BY THE DISPUTE R ESOLUTION PANEL UNDER SUB- 9 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 SECTION (5) OF SECTION 144C IN RESPECT OF ANY OBJEC TION FILED ON OR AFTER THE 1ST DAY OF JULY, 2012, BY THE ASSESSEE UNDER SUB-SECTION (2 ) OF SECTION 144C IN PURSUANCE OF WHICH THE ASSESSING OFFICER HAS PASSED AN ORDER COMPLETING THE ASSESSMENT OR REASSESSMENT, DIRECT THE ASSESSING OFFICER TO APPEA L TO THE APPELLATE TRIBUNAL AGAINST THE ORDER. THIS DIVULGES THAT THE AO WAS W ITHOUT ANY REMEDY TO CHALLENGE THE UNCONVINCING ADVERSE DIRECTION GIVEN BY THE DRP, GIVEN EFFECT TO IN HIS OWN ORDER, IN RESPECT OF ANY OBJECTIONS FILED B EFORE THIS CUT-OFF DATE OF 1.7.2012. NOW WITH ITA NO.1585/DEL/2015 20 THIS AME NDMENT, THE REVENUE HAS BEEN GIVEN A LIBERTY TO FILE APPEAL BEFORE THE TRIB UNAL IF THE CIT OBJECTS TO ANY DIRECTION ISSUED BY THE DISPUTE RESOLUTION PANEL, T HAT HAS BEEN GIVEN EFFECT TO BY THE AO. THE POINT TO BE UNDERSCORED IS THAT SUCH PO WER OF FILING APPEAL IS RESTRICTED ONLY TO THE CASES WHERE `OBJECTION IS TO THE DIRECTION OF THE DRP AND NOT TO THE VOLUNTARY ACTION OF THE AO HIMSELF. IN O THER WORDS, IF THE AO/TPO HAS CHOSEN A COMPANY AS COMPARABLE, WHICH HAS BEEN DIRE CTED TO THE EXCLUDED BY THE DRP, THEN AN APPEAL CAN BE FILED AGAINST THE ASSESS MENT ORDER ON SUCH EXCLUSION. THE POWER TO FILE APPEAL DOES NOT EXTEND TO THE SEL ECTION OF A COMPANY AS COMPARABLE BY THE AO/TPO HIMSELF WHICH HAS REMAINED INTACT EVEN AFTER THE DIRECTION GIVEN BY THE DRP. 14. SIMILAR IS THE POSI TION ON FILING A CROSS OBJECTION BY THE DEPARTMENT, WHICH IS COVERED UNDER SUB-SECTI ON (4) OF SECTION 254. AS PER THIS PROVISION AMENDED BY THE FINANCE ACT, 2012, : `THE ASSESSING OFFICER ., ON RECEIPT OF NOTICE THAT AN APPEAL AGAINST THE ORDER OF . THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE ITA NO.1 585/DEL/2015 21 RESOLUTION PANEL HAS BEEN PREFERRED UNDER SUB-SECTION (1) , M AY, NOTWITHSTANDING THAT HE MAY NOT HAVE APPEALED AGAINST SUCH ORDER OR ANY PAR T THEREOF; WITHIN THIRTY DAYS OF THE RECEIPT OF THE NOTICE, FILE A MEMORANDUM OF CROSS-OBJECTIONS AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFICER (IN PURS UANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL)... IT IS MANIFEST THAT THE LIBERTY TO FILE CROSS OBJECTION HAS BEEN GIVEN TO THE AO U/S 253(4) OF TH E ACT ONLY AGAINST THAT PART OF THE ORDER OF THE ASSESSING OFFICER WHICH IS IN PURS UANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL. THIS PROVISION WOULD NOT ENCOMPASS A CASE OF THE AO FILING CROSS OBJECTION AGAINST THAT PART OF THE ASS ESSMENT ORDER WHICH HAS NOT BEEN DISTURBED BY THE DRP. 15. IN A NUTSHELL, THE P OSITION IS THAT AFTER THE INSERTION/AMENDMENT BY THE FINANCE ACT, 2012 TO SUB -SECTIONS (2A) AND (4) OF SECTION 253, THE DEPARTMENT HAS ACQUIRED A RIGHT TO FILE APPEAL OR CROSS OBJECTION AGAINST THE ASSESSMENT ORDER PASSED IN PURSUANCE OF THE DIRECTION OF THE DRP TO THE EXTENT IT IS AGGRIEVED AGAINST SUCH DIRECTION. IT HAS NO RIGHT TO FILE APPEAL OR CROSS OBJECTION AGAINST THE VOLUNTARY DECISION OF T HE AO/TPO ITA NO.1585/DEL/2015 22 WHICH WAS NOT SUBJECT MATTER OF ANY ADVERSE DIRECTION BY THE DRP. THE ANALOGY WHICH FOLLOWS IS THAT IF NO AP PELLATE RECOURSE IS OPEN TO THE DEPARTMENT AGAINST THE SUO MOTU ORDER OF THE AO/TPO , THEN, THE DR, WHO ARGUES BEFORE THE TRIBUNAL FOR AND ON BEHALF OF THE AO, CA N EQUALLY HAVE NO RIGHT TO ARGUE AGAINST THAT PART OF THE ORDER. WE WANT TO CL ARIFY THAT THE DEPARTMENT IS FULLY EMPOWERED TO SET SUCH ADVERSE POSITION RIGHT BY TAKING RECOURSE TO THE OTHER REMEDIES, IF ANY, AVAILABLE AS PER LAW DE HORS THE APPELLATE OPTION. 16. THE LD. DR THEN ARGUED THAT THERE CAN BE NO ESTOPPEL AGAINS T THE ACT AND HENCE NO SHADOW CAN BE CAST ON HIS RIGHT TO ARGUE AGAINST TH E INCLUSION OF FOUR COMPANIES WHICH ARE NOT COMPARABLE. WE APPRECIATE THE CONCERN OF THE LD. DR AND FIND FORCE IN HIS CONTENTION THAT THERE CAN BE NO ESTOPP EL AGAINST THE STATUTE. BUT, THE 10 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 POINT IS THAT IF THE STATUTE DOES NOT PERMIT THE RA ISING OF SUCH A CONTENTION BEFORE THE TRIBUNAL EITHER THROUGH APPEAL OR CROSS OBJECTI ON, THEN HOW PROHIBITING THE LD. DR TO ARGUE SUCH A MATTER, CAN BE CONSIDERED AS AN ESTOPPEL AGAINST THE ACT. ITA NO.1585/DEL/2015 23 17. AT THIS JUNCTURE, IT IS IMP ERATIVE TO HIGHLIGHT THE DIFFERENCE BETWEEN THE RIGHT OF THE DR TO ARGUE AGA INST THE ASSESSMENT ORDER ON THE INCLUSION OF INCOMPARABLE COMPANIES WITH LOWER PROFIT RATES BY THE AO HIMSELF AND THE POWER OF THE TRIBUNAL TO SUO MOTU E XAMINE THE CORRECTNESS OF SUCH AN ACTION OF THE AO, WHILE HEARING AN APPEAL FILED BY THE ASSESSEE. AS AGAINST OUR DECISION ABOUT THE DR HAVING NO RIGHT TO ARGUE AGAI NST THE ORDER OF THE AO/TPO IN INCLUDING SUCH COMPANIES IN THE LIST OF COMPARAB LES, THE TRIBUNAL HAS UNBRIDLED POWER TO VET THE CORRECTNESS OF SUCH AN ACTION OF T HE AO/TPO AT ITS OWN BY VIRTUE OF THE LANGUAGE OF SECTION 254(1), WHICH PROVIDES T HAT :` THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDER THEREON AS ITS THINKS FIT. THE USE OF EXPRESSION `PASS SUCH ORDER THEREON AS ITS THINKS FIT GIVES WIDEST POWERS TO T HE TRIBUNAL TO DEAL WITH THE ISSUE BEFORE IT. WE ARE EQUALLY CONSCIOUS OF THE LIMITATI ON ON THE POWER OF THE TRIBUNAL U/S 254(1) IN NOT DIRECTING ENHANCEMENT OF INCOME. AT THE SAME TIME, THE TRIBUNAL HAS A POWER TO REMAND A MATTER TO THE LOWER AUTHORI TIES AND THERE IS NO BAR IF THE CONSEQUENTIAL ORDER PASSED BY THE LOWER AUTHORITY O N REMAND LEADS TO ITA NO.1585/DEL/2015 24 ENHANCEMENT. THIS POSITION HAS BEEN LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. ASSAM TRAVELS SHIP PING SERVICE (1993) 199 ITR 1 (SC). RESULTANTLY, WE HAVE NO HESITATION IN H OLDING THAT ALBEIT THE TRIBUNAL HAS THE POWER TO VOLUNTARILY DIRECT THE AO/TPO TO R ECONSIDER THE CORRECTNESS OF THE COMPANIES INCLUDED BY HIM IN THE LIST OF COMPAR ABLES, BUT IN NO CASE, CAN THE DR ARGUE, AS A MATTER OF RIGHT, AGAINST SUCH INCLUS ION. 18. 8. LEARNED COUNSEL FURTHER RELIED ON THE DECISION I N THE CASE OF J.C. BAMFORD INVESTMENTS ROCESTER VS. DEPUTY DIRECTOR OF INCOME TAX, CIRCLE-3(1), INTERNATIONAL TAXATION, NEW DELHI , WHEREIN IN PARAGRAPH NOS. 10 AND 11, THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS UNDER: . 