Appeal Details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 0937 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-01-2018
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
Not Allotted
Assessment Year
2010-2011
Appeal Filed On
27-05-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & AMARJIT SINGH (JM) I.T.A. NO. 3700 /MUM/20 16 (ASSESSMENT YEAR 20 10 - 11 ) ACIT - 10(2)(1) ROOM NO. 216A AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS . M/S. JACOB ENGIN EERING INDIA PVT. LTD. JACOB HOUSE RAMKRISHNA MANDIR ROAD KONDIVITA, ANDHERI (EAST) MUMBAI - 400 059. PAN : AAACH0456J ( APPELLANT ) ( RESPONDENT ) C.O NO. 36/MUM/2017 (ASSESSMENT YEAR 2010 - 11) M/S. JACOB ENGINEERING INDIA PVT. LTD. JACOB HOUSE RAMKRISHNA MANDIR ROAD KONDIVITA, ANDHERI (EAST) MUMBAI - 400 059. PAN : AAACH0456J VS . ACIT - 10(2)(1) ROOM NO. 216A AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI NIRAJ SHETH DEPARTMENT BY S HRI JAYANT KUMAR DATE OF H EARING 10 . 01 . 201 8 DATE OF PRONOUNCEMENT 10 . 0 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 29.2.2016 PASSED BY THE LEARNED CIT(A) - 56, MU MBAI AND THEY RELATE TO A.Y. 2010 - 11. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN DELETING THE ADDITION MADE BY WAY OF TRANSFER PRICING ADJUSTMENT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS : - (1) 0N THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE, THE CTT(A) HAS ERRED IN DELETING THE ADJUSTMENT TO ALP MADE BY THE AO/TPO. JACOBS ENGI NEERING INDIA PVT. LTD. 2 (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN ACCEPTING THE COMPARABLE M/S ACCUSPEED ENGINEERING DESIGN SERVICES LIMITED IGNORI NG THE FACT THAT ITS TURNOVER WAS 125 TIMES LOWER THAN THAT OF THE ASSESSEE COMPANY AND ITS OPERATIONAL PARAMETERS WOULD, THEREFORE, BE NOT COMPARABLE TO THAT OF THE ASSESSEE COMPANY. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN ACCEPTING M/S CADES DIGITECH PRIVATE LIMITED AS A COMPARABLE BY RELYING ON THE SUBSEQUENT YEAR INFORMATION, EVEN THOUGH, THE ASSESSEE HAD NEGATIVE NET WORTH IN THE RELEVANT YEAR AND IT WAS, THEREFORE, NOT COMPARABLE TO THE ASSESSEE COMPANY. (4) O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN REJECTING THE COMPARABLE COMPANIES M/S ENGINEERING INDIA LIMITED, M/S RITES LIMITED AND M/S WAPCOS LIMITED TAKEN BY THE A.O./T.P.O. SOLELY FOR THE REASON THAT THESE WERE GOVERNMENT C OMPANIES, WITHOUT APPRECIATING THE FACT THAT THESE COMPANIES WERE FUNCTIONALLY SIMILAR IN ALL ASPECTS TO THE ASSESSEE COMPANY AND THAT THESE WERE PROFESSIONALLY MANAGED COMPANIES. (5) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND WHETHER THE CIT(A) HAD E RRED IN DIRECTING TO INCLUDE M.N. DASTUR & COMPANY AS A COMPARABLE WITHOUT APPRECIATING THE TPO'S FINDINGS THAT THE SAID COMPARABLE WAS IN MULTIFARIOUS ACTIVITIES INCLUDING TAKING PREMISES ON RENT AND GIVING IT FOR RENT, BUT AT THE SAME TIME SEGMENTALS FOR EACH ACTIVITY WAS NOT AVAILABLE?' (6) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. (7) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECES SARY. 3. AT THE TIME OF HEARING , THE LEARNED AR SUBMITTED THAT THE MAIN GROUND URGED BY THE REVENUE IS GROUND NO. 4 RELATING TO EXCLUSION OF GOVERNMENT COMPANIES FROM BENCH MARKING EXERCISE . THE LEARNED AR SUBMITTED THAT THE LEARNED CIT(A) HAS HELD THAT T HE GOVERNMENT COMPANIES , VIZ., M/S . ENGINEERING INDIA LIMITED, M/S. RITES LIMITED AND M/S . WAPCOS LIMITED CANNOT BE CONSIDERED AS COMPARABLE COMPANIES. IN THIS REGARD, THE LEARNED CIT(A) HAS FOLLOWED THE DECISION RENDERED BY MUMBAI BENCH OF THE ITAT IN THE CASE OF CIT VS. THYSEEN KRUPP INDUSTRIES INDIA P. LTD. (ITA NO. 6460/MUM/2012). HE SUBMITTED THAT THE REVENUE IS AGGRIEVED BY THE SAID VIEW TAKEN BY LD CIT(A). THE LEARNED AR SUBMITTED THAT AN IDENTICAL ISSUE JACOBS ENGI NEERING INDIA PVT. LTD. 