10. THE FIRST REASON IS THAT THE CO OF THE REVENUE IS N OT MAINTAINABLE AS PER LAW. SECTION 253(1) OF THE ACT DEALS WITH THE FILING OF APPEALS BY THE ASSESSEE BEFORE THE TRIBUNAL AGAINST THE ORDERS SPECIFIED THEREIN. SUB- SECTION (2) OF SECTION 253 EMPOWERS THE REVENUE TO FILE APPEAL BEFORE THE TRIB UNAL. THIS SECTION PROVIDES THAT THE C1T MAY, IF HE OBJECTS TO ANY ORDER PASSED BY T HE CIT(A) U/S 154 OR 250, DIRECT THE ASSESSING OFFICER TO APPEAL TO THE APPELLATE TR IBUNAL AGAINST THE ORDER. THIS SECTION DOES NOT EMBRACE CASES WHERE THE FIRST APPE AL LIES TO THE TRIBUNAL AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/S I44C( 13) PURSUANT TO THE DIRECTION GIVEN BY THE DISPUTE RESOLUTION PANE! (DRP) U/S 144C(5) O F THE ACT. THIS IS IN A SHARP CONTRAST TO THE SPECIFIC ENTITLEMENT OF THE ASSESSE E UNDER CLAUSE (D) OF SECTION 253(1) TO APPEAL AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DRP. THE REASON APPEARS TO BE THA T \\HEN THE DRP HAS SCRUTINIZED THE DRAFT ORDER OF THE ASSESSING OFFICER AND GIVEN THE APPROPRIATE DIRECTION TO MODIFY 11 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 IT. IF NECESSARY, THEN THERE IS NO LOGIC IN EMPOWER ING THE C1T TO RESCRUTINIZE SUCH ORDER OF THE ASSESSING OFFICER AND HAVE ANY GRIEVAN CE AGAINST THE SAME. IT IS MORE SO BECAUSE THE ORDER OF THE AO HAS ALREADY BEEN CHECKE D BY A GROUP OF THREE CITS CONSTITUTING THE DRP. I HOWEVER LATER IT WAS REALIZ ED THAT THE INTEREST OF THE REVENUE WAS SUFFERING BECAUSE OF CERTAIN DIRECTIONS GIVEN B Y THE DRP PREJUDICIAL TO THE INTEREST OF THE REVENUE, WHICH THE ASSESSING OFFICE R CANNOT TINKER WITH AND BECOME BINDING ON HIM. WITH A VIEW TO EMPOWER THE CIT TO C HALLENGE SUCH ADVERSE DIRECTIONS GIVEN BY THE DRP PURSUANT TO WHICH THE A SSESSING OFFICER HAS PASSED ORDER U/S 144C, THE LEGISLATURE STEPPED IN BY INTRO DUCING SUB-SECTION (2A) TO SECTION 253 W.E.F 1.7.2012. WHICH PROVIDES THAT THE : THE C OMMISSIONER MAY, IF HE OBJECTS TO ANY DIRECTION ISSUED BY THE DISPUTE RESOLUTION PANE L UNDER SUB-SECTION (5) OF SECTION 144C IN RESPECT OF ANY OBJECTION FILED ON OR AFTER THE 1ST DAY OF JULY. 2012. BY THE ASSESSEE UNDER SUB-SECTION (2) OF SECTION I44C IN P URSUANCE OF WHICH THE ASSESSING OFFICER HAS PASSED AN ORDER COMPLETING THE ASSESSME NT OR REASSESSMENT, DIRECT THE ASSESSING OFFICER TO APPEAL TO THE APPELLATE TRIBUN AL AGAINST THE ORDER.' SUB-SECTION (4) OF SECTION 253 EMPOWERING THE ASSESSEE OR THE A SSESSING OFFICER TO FILE CROSS- OBJECTION WAS ALSO SUITABLY AMENDED BY THE FINANCE ACT. 2012 TO. INTER-ALIA. PROVIDE THAT THE ASSESSING OFFICER MAY, ON RECEIPT OF NOTIC E THAT AN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECT IONS OF THE DISPUTE RESOLUTION PANEL HAS BEEN PREFERRED BY THE ASSESSEE UNDER SUBS ECTION (1). FILE A CROSS-OBJECTIONS AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFI CER (IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL). WHEN WE READ SUB- SECTION (1) OF SECTION 253 IN JUXTAPOSITION TO SUB-SECTION (2A) OF SECTION 253, T HE POSITION WHICH EMERGES IS THAT WHEREAS THE ASSESSEE WAS EARLIER ALSO ENTITLED TO F ILE APPEAL AGAINST THE ORDER PASSED BY THE AO PURSUANT TO THE DIRECTION OF THE DRP, THE REVENUE HAS BEEN CLOTHED WITH SUCH POWER BY THE FINANCE ACT. 2012. PROVIDED THE O BJECTION WAS FILED BY THE ASSESSEE BEFORE THE DRP ON OR AFTER 01.07.12. THUS, IT BECOMES PALPABLE THAT THE DEPARTMENT HAS NO POWER TO FILE APPEAL OR OBJECT TO THE ANY DIRECTION ISSUED BY THE DRP IN PURSUANCE OF WHICH THE ASSESSING OFFICER PAS SED ORDER U/S 144C, IF THE ASSESSEE FILED OBJECTION BEFORE THE DRP BEFORE THIS CUT-OFF DATE OF 1.7.2012. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSEE FILED OBJECTION AGAINST THE DRAFT ASSESSMENT ORDER BEFORE THE DRP O N 30.01.2012. SINCE THE OBJECTION IN THIS CASE WAS FILED BY THE ASSESSEE BE FORE THE DRP PRIOR TO 01.07.12. THE REVENUE COULD HAVE NEITHER FILED APPEAL NOR CROSS-O BJECTION AGAINST THE ORDER OF THE ASSESSING OFFICER. WE. THEREFORE, HOLD THAT THE CRO SS-OBJECTION FILED BY THE REVENUE IS NOT MAINTAINABLE AS PER LAW. 11. THE SECOND REASON FOR WHICH THE CO OF THE REVEN UE DESERVES THE FATE OF DISMISSAL IS THE LANGUAGE OF SECTION 253 OF THE ACT WHICH PER MITS THE CIT TO AUTHORIZE THE ASSESSING OFFICER TO FILE APPEAL U/S SUB-SECTION (2 A) 'IF HE OBJECTS TO ANY DIRECTION ISSUED BY THE DISPUTE RESOLUTION PANEL UNDER SUB-SE CTION (5) OF SECTION 144C. IN THE LIKE MANNER, CROSS-OBJECTION CAN BE FILED UNDER SUB -SECTION (4) OF SECTION 253 OF THE ACT WHICH PROVIDES THAT: 'THE ASSESSING OFFICER ... . ON RECEIPT OF NOTICE THAT AN APPEAL AGAINST THE ORDER OF... THE ASSESSING OFFICER IN PU RSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL HAS BEEN PREFERRED UNDER S UB-SECTION (1) .... HE MAY ... FILE A MEMORANDUM OF CROSS-OBJECTIONS... AGAINST ANY PAR T OF THE ORDER OF THE ASSESSING OFFICER (IN PURSUANCE OF THE DIRECTIONS OF THE DISP UTE RESOLUTION PANEL) ...'. THE CRUX OF THE MATTER IS THAT THE APPEAL OR THE CROSS-OBJEC TION CAN BE FILED BY THE REVENUE ONLY IF THE CIT OBJECTS TO ANY 'DIRECTION ISSUED BY THE DRP ' OR 'AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFICER (IN PURSUANCE OF THE DIRECTIONS OF THE DRP) 1 . THUS 12 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 IT IS MANIFEST THAT THE APPEAL CAN BE FILED ONLY AG AINST DIRECTION ISSUED BY THE DRP AND THE CO CAN BE FILED AGAINST ANY PART OF THE ORD ER OF THE ASSESSING OFFICER PASSED IN PURSUANCE TO THE DIRECTION OF THE DRP. THE NITTY -GRITTY OF THE MATTER IS THAT REVENUE SHOULD HAVE OBJECTION EITHER AGAINST THE DI RECTION OF THE DRP OR AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER. IN OTHER WOR DS, THE SCOPE OF THE APPEAL OR CROSS-OBJECTION BY THE REVENUE IS CONFINED TO THE S OME ADVERSE FINDING RENDERED BY EITHER OF THE AUTHORITIES, AS THE CASE MAY BE. 9. LEARNED COUNSEL FURTHER RELIED ON THE DECISION O F ITAT MUMBAI BENCH IN THE CASE OF M/S NOMURA SERVICES INDIA PVT. LTD VS. THE DY. COMMISSIONER OF INCOME TAX VIDE ITA NO. 3675/M/2014, WHEREIN, THE TRIBUNAL HAS IN PARA 12 HAS OBSERVED AS UNDER: IN THE CASE IN HAND, THE OBJECTIONS WERE FILED ON 2 3.12.2010, THEREFORE, THE DIRECTIONS PASSED BY THE DRP ON THE OBJECTIONS FILE D BY THE ASSESSEE ARE BINDING ON THE ASSESSING OFFICER. THE ORDER OF THIS TRIBUNA L RESORTING THE ASSESSEE ON MERITS WOULD NOT CHANGE THE FACTUM OF FILING THE OB JECTIONS BY THE ASSESSEE ON 23.12.2010 AND THEREFORE THE DIRECTION OF THE DRP D ATED 11.03.2014 ARE IN RESPECT OF THE OBJECTIONS DATED 23.12.2010 CANT BE CHALLENGED BY THE ASSESSING OFFICER. 10. WITH REFERENCE TO THESE DECISIONS, LEARNED COUN SEL SUBMITTED THAT SINCE THE OBJECTIONS WERE FILED BY THE ASSESSEE BEF ORE LEARNED DRP IN BOTH ROUND OF PROCEEDINGS PRIOR TO JULY, 2012, THEREFORE , THE CROSS OBJECTIONS FILED BY THE DEPARTMENT ARE NOT MAINTAINABLE. 11. PER CONTRA , LD. CIT (DR) SUBMITTED THAT APPELLATE COURT HAS P OWER TO ENTERTAIN NEW GROUNDS. IN THIS REGARD, HE RELIED ON FOLLOWING DECISIONS :- (A) ASHOK VARDHAN BIRLA VS. CIT (1994) 208 ITR 958 (BOM BAY) (B) CIT VS. GEORGE WILLIAM, ASSAM 091 TAXMANN 293 ( GAUHATI) (C) CIT VS. INDIAN EXPRESS (MADURAI) (P) LTD. (1983 ) 13 TAXMANN 441 13 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 (D) NTPC VS. CIT 229 ITR 383 (E) JUTE CORPORATION OF INDIA 88 CTR 66 12. HE FURTHER SUBMITTED THAT ADDITIONAL GROUND CAN BE RAISED AT APPELLATE STAGE RELYING ON THE DECISION IN THE CASE OF AMINES PLASTICIZERS LTD. VS. CIT 223 ITR 173. 13. LEARNED CIT(DR) FURTHER SUBMITTED THAT APPELLAT E AUTHORITY IS REQUIRED TO SET RIGHT THE WRONGFUL ACTIONS OF LOWER AUTHORITIES. IN THIS REGARD, HE RELIED ON THE DECISION IN KAPOOR CHAND SHRIMAL 131 ITR 451 AND ALSO ON THE DECISION OF HONBLE HIGH COURT OF DELHI IN T HE CASE OF THE COMMISSIONER OF INCOME TAX VS. M/S JANSAMPARK ADVER TISING AND MARKETING (P) LTD. IN ITA NO. 525/2014. 14. LEARNED CIT(DR) REFERRED TO PAGE 66 TO 68 WHERE IN THE TPOS ORDER IS CONTAINED AND REFERRED TO PAGE 73 OF THE PAPER B OOK TO POINT OUT THAT LEARNED TPO ACCEPTED CERTAIN COMPARABLES THOUGH THE Y WERE FUNCTIONALLY NOT COMPARABLE. HE SUBMITTED THAT SAME PRINCIPLE IS TO BE APPLIED FOR ALL COMPARABLES WHETHER EARNING HIGH PROFIT OR LOW PROF IT. LEARNED COUNSEL IN THE REJOINDER RELIED ON THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF MCORP GLOBAL (P.) LTD. VS. COMMISSIONER OF INCOME T AX, GHAZIABAD, [2009] 178 TAXMAN 347 (SC)/[2009] 309 ITR 434 (SC)/ [2009] 222 CTR 110 WHEREIN, IT HAS BEEN HELD THAT BENEFIT ONCE GRANTED TO ASSESSEE CANNOT BE TAKEN BACK. LEARNED DR REFERRED TO THE DECISION IN THE CASE OF TREND 14 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 MICRO INDIA PVT. LTD VS. DCIT, CIRCLE-25(2), NEW DE LHI, AND POINTED OUT THAT THE TRIBUNAL, AFTER DISCUSSION, HAD SET ASIDE THE MATTER TO LEARNED TPO AND, THEREFORE, THE SAME PRINCIPLE SHOULD BE APPLIE D HERE ALSO. 15. LD. DR FURTHER RELIED ON PARA 11 OF THE DECISIO N IN THE CASE OF M/S B J SERVICES COMPANY MIDDLE EAST LTD VS. ASSISTANT COMM ISSIONER OF INCOME TAX , WHICH READS AS UNDER :- 11. LEARNED COUNSEL FOR THE APPELLANT ALSO DREW OUR ATTENTION TO A JUDGMENT, REPORTED IN (1993) 199 ITR 351 = 2OO3-TIOL-367-HC-M UM-IT (AHMEDABAD ELECTRICITY CO. LTD. VS. COMMISSIONER OF INCOME-TAX ) OF THE FULL BENCH OF THE BOMBAY HIGH COURT, WHEREIN THE FULL BENCH, INTER AL IA, TOOK THE FOLLOWING VIEW: 'THE BASIC PURPOSE OF AN APPEAL IN AN INCOME-TAX MA TTER IS TO ASCERTAIN THE CORRECT TAX LIABILITY OF THE ASSESSES IN ACCORDANCE WITH LAW. THEREFORE, AT BOTH THE STAGES, EITHER BEFORE THE APPELLATE ASSISTANT COMMI SSIONER OR BEFORE THE APPELLATE TRIBUNAL, THE APPELLATE AUTHORITY CAN CON SIDER, THE PROCEEDINGS BEFORE IT AND THE MATERIAL ON RECORD BEFORE IT FOR THE PUR POSE OF DETERMINING THE CORRECT TAX LIABILITY OF THE ASSESS. THE APPELLATE AUTHORIT IES, OF COURSE, CANNOT TRAVEL BEYOND THE PROCEEDINGS AND EXAMINE NEW SOURCES OF I NCOME. FOR THIS PURPOSE, OTHER SEPARATE REMEDIES ARE PROVIDED TO THE DEPARTMENT UN DER THE INCOME-TAX ACT. BUT, APART FROM THIS, THERE IS NOTHING IN SECTION 254 O R SECTION 251 OF THE INCOME-TAX ACT, 361, WHICH WOULD INDICATE THAT THE APPELLATE AUTHORITIES ARE CONFINED TO CONSIDERING ONLY THE OBJECTIONS RAISED BEFORE THEM OR ALLOWED TO BE RAISED BEFORE THEM EITHER BY THE ASSESSEE OR BY THE DEPARTMENT, AS THE CASE MAY BE. THEY CAN INSIDER THE ENTIRE PROCEEDINGS TO DETE RMINE THE TAX LIABILITY OF THE ASSESSEE. RIDER SECTION 254 (1), THE APPELLATE TRIB UNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD , 'PASS SUCH ORDERS THEREON AS IT THINKS FIT'. THIS GIVES VERY WIDE POWER TO THE A PPELLATE TRIBUNAL TO PASS, ON THE APPEAL, SUCH ORDERS AS IT MAY THINKS FIT. ' 12. THIS IS AN APPEAL UNDER SECTION 260A OF THE ACT AND SECTION 260A OF THE ACT READS AS FOLLOWS:- '260A. APPEAL TO HIGH COURT- (1) AN APPEAL SHALL LI E TO THE HIGH COURT FROM EVERY ORDER PASSED IN APPEAL BY THE APPELLATE TRIBU NAL BEFORE THE DATE OF ESTABLISHMENT OF THE NATIONAL TAX TRIBUNAL, IF THE HIGH COURT IS SATISFIED THAT THE CASE INVOLVES A SUBSTANTIAL QUESTION OF LAW. (2) THE CHIEF COMMISSIONER OR THE COMMISSIONER OR A N ASSESSEE AGGRIEVED BY ANY ORDER PASSED BY THE APPELLATE TRIBUNAL MAY FILE AN APPEAL TO THE HIGH COURT AND SUCH APPEAL UNDER THIS SUB-SECTION SHALL BE- (A) FILED WITHIN ONE HUNDRED AND TWENTY DAYS FROM T HE DATE ON WHICH THE ORDER APPEALED AGAINST IS RECEIVED BY THE ASSESSEE OR THE CHIEF COMMISSIONER OR COMMISSIONER; (B) 15 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 (C) IN THE FORM OF A MEMORANDUM OF APPEAL PRECISELY STATING THEREIN THE SUBSTANTIAL QUESTION OF LAW INVOLVED, (2A) THE HIGH COURT MAY ADMIT AN APPEAL AFTER THE E XPIRY OF THE PERIOD OF ONE HUNDRED AND TWENTY DAYS REFERRED TO IN CLAUSE (A) O F SUB-SECTION (2), IF IT IS SATISFIED THAT THERE WAS SUFFICIENT CAUSE FOR NOT F ILING THE SAME WITHIN THAT PERIOD. (3) WHERE THE HIGH COURT IS SATISFIED THAT A SUBSTA NTIAL QUESTION OF LAW IS INVOLVED IN ANY CASE, IT SHALL FORMULATE THAT QUEST ION. THE APPEAL SHALL BE HEARD ONLY ON THE QUESTION SO F ORMULATED, AND THE RESPONDENTS SHALL, AT THE HEARING OF THE APPEAL, BE ALLOWED TO ARGUE THAT THE CASE DOES NOT INVOLVE SUCH QUESTION: PROVIDED THAT NOTHING IN THIS SUB-SECTION SHALL BE DEEMED TO TAKE AWAY OR ABRIDGE THE POWER OF THE COURT TO HEAR, FOR REASONS TO BE R ECORDED, THE APPEAL ON ANY OTHER SUBSTANTIAL QUESTION OF LAW NOT FORMULATED BY IT, IF IT IS SATISFIED THAT THE CASE INVOLVES SUCH QUESTION, (5) THE HIGH COURT SHALL DECIDE THE QUESTION OF LAW SO FORMULATED AND DELIVER SUCH JUDGMENT THEREON CONTAINING THE GROUNDS ON WHI CH SUCH DECISION IS FOUNDED AND MAY AWARD SUCH COST AS IT DEEMS FIT (6) THE HIGH COURT MAY DETERMINE ANY ISSUE WHICH- (A) HAS NOT BEEN DETERMINED BY THE APPELLATE TRIBUN AL; OR (B) HAS BEEN WRONGLY DETERMINED BY THE APPELLATE TR IBUNAL, BY REASON OF A DECISION ON SUCH QUESTION OF LAW AS IS REFERRED TO IN SUB-SECTION (1). (7) SAVE AS OTHERWISE PROVIDED IN THIS ACT, THE PRO VISIONS OF THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908), RELATING TO APPEALS TO THE HIGH COURT SHALL, AS FAR AS MAY BE, APPLY IN THE CASE OF APPEALS UNDER THIS SECTION.' 13. ON A CONSPECTUS OF THESE PROVISIONS, THE LEGAL EFFECT OF THE SECTION WOULD APPEAR TO BE THAT THE APPEAL IS NORMALLY TO BE HEAR D ON THE SUBSTANTIAL QUESTIONS OF LAW FORMULATED AND THE APPELLANT CAN BE ALLOWED TO ARGUE ONLY IN REGARD TO THE SAME. IT IS ALSO OPEN TO THE RESPONDENT TO POINT OU T THAT THOUGH A SUBSTANTIAL QUESTION OF LAW HAS BEEN FORMULATED BUT IN FACT AND IN LAW, THE SAID QUESTION OF LAW IS REALLY NOT A SUBSTANTIAL QUESTION OF LAW. TH E HIGH COURT IS TO DELIVER JUDGMENT ON THE BASIS OF THE: DECISION ON THE QUEST ION OF LAW FRAMED AND IT ALSO PROVIDES THAT THE HIGH COURT MAY ALSO DECIDE THE AP PEAL ON ANY OTHER SUBSTANTIAL QUESTION OF LAW WHICH MAY NOT HAVE BEEN FORMULATED. THE ONLY CONDITION IS THAT IT SHOULD BE SATISFIED THAT THE CASE INVOLVED SUCH A Q UESTION. EVEN IF THE APPELLATE TRIBUNAL HAS NOT DECIDED AN ISSUE OR AN ISSUE HAS B EEN WRONGLY DECIDED, IT IS OPEN TO THE HIGH COURT IN A PROCEEDING UNDER SECTIO N 260A OF THE ACT TO EITHER DECIDE THE QUESTION WHICH HAS NOT BEEN DECIDED OR T O DECIDE THE QUESTION WHICH IS WRONGLY DECIDED SUBJECT TO THE ONLY LIMITATION THAT THIS IS OCCASIONED BY THE DECISION WHICH IT RENDERS ON THE SUBSTANTIAL QUESTI ON OF LAW. THEREFORE, IN THE ULTIMATE ANALYSIS, THE HIGH COURT'S INTERFERENCE WI TH THE IMPUGNED DECISION MUST BE PREMISED ON THE EXISTENCE OF THE SUBSTANTIAL QUE STION OF LAW AND A DECISION ON THE SAME. IF THERE IS A SUBSTANTIAL QUESTION OF LAW MADE OUT; IT PROVIDES POWER TO INTERFERE WITH THE APPELLATE TRIBUNAL'S ORDER; BE I T ON AN ISSUE WHICH HAS. BEEN DECIDED BY IT-ERRONEOUSLY OR ON AN ISSUE NOT DECIDE D BY IT. IN THIS CASE, IT MAY BE TRUE THAT THE APPELLANT HAS NOT RAISED THIS QUESTIO N BEFORE THE APPELLATE AUTHORITY AND ALSO BEFORE THE APPELLATE TRIBUNAL. THE APPELLA NT HAS NOT PRODUCED THE MEMORANDUM OF THE APPEAL BEFORE THE TRIBUNAL AND TH E ORDER OF THE APPELLATE 16 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 TRIBUNAL ALSO DOES: NOT BEAR IT OUT THAT THE APPELL ANT HAS RAISED THIS QUESTION, BUT WE WOULD THINK THAT THE QUESTION WHICH IS RAISED ES SENTIALLY, APPEARS TO BE A PURE QUESTION OF LAW AND IT IS SUBSTANTIAL IN THE SENSE THAT IT HAS GOT A DIRECT AND SUBSTANTIAL IMPACT ON THE DESTINY OF THE APPELLANT' S CASE AND WE HENCE PROCEED TO FORMULATE THE FOLLOWING SUBSTANTIAL QUESTION OF LAW :- WHETHER IN THE CIRCUMSTANCES OF THE CASE, THE APPEL LATE AUTHORITY AND THE TRIBUNAL SHOULD HAVE FOUND THAT THE AMOUNT OF INTER EST RECEIVED ON THE REFUND BY THE INCOME TAX DEPARTMENT SHOULD BE INCLUDED IN THE AMOUNT ON WHICH THE APPELLANT WAS TAXED UNDER SECTION 44BB OF THE ACT? WHETHER IN THE CIRCUMSTANCES OF THE CASE, THE APPEL LATE AUTHORITY AND THE TRIBUNAL SHOULD HAVE FOUND THAT THE AMOUNT OF INTER EST RECEIVED ON THE REFUND BY THE INCOME TAX DEPARTMENT SHOULD BE INCLUDED IN THE AMOUNT ON WHICH THE APPELLANT WAS TAXED UNDER SECTION 44BB OF THE ACT? . RELYING ON THIS DECISION, LD. CIT(DR) SUBMITTED THA T CORRECT INCOME IS TO BE COMPUTED. 16. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORD ON THE PRELIMINARY OBJECTIONS RAISED BY LEARNED COUNSEL ON THE ADMISSIBILITY/ MAINTAINABILITY OF CROSS OBJECTION F ILED BY THE DEPARTMENT. THERE IS NO GAIN-SAYING THAT RIGHT TO APPEAL IS ALW AYS GIVEN BY STATUTE AND UNLESS SPECIFIC PROVISION OF APPEAL IS THERE, THERE CANNOT BE ANY RIGHT TO APPEAL. THE APPEAL AND CROSS OBJECTION ARE AT PAR A S FAR AS THEIR ADMISSIBILITY IS CONCERNED. 17. THE SCHEME OF THE ACT IS VERY CLEAR. THE ASSESS ING OFFICER PASSES THE ASSESSMENT ORDER WHICH CAN BE ASSAILED BEFORE LD. C IT(A) BY THE ASSESSEE. IF, THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE THEN THE REMEDY LIES IN THE PASSING OF THE REVISIONAL ORDER BY 17 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 LEARNED CIT UNDER SECTION 263. LEARNED CIT(A) HAS C OTERMINOUS POWER WITH ASSESSING OFFICER AND, THEREFORE, HE IS ENTITL ED TO ENHANCE THE ASSESSMENT. BUT THIS POWER IS TO BE EXERCISED ONLY WITH REFERENCE TO THE ISSUES CONSIDERED BY THE ASSESSING OFFICER. LEARNE D CIT(A) IS NOT ENTITLED TO MAKE ENHANCEMENT BY RESORTING TO OR CONSIDERING NEW SOURCES OF INCOME. LEARNED CIT (DR) IN COURSE OF HIS SUBMISSIONS ALSO SUBMITTED THAT SINCE IN TRANSFER PRICING PROCEEDINGS, TRIBUNAL IS THE FIRST APPELLATE AUTHORITY, THEREFORE, IT HAS COTERMINOUS POWERS WITH ASSESSING OFFICER AND, THEREFORE, THE TRIBUNAL SHOULD ENTERTAIN THE OBJECTIONS RAISED BY THE DEPARTMENT BY WAY OF CROSS OBJECTION. THIS PLEA OF LD. CIT(DR) IS DEV OID OF ANY MERIT BECAUSE THIS PLEA OVERLOOKS THE FORUM OF DRP WHICH PRIMARIL Y HAS COTERMINOUS POWERS WITH TPO AND ASSESSING OFFICER IS OBLIGED TO GIVE EFFECT TO LD. DRPS DIRECTIONS. IN OUR OPINION, THE ANSWER TO LEA RNED CIT DRS SUBMISSIONS LIES IN THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MCORP GLOBAL (P.) LTD. VS. COMMISSIONER OF INCOME T AX, GHAZIABAD,(SUPRA) , IN WHICH PARA 6 IS REPRODUCED HEREINBELOW: 6. IN THE CASE OF HUKUMCHAND MILLS LTD. V. CIT[196 7] 63 ITR 232 THIS COURT HAS HELD THAT UNDER SECTION 33(4) OF THE INCOME-TAX ACT, 192 2 [EQUIVALENT TO SECTION 254(1) OF THE 1961 ACT], THE TRIBUNAL WAS NOT AUTHORIZED TO TAKE BACK THE BENEFIT GRANTED TO THE ASSESSEE BY THE ASSESSING OFFICER. THE TRIBUNAL HAS NO POWER TO ENHANCE THE ASSESSMENT. APPLYING THE RATIO OF THE SAID JUDGMENT TO THE PRES ENT CASE, WE ARE OF THE VIEW THAT, IN THIS CASE, THE ASSESSING OFFICER HAD GRANTED DEPREC IATION IN RESPECT OF 42,000 BOTTLES OUT OF THE TOTAL NUMBER OF BOTTLES (5,46,000), BY REASO N OF THE IMPUGNED JUDGMENT. THAT BENEFIT IS SOUGHT TO BE TAKEN AWAY BY THE DEPARTMEN T, WHICH IS NOT PERMISSIBLE IN LAW. THIS IS THE INFIRMITY IN THE IMPUGNED JUDGMENT OF T HE HIGH COURT AND THE TRIBUNAL. 18 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 18. LEARNED CIT (DR) REFERRED TO THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF ASHOK VARDHAN BIRLA (SUPRA). IN THIS CASE, IT WAS, INTER ALIA, HELD THAT WHILE DECIDING A TAX APPEAL, THE APPELLA TE AUTHORITIES VIZ. THE APPELLATE ASSISTANT COMMISSIONER AS ALSO THE TRIBUN AL HAVE JURISDICTION TO PERMIT ADDITIONAL GROUNDS TO BE RAISED BEFORE THEM EVEN THOUGH THESE GROUNDS MAY NOT HAVE BEEN RAISED BEFORE EITHER THE ASSESSING OFFICER OR THE APPELLATE ASSISTANT COMMISSIONER, SO LONG AS THE PO INTS FOR DECISION ARISE FROM THE PROCEEDINGS WHICH WERE THE SUBJECT MATTER OF ASSESSMENT BEFORE THE ASSESSING AUTHORITY. IT WAS FURTHER HELD THAT A DDITIONAL GROUNDS CAN BE ENTERTAINED SO LONG AS THEY RELATE TO THE MATTER OF THE PROCEEDINGS WHICH WERE BEFORE THE ASSESSING OFFICER OR BEFORE THE APP ELLATE AUTHORITY. THIS DECISION, IN OUR HUMBLE OPINION, DOES NOT HELP THE DEPARTMENT BECAUSE THERE WAS NO DISPUTE AS REGARDS THE MAINTAINABILITY OF AP PEAL BEFORE EITHER APPELLATE ASSISTANT COMMISSIONER OR TRIBUNAL. IT WA S A CASE OF PENDING APPEAL IN WHICH THE ADDITIONAL GROUNDS WERE SOUGHT TO BE RAISED PROVIDED THEY RELATED TO THE SUBJECT MATTER OF ASSESSMENT. T HE NEXT DECISION RELIED UPON BY LEARNED DR IS IN THE CASE OF GEORGE WILLIAMSON, ASSAM (SUPRA) . AS IN THE CASE OF NTPC (SUPRA) HERE ALSO THE ISSUE WAS REGARDING POWER OF THE TRIBUNAL IN DEALING WITH APPEALS AND IT WAS, INTER ALIA, HELD THAT THE POWER OF THE TRIBUNAL IN DEALING WITH APPEALS IS EX PRESSED IN THE WIDEST POSSIBLE TERMS. IT WAS HELD THAT THE PURPOSE OF THE ASSESSMENT PROCEEDINGS 19 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTL Y TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW AND IF AS A RESULT A JUDICIAL DECISION GIVEN, WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON- TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED THEN THERE IS NO REASON WHY THE ASSESSEE SHOULD BE RESTRAINED FROM R AISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME. HOWEVER, TH ESE OBSERVATIONS WERE WITH A RIDER THAT RELEVANT FACTS ARE ON RECORD IN RESPECT OF THE ITEM. THIS DECISION ALSO WAS RENDERED IN AN APPEAL WHICH WAS PENDING BE FORE THE TRIBUNAL. THIS DECISION IS ALSO OF NO ASSISTANCE TO THE DEPARTMENT BECAUSE, IN THE PRESENT CASE, THE DEPARTMENT WANTS THE TRIBUNAL TO REVOKE T HE FINDINGS OF LEARNED TPO THOUGH IT HAS NO RIGHT OF APPEAL. LEARNED CIT ( DR) ALSO REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN KAPOOR CHAND SHRIMAL (SUPRA). IN THIS CASE ALSO HONBLE SUPREME COURT OBSERVED THAT IT IS WELL KNOWN THAT AN APPELLATE AUTHORITY HAS THE JURISDICTION AS WELL AS THE DUTY TO CORRECT ALL ERRORS IN THE PROCEEDINGS UNDER AN APPEAL AND TO IS SUE, IF NECESSARY, APPROPRIATE DIRECTIONS TO THE AUTHORITY AGAINST WHO SE DECISION THE APPEAL IS PREFERRED AND DISPOSE OF WHOLE OR ANY PART OF THE M ATTER, UNLESS FORBIDDEN FROM DOING SO. HERE ALSO THERE WAS NO DISPUTE REGAR DING MAINTAINABILITY OF APPEAL AND THE OBSERVATIONS WERE MADE ONLY IN REGAR D TO THE PENDING APPEAL. HONBLE SUPREME COURT REMINDED THE APPELLATE AUTHOR ITY TO CORRECT ALL 20 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 ERRORS IN PROCEEDINGS UNDER APPEAL BUT DID NOT EMPO WER THE APPELLATE AUTHORITY TO WITHDRAW THE BENEFITS GRANTED BY ASSES SING AUTHORITY. 