3 CAME TO BE CONSIDERED BY THE COORDINATE BENC H OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 7194/MUM/2012 RELATING TO A.Y. 2008 - 09 AND THE TRIBUNAL FOLLOWED THE DECISION RENDERED IN THE CASE OF THYSEEN KRUPP INDUSTRIES INDIA P. LTD. (SUPRA) AND ALSO OTHER DECISIONS AND HELD THAT THE GOVERNMENT C OMPANIES CANNOT BE TAKEN AS COMPARABLE. THE LEARNED AR ACCORDINGLY SUBMITTED THAT THE LEARNED CIT(A)S DECISION IN THIS REGARD CANNOT BE FOUND FAULT WITH. 4 . LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT CONTRADICT THE SUBMISSIONS MADE BY LEARNED AR. 6. WE HEARD THE PARTIES ON THIS ISSUE. WE NOTICED THAT THE QUESTION WHETHER GOVERNMENT COMPANIES CAN BE TAKEN AS COMPARABLES OR NOT WAS CONSIDERED BY THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE IN A.Y. 2008 - 09 (SUPRA) AND THE TRIBUNAL HAS HELD THAT THE GOVER NMENT COMPANIES CANNOT BE TAKEN AS COMPARABLES. FOR THE SAKE OF CONVENIENCE , WE EXTRACT BELOW RELEVANT PORTION OF THE ORDER PASSED BY THE COORDINATE BENCH IN ASSESSEES OWN CASE : - 11. THE FIRST CONTENTION OF THE ASSESSEE (SIC. IS) THAT THE GOVERNMENT COMPANIES SHOULD NOT HAVE BEEN TAKEN AS COMPARABLE AS PER THE FOLLOWING DECISIONS: - (A) CIT VS. THYSSEN KRUPP INDUSTRIES INDIA P LTD (2016)(68 TAXMANN.COM 248)(BOM) (B) ACIT VS. CHEMTEX GLOBAL ENGINEERS P LTD (2013)(35 TAXMANN.COM 351)(MUM ITAT) (C) INTERNATIONAL SOS SERVICES INDIA P LTD VS. DCIT (2016)(67 TAXMANN.COM 73)(DELHI ITAT) (D) BECHTEL INDIA PVT . L TD VS. DCIT (ITA NO.1478/DEL/2015) IN THE CASE OF THUSEEN KRUPP INDUSTRIES INDIA P LTD, THE TPO HAD INCLUDED M/S ENGINEERS INDIA LTD, A GOVERNM ENT COMPANY. THE TRIBUNAL EXCLUDED THE SAME WITH THE OBSERVATION THAT THE ENGINEERS INDIA LTD COULD NOT BE CONSIDERED TO BE COMPARABLE FOR THE REASON THAT THE CONTRACTS BETWEEN PUBLIC SECTOR UNDERTAKINGS ARE NOT DRIVEN BY PROFIT MOTIVE ALONG BUT OTHER CON SIDERATION ALSO WEIGH IN SUCH AS DISCHARGE OF SOCIAL OBLIGATIONS ETC. IDENTICAL VIEW HAS BEEN EXPRESSED IN OTHER CASES ALSO. THE VIEW TAKEN BY THE TRIBUNAL WAS NOT FOUND FAULT WITH BY THE HONBLE BOMBAY HIGH COURT. JACOBS ENGI NEERING INDIA PVT. LTD. 4 12. IN THE INSTANT CASE, THE COMPAR ABLES VIZ., ENGINEERS INDIA LTD AND WATER AND POWER CONSULTANCY LTD ARE GOVERNMENT COMPANIES. ACCORDINGLY, CONSISTENT WITH THE VIEW TAKEN IN THE CASES REFERRED TO PRECEDING PARAGRAPH, WE HOLD THAT THE GOVERNMENT COMPANIES CANNOT BE TAKEN AS COMPARABLE. WE NOTICE THAT THE VIEW TAKEN BY LD CIT(A) IS IN ACCORDANCE WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER PASSED ON THIS ISSUE AND ACCORDINGLY WE UPHOLD THE SAME. 7. WITH REGARD TO REMAINING GROUNDS URGED BY THE REVENUE , THE LEARNED AR SUBMITTED THAT EVEN IF OTHER GROUNDS OF THE REVENUE ARE DECIDED IN FAVOUR OF THE REVENUE, THE SAME WOULD NOT RESULT IN MAKING ANY ADDITION SINCE ADJUSTMENT WOULD FALL WITHIN TOLERANCE RA NGE OF 5%. 8. WE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE. FROM THE SUBMISSIONS MADE BY LEARNED AR, WE NOTICED THAT THE ADJUDICATION OF OTHER GROUNDS WOULD BE ACADEMIC IN NATURE , SINCE ACCORDING TO LEARNED AR EVEN IF THOSE GROUNDS ARE DECIDED IN FAVOUR O F THE REVENUE, THE SAME WOULD NOT RESULT IN ANY ADDITION. IN VIEW OF THE SAM E , WITHOUT DELIBERATING ON THOSE GROUNDS, WE DECIDE TH EM IN FAVOUR OF THE REVE NUE . 9. THE ASSESSEE HAS FILED CROSS OBJECTION. AT THE TIME OF HEARING LEARNED AR DID NOT ADVANCE AR GUMENTS ON THE GROUNDS URGED THEREIN. ACCORDINGLY, WE DISMISS THE CROSS OBJECTION FILED BY THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER HAS BE EN PRON OUNCED IN THE COURT ON 10 . 0 1 .201 8 . SD/ - SD/ - (AMRAJIT SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 10 / 0 1 / 20 1 8 JACOBS ENGI NEERING INDIA PVT. LTD. 5 COPY O F THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR P RIVATE S ECRETARY ) PS ITAT, MUMBAI