19. SIMILARLY, IN THE CASE THE COMMISSIONER OF INCOME TAX VS. M/S JANSANPARK ADVERTISING AND MARKETING (P) LTD, ALSO THE OBSERVATIONS WERE MADE WITH THE REFERENCE TO POWERS OF APPELLATE AUTH ORITIES, WHICH WERE AS FOLLOWS: 38. THE PROVISION OF APPEAL, BEFORE THE CIT (APPEA LS) AND THEN BEFORE THE ITAT, IS MADE MORE AS A CHECK ON THE ABUSE OF POWER AND A UTHORITY BY THE AO. WHILST IT IS TRUE THAT IT IS THE OBLIGATION OF THE AO TO COND UCT PROPER SCRUTINY OF THE MATERIAL, GIVEN THE FACT THAT THE TWO APPELLATE AUT HORITIES ABOVE ARE ALSO FORUMS FOR FACT-FINDING, IN THE EVENT OF AO FAILING TO DIS CHARGE HIS FUNCTIONS PROPERLY, THE OBLIGATION TO CONDUCT PROPER INQUIRY ON ITA NO.525/ 2014 PAGE 21 OF 24 FACTS WOULD NATURALLY SHIFT TO THE DOOR OF THE SAID APPEL LATE AUTHORITY. FOR SUCH PURPOSES, WE ONLY NEED TO POINT OUT ONE STEP IN THE PROCEDURE IN APPEAL AS PRESCRIBED IN SECTION 250 OF THE INCOME TAX ACT WHE REIN, BESIDES IT BEING OBLIGATORY FOR THE RIGHT OF HEARING TO BE AFFORDED NOT ONLY TO THE ASSESSEE BUT ALSO THE AO, THE FIRST APPELLATE AUTHORITY IS GIVEN THE LIBERTY TO MAKE, OR CAUSE TO BE MADE, FURTHER INQUIRY, IN TERMS OF SUB-SECTION (4 ) WHICH READS AS UNDER:- THE COMMISSIONER (APPEALS) MAY, BEFORE DISPOSING OF ANY APPEAL, MAKE SUCH FURTHER INQUIRY AS HE THINKS FIT, OR MAY DIRECT THE ASSESSING OFFICER TO MAKE FURTHER INQUIRY AND REPORT THE RESULT OF THE SAME T O THE COMMISSIONER (APPEALS). 39. THE FURTHER INQUIRY ENVISAGED UNDER SECTION 250 (4) QUOTED ABOVE IS GENERALLY BY CALLING WHAT IS KNOWN AS REMAND REPORT. THE PU RPOSE OF THIS ENABLING CLAUSE IS ESSENTIALLY TO ENSURE THAT THE MATTER OF ASSESSMENT REACHES FINALITY WITH ALL THE REQUISITE FACTS FOUND. THE ASSESSMENT PROCE EDINGS REOPENED ON THE BASIS OF PRELIMINARY SATISFACTION THAT SOME PART OF THE INCO ME HAS ESCAPED ASSESSMENT, PARTICULARLY WHEN SOME UNEXPLAINED CREDIT ENTRIES H AVE COME TO THE NOTICE (AS IN SECTION 68), CANNOT CONCLUDE, SAVE AND EXCEPT BY RE ACHING SATISFACTION ON THE TOUCHSTONE OF THE THREE TESTS MENTIONED EARLIER; VI Z. THE IDENTITY OF THE THIRD PARTY MAKING THE PAYMENT, ITS CREDITWORTHINESS AND GENUIN ENESS OF THE TRANSACTION. WHILST IT IS TRUE THAT THE ASSESSEE CANNOT BE CALLE D UPON TO ADDUCE CONCLUSIVE PROOF ON ALL THESE THREE QUESTIONS, IT IS NONETHELE SS LEGITIMATE EXPECTATION OF THE PROCESS THAT HE WOULD BRING IN SOME PROOF SO AS TO DISCHARGE THE INITIAL BURDEN PLACED ON HIM. SINCE SECTION 68 ITSELF DECLARES THA T THE CREDITED SUM WOULD HAVE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE IN THE ABSENCE OF EXPLANATION, OR IN ITA NO.525/2014 PAGE 22 OF 24 THE EVENT OF EXPLANAT ION BEING NOT SATISFACTORY, IT NATURALLY FOLLOWS THAT THE MATERIAL SUBMITTED BY TH E ASSESSEE WITH HIS EXPLANATION MUST ITSELF BE WHOLESOME OR NOT UNTRUE. IT IS ONLY WHEN THE EXPLANATION AND THE MATERIAL OFFERED BY THE ASSESSEE AT THIS STAGE PASS ES THIS MUSTER THAT THE INITIAL 21 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 ONUS PLACED ON HIM WOULD SHIFT LEAVING IT TO THE AO TO START INQUIRING INTO THE AFFAIRS OF THE THIRD PARTY. 20. ALL THESE OBSERVATIONS WERE MADE BECAUSE THE AS SESSING OFFICER HAD NOT CARRIED OUT THE ENQUIRIES AS WAS EXPECTED FROM HIM. WHILE DECIDING THIS APPEAL, HONBLE SUPREME COURT CONSIDERED THE PROVIS IONS OF SECTION 250(4) BESTOWING CO-TERMINUS POWERS ON FIRST APPELLATE AUT HORITY WITH AO. HOWEVER, THERE IS NO CORRESPONDING PROVISION QUA TR IBUNALS POWER AND TRIBUNAL CAN PASS ORDER ON THE SUBJECT MATTER OF AP PEAL AS IT DEEMS FIT BUT IN THAT PROCESS IT CANNOT CORRECT THE ERRORS OF JUDGME NT OF AO UNLESS APPEAL IS PENDING BEFORE IT IMPUGNING SUCH FINDINGS. THEREFOR E, TRIBUNAL CANNOT ENTER INTO THE REALM OF FINDINGS OF DRP WITH WHICH ASSESS EE IS NOT AGGRIEVED UNLESS DEPARTMENT HAS RIGHT TO APPEAL AGAINST SUCH FINDINGS. THIS DECISION ALSO IS OF NO ASSISTANCE TO THE DEPARTMENT BECAUSE IN THE PRESENT CASE, THE LEARNED TPO HAS ALSO ARRIVED AT CERTAIN COMPARABLES AFTER DULY EXAMINING THE FACTS. THESE COMPARABLES, IMPUGNED BY LEARNED C IT(DR), ARE NOT THE SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL. THE S UBMISSION OF LEARNED CIT(DR) RELYING ON B.J. SERVICES COMPANY (SUPRA) TH AT THE APPELLATE AUTHORITY SHOULD SET RIGHT ALL THE ACTIONS OF LOWER AUTHORITIES ARE ACCEPTABLE TO THE EXTENT OF THE SUBJECT MATTER OF APPEAL. THOU GH, THE SUBMISSION OF LEARNED CIT (DR) THAT THE SUBJECT MATTER APPEAL IS DETERMINATION OF ARMS LENGTH PRICE, NO DOUBT IS CONVINCING, BUT AT THE SA ME IT HAS TO BE KEPT IN 22 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 MIND THAT DETERMINATION OF ARMS LENGTH PRICE OF IN TERNATIONAL TRANSACTIONS INVOLVES SEVERAL STEPS AND, ON THOSE STEPS, WHICH A RE NOT DISPUTED BY THE ASSESSEE, THE DEPARTMENT CANNOT BE HEARD UNLESS SPE CIFIC PROVISION IS THERE FOR ENTERING INTO THAT REALM. WE ARE OF THE CONSID ERED OPINION THAT THE ISSUE IS SQUARELY COVERED BY THE DECISIONS OF VARIOUS COO RDINATE BENCHES NOTED EARLIER. 21. IN VIEW OF THE ABOVE DISCUSSION, THE CROSS OBJE CTION FILED BY THE DEPARTMENT IS HELD TO BE NON MAINTAINABLE AND, THUS , REJECTED. 22. NOW, WE WILL TAKE UP THE ASSESSEES APPEAL. THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS UNDER RULE 11 OF T HE INCOME TAX APPELLATE TRIBUNALS RULES, 1963 VIDE ITS APPLICATIO N DATED 08 TH JULY, 2015, WHICH IS REPRODUCED HEREINBELOW :- 1. THE LD. TPO HAS ERRED WHILE MAKING WORKING CAPI TAL ADJUSTMENTS PURSUANT TO THE DIRECTIONS OF THE HONBLE DISPUTE R ESOLUTION PANEL. 23. IN THE APPLICATION, IT IS STATED THAT ADJUDICAT ION OF ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ESSENTIAL AS LEARNED TPO HAD COMMITTED AN ERROR WHILE MAKING WORKING CAPITAL ADJUSTMENT PURSUANT TO THE DIRECTIONS OF LEARNED DRP. IN THE PETITION, IT IS FURTHER SUBMITT ED THAT THE ASSESSEE HAS ALSO FILED AN APPLICATION UNDER SECTION 154 OF THE ACT B EFORE THE LEARNED TPO TO RECTIFY THE AFORESAID ERROR AND THE SAME IS PENDING . BEFORE US, A COPY OF THE 23 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 PETITION, FILED UNDER SECTION 154, HAS ALSO BEEN EN CLOSED AS ANNEXURE B TO THE PETITION. 24. LEARNED CIT(DR) VEHEMENTLY OPPOSED THE ADMISSIO N OF THIS ADDITIONAL GROUND, AND SUBMITTED THAT NO VALID REAS ONS ARE GIVEN FOR NOT RAISING THESE GROUNDS AT THE TIME OF FILING APPEAL. 25. AFTER HEARING BOTH THE PARTIES, WE ADMIT THE AD DITIONAL GROUND RAISED BY ASSESSEE AS ALL THE FACTS NECESSARY FOR DISPOSAL OF THE SAME ARE ON RECORD AND DIRECT THE ASSESSING OFFICER TO DISPOSE OF THE PETITION FILED BY ASSESSEE UNDER SECTION 154 PENDING WITH HIM. IN THE RESULT, THE ADDITIONAL GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 26. NOW, WE WILL CONSIDER THE MERITS OF THE CASE. B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 15 TH NOVEMBER, 1999. AS PER TRANSFER PRICING STUDY ASSE SSEE HAS TWO INDIVIDUALS AS SHAREHOLDERS. ONE SHAREHOLDER HOLDS MORE THAN 26 % OF THE VOTING POWER IN ASSESSEE COMPANY AND ALSO IN CHRYSC APITAL INVESTMENT ADVISORS (I) PVT. LTD. I.E. CMC-I, CMC-II, CMC-III AND CMC-4. ACCORDINGLY, UNDER THE INDIAN TRANSFER PRICING LEGI SLATION, ASSESSEE IS AN ASSOCIATED ENTERPRISE OF THE AFOREMENTIONED MANAGEM ENT COMPANIES. IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING ADVISORY SERVICES TO ITS ASSOCIATED ENTER PRISES NOTED ABOVE TO 24 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 ASSIST THEM IN PROVIDING SERVICES TO THE INVESTMENT FUNDS. CCIAPL PRIMARILY CARRIES OUT RESEARCH AND SCOUTING ACTIVIT IES FOR CHRYSCAPITAL MANAGEMENT COMPANIES TO IDENTIFY ENTREPRENEURS AND PORTFOLIO COMPANIES REQUIRING ASSISTANCE IN THE FORM OF CAPITAL INFUSIO N, STRATEGIC DIRECTION AND FINANCIAL ADVICE. CHRYSCAPITAL MANAGEMENT COMPANIE S ARE ASSET MANAGEMENT COMPANIES FOR INVESTMENT FUNDS (PRIVATE EQUITY FUNDS) WHO GENERALLY FOCUS ON INVESTMENT IN INCUBATION VENTURE S. THESE INVESTMENT FUNDS CONCENTRATE ON PROVIDING FUNDS TO ENTREPRENEU RS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE SERVICES, OUTSOURCIN G SERVICES AND TECHNOLOGY OUT OF INDIA. 27. THE ASSESSEE HAD UNDERTAKEN THE FOLLOWING INTER NATIONAL TRANSACTIONS:- S. NO DESCRIPTION AMOUNT (RS.) 1. ADVISORY SERVICES 25,20,11,250 2. REIMBURSEMENT OF EXPENSES INCURRED ON BEHALF OF AES 5,39,53,094 3. RECEIPT OF ADVANCE FOR SERVICES TO BE RENDERED I N FUTURE 3,33,41,250 28. THERE WAS NO ADJUSTMENT MADE IN REGARD TO THE R EIMBURSEMENT OF EXPENSES AND RECEIPT OF ADVANCE FOR SERVICES TO BE RENDERED IN FUTURE. AS REGARDS, THE ADVISORY SERVICES, THE ASSESSEE COMPAN Y ADOPTED TRANSACTIONAL NET MARGIN METHOD (TNMM) WITH OPERATING PROFIT/OPER ATING COST AS THE MOST APPROPRIATE METHOD AND PROFIT LEVEL INDICATOR (PLI) RESPECTIVELY TO 25 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 DETERMINE THE ARMS LENGTH PRICE OF THE INTERNATION AL TRANSACTION. THE OPERATING MARGIN OF CCIAPL HAS BEEN COMPUTED IN THE TRANSFER PRICING REPORT (PAGE 44) AT 24.15%. 29. THE ASSESSEE HAD DONE THE COMPARABILITY ANALYSI S BY SELECTING 6 COMPARABLES AND HAD USED WEIGHTED AVERAGE USING THE DATA FOR THE YEAR 2003-04, 2004-05 AND 2005-06. THE LEARNED TPO DID N OT ACCEPT THE DATA OF YEARS 2003-04 AND 2004-05 AND USED THE DATA FOR THE ASSESSMENT YEAR 2005-06 ONLY. THE UPDATED MARGINS OF SIX COMPARABL ES SUBMITTED BY ASSESSEE BEFORE TPO WERE AS UNDER :- S. NO. COMPANY NAME 2004 2005 2006 WT. AVG. 1. KHANDWALA SECURITIES -43.03 27.31 43.35 8.92 2. KEYNOTE CORPORATE SERVICES LTD -6.87 13.33 94.06 33.51 3. SUMEDHA FISCAL SERVICES LTD -31.08 -6.88 -16.71 -18.23 4. SREI CAPITAL MARKETS LTD 5.32 19.78 6.92 10.67 5. INTEGRATED ENTERPRISES (INDIA) LTD - 3.96 -9.61 -2.83 6. KJMC 2.02 6.60 -10.42 3.98 ARITHMETIC MEAN 6.00 30. THE LEARNED TPO POINTED OUT THAT ADMITTEDLY THE RE WAS NO CHANGE IN THE BUSINESS ACTIVITIES OF THE ASSESSEE AS COMPARED TO EARLIER YEARS. ACCORDINGLY THE COMPARABLES CHOSEN IN THE EARLIER Y EARS SHOULD ALSO BE ANALYZED FOR COMPARABILITY. FOLLOWING TABLE SHOWS T HE COMPARABLES USED BY THE ASSESSEE IN THE EARLIER YEAR, ACCEPTED OR REJEC TED BY THE LEARNED TPO AND THE COMPARABLES USED IN THIS YEAR :- 26 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 S. NO. NAME OF THE COMPARABLE A.Y. 2005-06 USED BY ASSESSEE A.Y. 2005-06 ACCEPTED/REJECTED BY TPO A.Y. 2006-07 USED BY ASSESSEE 1. AJCON GLOBAL SERVICES LIMITED YES YES NO 2. BRESCON CORPORATE ADVISORS LIMITED YES YES NO 3. EPIC ENERGY LIMITED YES REJECTED NO 4. ICDS SECURITIES LTD YES YES NO 5. KJMC GLOBAL MARKET (INDIA) LTD YES YES YES 6. KEYNOTE CORPORATE SERVICES LTD YES YES YES 7. MAHANIVESH INDIA LTD YES REJECTED NO 8. MAARG HOLDING & FINANCIAL SERVICE LTD. YES REJECTED NO 9. SUMEDHA FISCAL SERVICE LIMITED NO YES YES 10. CENTRUM FINANCE LIMITED NO YES NO 11. KHANDWALA SECURITIES LTD YES 12. SREI CAPITAL MARKETS LTD YES 13 INTEGRATED ENTERPRISES INDIA LTD YES 31. AFTER CONSIDERING THE AFOREMENTIONED TABLE, THE LEARNED TPO SHOW CAUSED THE ASSESSEE AS TO WHY THE COMPARABLES USED BY THE ASSESSEE IN EARLIER YEAR SHOULD NOT BE USED IN THE CURRENT YEAR ALSO. 32. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, T HE FINAL LIST OF COMPARABLES, ADOPTED BY LEARNED TPO, WAS AS UNDER: S. NO COMPANY NAME 2006 1. KHANDWALA SECURITIES LTD CURRENT YEAR 43.35 2. KEYNOTE CORPORATE SERVICES LTD CURRENT YEAR 94.0 6 3. SUMEDHA FISCAL SERVICES LTD CURRENT YEAR -16.71 4. KJMC GLOBAL MARKET (INDIA) LTD CURRENT YEAR -10. 42 5. BRESCON CORPORATE ADVISORS LTD PRECEDING YEAR 87 .89 6. ICDS PRECEDING YEAR 119.00 ARITHMETIC MEAN 52.86 27 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 33. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AS REGARDS THE WORKING CAPITAL ADJUSTMENTS AND, AFTER, RE-COMPUTING THE OP ERATING PROFIT OF THE ASSESSEE AT 19.08%, COMPUTED THE ADJUSTMENT IN THE ARMS LENGTH PRICE AT RS. 8,68,19,937/-, AS UNDER: TOTAL COST OF PROVISION OF SERVICES BY THE ASSESSEE (AS CALCULATED IN PARA 17 ABOVE) RS. 257,003,802 MARGIN (OP/OC) @ 52.86% OF THE ABOVE RS. 135,852,20 9 OPERATING MARGIN CALCULATED BY ASSESSEE RS. 49,032 ,272 DIFFERENCE RS. 86,819,937 34. NOW, IN THE PRESENT APPEAL, THE ASSESSEES MAIN GRIEVANCE VIDE GROUND NO. 5 IS AS REGARDS INCLUSION OF BRESCON COR PORATE ADVISORS LIMITED MAINLY RELYING ON THE DECISION IN THE CASE OF TEMASEK HOLDINGS ADVISORS INDIA (P.) LTD VS. DEPUTY COMMISSIONER OF INCOME TA X, CRICLE 3(3) AND THE DECISION OF ITAT DELHI BENCH IN THE CASE OF XANDER ADVISORS INDIA (P.) LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCL E-18(1), NEW DELHI . LEARNED COUNSEL POINTED OUT THAT IN BOTH THESE DECI SIONS THIS COMPANY HAD BEEN CONSIDERED AND IT WAS HELD THAT THIS WAS A MER CHANT BANKING COMPANY WITH ITS MAIN SOURCE OF INCOME FROM RECAPITALIZATIO N ADVISORY AND DEBT SYNDICATIONS AND, THUS, IT WAS NOT A SIMPLE INVESTM ENT ADVISORY SERVICES AS THE ASSESSEE IS. LEARNED CIT (DR) SUBMITTED THAT T HE DECISION IN THE CASE OF XANDER ADVISORS INDIA (P.) LTD VS. ASSISTANT COMMIS SIONER OF INCOME TAX, CIRCLE-18(1), NEW DELHI PERTAINS TO ASSESSMENT YEAR 2008-09 AND NOT 28 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 TO ASSESSMENT YEAR 2006-07 WHICH IS BEFORE US. IN T HIS REGARD, HE RELIED ON RULE ON 10B(4), WHEREIN, IT HAS BEEN MANDATED THAT THE DATA TO BE USED IN ANALYZING THE COMPARABILITY WITH AN INTERNATIONAL TRANSACTION SHALL BE THE DATA OF THE FINANCIAL YEAR IN WHICH THE INTERNATION AL TRANSACTION HAS BEEN ENTERED INTO. AS REGARDS, THE TEMASEK HOLDINGS ADVISORS INDIA (P.) LTD. , ALSO LEARNED CIT(DR) POINTED OUT THAT THE SAME DEAL T WITH ASSESSMENT YEAR 2005-06 AND NOT FOR ASSESSMENT YEAR 2006-07. HE, TH EREFORE, SUBMITTED THAT BOTH THESE CASE RELIED BY LEARNED COUNSEL ARE NOT R ELEVANT AND SINCE IN EARLIER YEAR THIS COMPARABLE WAS USED FOR DETERMINING ARMS PRICE LENGTH PRICE OF INTERNATIONAL TRANSACTION THEREFORE IT WAS RIGHTLY INCLUDED BY LEARNED TPO. 35. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORD OF THE CASE. WE ARE NOT INCLINED ACCEPT THE SUBMISSION OF LEARNED CIT (DR) THAT A DECISION CAN BE APPLIED IN TRANSFER PRICING CASES ONLY IF IT PERTAINS TO THE SAME ASSESSMENT YEAR BECAUSE ULTIMA TELY IT IS THE FAR ANALYSIS WHICH IS RELEVANT OF THE TESTED PARTY AS W ELL AS OF COMPARABLE FOR SELECTING/REJECTING A COMPARABLE. IF THE FUNCTIONAL PROFIT OF A COMPARABLE VIS--VIS THE TESTED PARTY REMAINS THE SAME OVER TH E YEARS THEN THERE IS NO REASON AS TO WHY THE DECISION RENDERED IN REGARD TO ONE ASSESSMENT YEAR MAY NOT BE APPLIED FOR ANY OTHER YEAR UNLESS IT IS DEMO NSTRATED WITH FACTS AND FIGURES THAT THE SAID DECISION WAS RENDERED IN ENTI RELY DIFFERENT SET OF FACTS. IN THE PRESENT CASE, THE ASSESSEE HAS REFERRED TO P ARA 10 OF XANDER ADVISORS 29 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 INDIA (P.) LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-18(1), NEW DELHI, WHICH IS AS FOLLOWS: WE HAVE PERUSED THE ANNUAL ACCOUNTS OF THIS COMPAN Y, A COPY OF WHICH HAS BEEN PLACED ON /RECORD. THIS COMPANY IS ENGAGED IN CARRYING ON MER CHANT BANKING AND INVESTMENT ACTIVITIES ALONG WITH PROVIDING PROJECT ADVISORY SERVICES. A L OOK AT THE ANNUAL ACCOUNTS OF BRESCON CORPORATE ADVISORS LTD. INDICATES THAT IT HAS TWO S TREAMS OF INCOME, NAMELY, TEE BASED FINANCIAL SERVICES' AND 'OTHER INCOME 1 . DETAILS OF THE REVENUE UNDER 'FEE BASED FINANCIAL SERVICES' IS GIVEN AT PAGE 324 OF THE PAPER BOOK, W HICH IS AS UNDER: FINANCIAL RESTRUCTURING & RECAPITALISATION RS. 1 0,00 CRORE SYNDICATION OF DEBT RS. 2.18 CRORE EQUITY RELATED ADVISORY/M&A ADVISORY RS. 2.03 CR ORE DUE DILIGENCE ADVISORY TO ARCIL NIL TOTAL RS. 14.23 CRORE THE SECOND STREAM OF ITS INCOME TOTALING RS.6.04 CR ORE INCLUDES DIVIDEND, INTEREST RECEIVED, PROFIT/LOSS ON SALE OF INVESTMENTS AND PROFIT/LOSS ARISING OUT OF DEALING IN SHARES AND SECURITIES. A CLOSE LOOK AT THE COMPOSITION OF THE GROSS REVENUE FROM TEE BASED FINANCIAL SERVICES' TRANSPIRES THAT SOME COMPONENT OF 'EQUITY RELATED ADVISORY/M&A ADVISORY' PRIMA FACIE PARTLY RESEMBLES WITH THE SERVICES RENDERED B Y THE ASSESSEE. THE ID. DR HIMSELF CANDIDLY ACCEPTED, AND RIGHTLY SO, THAT THE OTHER C OMPONENTS OF THIS STREAM OF THE REVENUE ARE OF NO MATCH WITH THAT OF THE ASSESSEE. NOW, THE QUE STION ARISES AS TO WHETHER BRESCON CORPORATE ADVISORS LTD., UNDER THESE CIRCUMSTANCES CAN BE CONSIDERED AS COMPARABLE? AT THIS STAGE, IT IS PERTINENT TO MENTION THAT THE GRO SS REVENUE OF THIS COMPANY AMOUNTS TO RS.20.27 CRORE AND THERE IS NO SEGMENTAL DATA AVAIL ABLE EITHER IN RESPECT OF NET PROFIT FROM 'FEE BASED FINANCIAL SERVICES' OR 'OTHER INCOME'. A S 'OTHER INCOME' ALSO INCLUDES INCOME FROM INVESTMENT ACTIVITY, BEING PROFIT/LOSS ON SALE OF I NVESTMENT AND DEALING IN SHARES AND SECURITIES, THE IMPACT OF SUCH PROFIT/LOSS ON THE O VERALL NET PROFIT OF THE COMPANY ON ENTITY LEVEL, CANNOT BE DETERMINED. EVEN THOUGH SOME COMPO NENT OF 'EQUITY RELATED ADVISORY/M&A ADVISORY', WITH THE GROSS REVENUE OF RS.2.03 CRORE, PARTLY RESEMBLES WITH THE ASSESSEE, STILL IN THE ABSENCE OF ANY SEGMENTAL DATA OF SUCH COMPOSITI ON, THERE CAN BE NO VALID COMPARISON. REVENUE FROM THIS COMPONENT ACCOUNTS FOR AROUND 10% OF THE TOTAL GROSS REVENUE OF THIS COMPANY AND IF WE FURTHER EXAMINE THIS 10% COMPONEN T IN ITSELF, IT TURNS OUT THAT THE SAME ALSO INCLUDES M&A ADVISORY, WHICH IS OBVIOUSLY NOT AKIN TO THE SERVICES RENDERED BY THE ASSESSEE. THE ASSESSEE'S ACTIVITY, IN A NUTSHELL, I S TO TENDER ADVICE TO THE MANAGER ABOUT THE AVENUES FOR MAKING INVESTMENT IN REAL ESTATE, AND, IF THE MANGER AGREES TO GO AHEAD WITH SUCH INVESTMENT OPPORTUNITY, THEN, TO GET INVOLVED IN THE PROCESS OF FINALIZATION OF THE DEAL AND THEN PROVIDE SUPPORT SERVICES, INCLUDING MAINTE NANCE OF BOOKS OF ACCOUNT ETC., ON THE CLICKING OF THE DEAL. TAKING A HOLISTIC VIEW OF THE FACTUAL MATRIX, WE DO NOT FIND ANY RATIONALITY IN INCLUDING THIS COMPANY IN THE LIST O F COMPARABLES SINCE NO SEGMENTAL DATA OF THE ADVISORY SERVICES BY THIS COMPANY IS AVAILAB LE, WHICH COMPONENT IS VERY SMALL VIS- A-VIS THE ENTITY LEVEL OPERATIONS. AVAILABILITY OF SEPARATE DATA OF THIS SEGMENT COULD HAVE POSSIBLY MADE IT COMPARABLE WITH THE ASSESSEE. THIS COMPANY IS, THEREFORE, DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. 30 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 36. LEARNED COUNSEL REFERRED TO THE ANNUAL REPORT O F BRESCON CORPORATE ADVISORS LIMITED FOR ASSESSMENT YEAR 2006-07 WHEREI N SCHEDULE 9 DEALING WITH FEE BASED FINANCIAL SERVICES READS AS UNDER: SCHEDULE-9 FEE BASED FINANCIAL SERVICES FINANCIAL RESTRUCTURING & RECAPITALISATION 68,049,356 72,067,663 SYNDICATION OF DEBT 29,881,668 10,356,217 EQUITY RELATED ADVISORY 25,253,608 23,180,884 DUE DILIGENCE ADVISORY TO ADVISORY TO ARCIL/ M&A ADVISORY 16,378,720 139,563,352 105,604,764 37. FROM THE ABOVE IT IS EVIDENT THAT THERE IS NO C HANGE IN FUNCTIONAL PROFILE OF BRESCON IN ASSESSMENT YEAR 2006-07 AS CO MPUTED TO ASSESSMENT YEAR 2005-06 EXCEPT THAT IN THE ASSESSMENT YEAR 200 6-07 DUE DILIGENCE ADVISORY TO ADVISORY TO ARCIL/M&A ADVISORY FEES WAS ALSO THERE. THEREFORE, THERE IS NO CHANGE IN FUNCTIONAL PROFILE AS REGARDS THE ADVISORY SERVICES GIVEN BY ASSESSEE AS COMPARED TO BRESCON, THEREFORE , THE DECISION RELIED UPON BY LEARNED COUNSEL IS APPLICABLE TO THE PRESEN T SET OF FACTS. 38. AS FAR AS LD. CIT(DR)S CONTENTION REGARDING IN CLUSION OF THIS COMPARABLE BY ASSESSEE IN EARLIER YEAR IS CONCERNED , IT WOULD SUFFICE TO OBSERVE THAT THERE IS NO ESTOPPEL AGAINST THE ASSES SEE FROM DEMONSTRATING THAT A PARTICULAR COMPARABLE WAS WRONGLY INCLUDED I N EARLIER YEAR AND, THEREFORE, IT SHOULD BE EXCLUDED IN THIS YEAR. WE F IND THAT BOTH THE DECISIONS 31 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 REFERRED BEFORE US CLEARLY SUPPORTS THE ASSESSEES CONTENTION AND, THEREFORE, WE DIRECT FOR EXCLUDING BRESCON CORPORATE ADVISORS LIMITED FROM THE LIST OF COMPARABLES. AS FAR AS THE INCLUSION OF ICDS SECUR ITIES IS CONCERNED, THE SAME WAS NOT PRESSED AT THE ITEM OF HEARING AND, TH EREFORE, THE SAME WILL REMAIN IN THE LIST OF COMPARABLES. IN THE RESULT, G ROUND NO. 5 IS PARTLY ALLOWED. 39. VIDE GROUND NO. 7, THE MAIN GRIEVANCE RAISED BY ASSESSEE IS IN REGARD TO THE INCLUSION OF NON OPERATING INCOMES WHILE COM PUTING PROFITS OF FOLLOWING COMPARABLES :- I.) KGMC GLOBAL MARKET (INDIA) LTD (PROFIT OR SALE OF SHARE TO BE EXCLUDED). II.) KHANDWALA SECURITIES LTD (CAPITAL MARKET OPERA TIONS PROFIT AND SALE LONG TERM INVESTMENT (EXCLUDED). III) SUMEDHA FISCAL SERVICES LTD (DIVIDEND AND INTE REST TO BE EXCLUDED). 40. LEARNED COUNSEL POINTED OUT THAT FOR PROPER BEN CH MARKETING PROFIT HAS TO BE CORRECTLY COMPUTED. LEARNED DR SUBMITTED THAT IF NON OPERATING INCOMES ARE TO BE EXCLUDED THEN THE EXPENSES INCURR ED IN EARNING THAT INCOME ALSO SHOULD BE EXCLUDED WHILE DETERMINING TH E PLI OF THE COMPARABLE. AFTER HEARING BOTH THE PARTIES WE RESTO RE THIS ISSUE TO THE FILE OF LEARNED TPO TO EXAMINE THE CONTENTIONS OF BOTH THE PARTIES. IF THEY ARE FOUND TO BE CORRECT THEN RE-DETERMINE OPERATING MAR GIN AFTER EXCLUDING THE 32 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 IMPUGNED AMOUNTS AND RELATED EXPENSES. IN THE RESU LT, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 41. NOW, WE COME TO THE GROUNDS RELATING TO CORPORA TE ISSUES. THE ASSESSEE HAS PRIMARILY PRESSED GROUND NOS. 10 AND 1 1 IN THIS REGARD. BRIEF FACTS OF THE CASE QUA GROUND NO.10 ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD PAID SALARY AND OTHER ALLOWANCES TO ITS DIRECTORS. THE PAYMENT ALSO INCLUDED BONUS TO I TS MANAGING DIRECTOR AND DIRECTORS NAMELY SRI. ASHISH DHAWAN AND SRI. KUNAL SHROFF AT RS.1,89,75,000/- AND 1,06,18,000/- WHO ARE ALSO MAJ OR SHAREHOLDERS IN THE COMPANY WITH 50% SHAREHOLDING OF EACH. ASSESSING O FFICER OBSERVED THAT AS PER THE PROVISION OF SECTION 36(I)(II) BONUS AND /OR COMMISSION PAID TO AN EMPLOYEE IS ALLOWABLE AS DEDUCTION, IF AND ONLY IF, IT IS NOT PAYABLE AS PROFIT OR DIVIDEND. ASSESSING OFFICER POINTED OUT THAT IN THE CASE OF ASSESSEE COMPANY, PROFIT OF RS.5,06,14,970/- HAD BEEN DECLAR ED, HOWEVER, NO DIVIDEND HAD BEEN PROPOSED OR DISTRIBUTED AMONG THE SHAREHOLDERS WHICH ALSO INCLUDED THE DIRECTORS OF THE COMPANY. THUS, H E CONCLUDED THAT IN CASE OF DIRECTORS OF THE COMPANY, THE SUM PAID AS COMMIS SION AND BONUS COULD HAVE BEEN PAID AS PROFIT OR DIVIDEND WHICH IS NOT T HE CASE HERE. AFTER CONSIDERING THE ASSESSEES DETAILED REPLY HE MADE A N ADDITION OF RS. 2,95,93,000/-. AT THE TIME OF HEARING, LD. COUNSEL POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH 33 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 COURT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA R 2008-09. HAVING HEARD BOTH THE PARTIES, WE FIND THAT HONBLE DELHI HIGH COURT VIDE ITA NO.417/2014 DATED 27 TH APRIL, 2015, HAS OBSERVED AS UNDER: THE FINAL QUESTION THAT ARISES FOR THIS COURTS DET ERMINATION IN THE PRESENT APPEAL IS THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 36(1)(II) OF THE ACT IN RESPECT OF THE BONUS PAID BY IT TO ITS TWO SHAREHOL DERS - ASHISH DHAWAN AND KUNAL SHROFF. THE LOWER AUTHORITIES DENIED SUCH CLA IM, HOLDING THAT THE BONUS WAS PAID TO THE SHAREHOLDERS IN LIEU OF DIVIDEND WI TH THE OBJECTIVE OF AVOIDING TAX. SUCH INFERENCE WAS DRAWN FROM TWO FACTS: A) TH E BONUS PAID WAS IN PROPORTION OF THEIR SHAREHOLDING IN THE ASSESSEE CO MPANY, I.E. 2:1; AND B) NO DIVIDEND HAD BEEN DECLARED BY THE ASSESSEE. HOWEVER , A PERUSAL OF AN EXCERPT FROM THE DRP S ORDER DATED 21.09.2012 QUOTED BY THE AO IN HIS OR DER DATED 19.10.2012 CONTRADICTS BOTH THESE FACTS: A) BONUS W AS NOT PAID IN THE RATIO OF 2:1 AND B) THE ASSESSEE HAD DECLARED INTERIM DIVIDEND I TA 417/2014 PAGE 52 OF ` 5,47,47,000/-. FURTHER, THE BONUSES PAID TO THE TWO SHAREHOLDER-DIRECTORS IN THE PRECEDING TWO FINANCIAL YEARS WERE IN THE RATIO OF 60-65%:40-35%, EVEN THOUGH THEIR SHAREHOLDING WAS 1:1. THE BALANCE SHEET OF TH E ASSESSEE PLACED ON RECORD ALSO INDICATES THAT THE TWO SHAREHOLDERS ALSO HOLD DIRECTORIAL POSITIONS IN THE ASSESSEE. THEREFORE, THE ASSESSEES CONTENTION THAT THE BONUS WAS PAID TO THE SHAREHOLDERS IN THEIR MANAGERIAL CAPACITY, LIKE IN THE CASE OF OTHER MANAGERS, CANNOT BE QUESTIONED MERELY ON THE BASIS OF A SPECU LATION BY THE REVENUE THAT SUCH PAYMENT WAS TO AVOID TAX. IN SUCH CIRCUMSTANCE S, THE DEDUCTION UNDER SECTION 36(1)(II) IN RESPECT OF PAYMENT OF BONUS TO THE TWO SHAREHOLDER-DIRECTORS IS ALLOWED. THE ASSESSEE HAS RELIED UPON A NUMBER O F JUDICIAL PRONOUNCEMENTS TO SUPPORT ITS CONTENTION. HOWEVER, WE DO NOT CONSIDER IT NECESSARY TO DISCUSS THOSE DECISIONS FOR RULING IN ITS FAVOUR. THEREFORE, THIS QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE. 42. RESPECTFULLY FOLLOWING AFOREMENTIONED DECISION, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 43. BRIEF FACTS APROPOS GROUND NO.11 ARE THAT DURIN G THE ASSESSMENT YEAR, THE ASSESSEE HAD PAID AN AMOUNT 35,10,000/- TO SRI. GIRISH BALIGA AS A SEVERANCE COST AND THE SAME WAS DEBITED IN THE PROF IT AND LOSS ACCOUNT. THE 34 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 ASSESSEES SUBMISSION IN REGARD TO THE ASSESSING OF FICERS QUERY WAS AS UNDER: DURING THE RELEVANT YEAR, THE ASSESSEE PAID A SEVE RANCE COST OF RS. 3510000/- TO MR. GIRISH BALIGA AT THE TIME OF HIS LEAVING THE JO B IN NOVEMBER, 2005. MR. GIRISH BALIGA IS A QUALIFIED CHARTERED ACCOUNTANT A ND HOLDS A BACHELOR OF ART FROM BOMBAY UNIVERSITY. MR. GIRISH BALIGA HAS THE E XPERIENCE OF WORKING WITH JP MORGAN AND WHITEFIELD CAPITAL INVESTMENT ADVISOR S PRIOR TO WORKING THE ASSESSEE. IT WILL BE APPRECIATED THAT MR. BALIGA WA S NEITHER A SHAREHOLDER NOR A DIRECTOR OF THE ASSESSEE AND DID NOT HAVE ANY OTHER BENEFICIAL INTEREST IN THE ASSESSEE. THUS, THE PAYMENT MADE BY THE ASSESSEE TO MR. BALIGA WAS EXCLUSIVELY ON ACCOUNT OF THE SERVICES RENDERED BY HIM TO THE C O. WAS BASED ON BUSINESS EXIGENCIES KEEPING IN MIND THE BEST PRACTICES BEING FOLLOWED IN THE INDUSTRY. IT IS EVIDENT FROM THE ABOVE FACTS THAT THE ABOVE REGULAR EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF CARRYING OUT ITS BUSINE SS. 44. THE ASSESSEE HAD ALSO IN HIS SUBMISSION RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. GOBALD MOTOR SERVICE PVT. LTD. 100 ITR 240, WHEREIN, IT WAS, INTER ALIA, HELD THAT IT WAS NOT FOR THE REVENUE TO QUESTION THE COMMERCIAL EXPEDIENCY OF TH E EXPENDITURE. COMMERCIAL EXPEDIENCY IS A MATTER ENTIRELY LEFT TO THE JUDGMENT OF THE ASSESSEE. THE ASSESSING OFFICER, BEING NOT SATISFIE D WITH THE ASSESSEES REPLY, MADE AN ADDITION OF RS. 35,10,000/-, INTER ALIA, OBSERVING THAT ASSESSEE FAILED TO JUSTIFY THE PAYMENT TO MR. BALIG A WITH REFERENCE TO SERVICES RENDERED BY HIM. 45. LEARNED COUNSEL SUBMITTED THAT THE SEVERANCE AL LOWANCE WAS PAID TO THE EMPLOYEE ON THE BASIS OF BUSINESS EXIGENCIES AN D, THUS, THE SAME COULD NOT BE DISALLOWED. HE SUBMITTED THAT UNIT DID NOT C LOSE DOWN AND, THEREFORE, 35 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 IT COULD NOT BE HELD TO BE A CAPITAL EXPENDITURE. L EARNED DR SUBMITTED THAT IT IS FOR ASSESSEE TO SHOW THAT AN EXPENSE WAS FOR BUS INESS PURPOSE. HE SUBMITTED THAT NO INFORMATION WAS GIVEN WHY PAYMENT MADE AND NO JUSTIFICATION HAS BEEN PROVIDED FOR PAYMENT. 46. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOT H THE PARTIES. ADMITTEDLY, SRI. GIRISH BALIGA WAS NEITHER A SHAREH OLDER NOR A DIRECTOR OF THE ASSESSEE COMPANY AND DID NOT HAVE ANY OTHER BEN EFICIAL INTEREST IN THE ASSESSEE. HE WAS A QUALIFIED CA AND A VERY EXPERIE NCED PERSON. THEREFORE, THERE COULD NOT BE ANY OTHER CONSIDERATION FOR SEVE RANCE COST OF RS.35,10,000/- PAID TO HIM EXCEPT THE SERVICES REND ERED BY HIM TO ASSESSEE COMPANY. THE ASSESSEE IN ITS SUBMISSIONS HAS, INTER-ALIA, POINTED OUT THAT THIS PAYMENT WAS BASED ON BUSINESS EXIGENCY KEEPING IN MIND THE BEST PRACTICES BEING FOLLOWED IN THE INDUSTRY. THEREFOR E, THE PAYMENT MADE TO SRI. GIRISH BALIGA BY THE ASSESSEE COMPANY AS GOING CONCERN WAS IN LINE WITH THE PRACTICE PREVALENT IN THE INDUSTRY. IN OR DER TO MAINTAIN GOOD REPUTATION AS REGARDS EMPLOYMENT OF HUMAN RESOURCES , IT HAD TO MEET THE COMMON COMMERCIAL PRACTICES. THE PAYMENT HAD NOT BE EN MADE IN CONTEMPLATION OF CLOSING DOWN OF UNIT BUT IN REGULA R COURSE OF CARRYING ON ASSESSEES BUSINESS. UNDER SUCH CIRCUMSTANCES, THI S PAYMENT CANNOT BE HELD 36 ITA NO.3288/DEL/2013 C.O. NO.309/DEL/2015 TO BE IN CAPITAL FIELD AND WAS AN ALLOWABLE EXPENDI TURE IN THE HANDS OF THE ASSESSEE COMPANY. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 47. RESULTANTLY, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AND CROSS OBJECTION OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF FEBRUARY, 2017. SD/- SD/- (SUCHITRA KAMBLE) ( S.V. MEHROTRA) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED : 09-02-2017. SH/SUJEET COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE DRP-I, NEW DELHI; 4) THE DR, I.T.A.T., NEW DELHI; BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI