DCIT, New Delhi V. M/s. Vertex Customer Service India Pvt. Ltd, New Delhi

ITA 3752/DEL/2009

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3925 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I1
• Next Hearing Date: 03-07-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANUBHAV RA
• Keywords: Related party transaction; Depreciation; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 10; 154

Judgement Text

1 ITA NO. 3752/DEL/2009 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO. 3752/DEL/200 9 ( A.Y 2004-05) DCIT CIRCLE-17(1) C.R. BUILDING NEW DELHI (APPELLANT) VS VERTEX CUSTOMER SERVICES INDIA PVT. LTD. 1 ST FLOOR, DR. GOPAL DAS BHAWAN 28, BARAKHAMBA ROAD NEW DELHI AAGCS0438M (RESPONDENT) APPELLANT BY SH. KUMAR PRANAV, SR. DR RESPONDENT BY SH. RAVI SHARMA, ADV, SH. RISHABH MALHOTRA & SH. ANUBHAV RASTOGI ADVS ORDER PER SUCHITRA KAMBLE THIS APPEAL IS FIELD BY THE REVENUE AGAINST THE ORD ER DATED 8/7/2009 PASSED BY CIT(A)-XIX, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN HOLDING THAT THE COMPANY M/S. SUPRAWIN TEC HNOLOGIES LTD. TO BE INCLUDED IN THE COMPARABLE SET IGNORING THE F ACT THAT THE SALES OF THE ASSESSEE COMPANY M/S SUPRAWIN TECHNOLOGIES D URING THE FINANCIAL YEAR 2003-04 WERE ONLY RS.1,77 CRORES WH ICH CANNOT BE DATE OF HEARING 31.10.2017 DATE OF PRONOUNCEMENT 19.01.2018 2 ITA NO. 3752/DEL/2009 HELD COMPARABLE WITH THE ASSESSEE COMPANY WHICH HAS SALES OF RS.55.65 CRORES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN WORKING OUT THE AVERAGE OPERATING PROFIT/ TOTAL COST MARGIN AT 16.28% BY SELECTING 8 COMPANIES AS AGAINST THE A VERAGE OPERATING PROFIT/TOTAL COST MARGIN WORKED OUT AT 24 .69% REVISED TO 17.37% BY THE TPO U/S 154 BY THE TPO ON THE BASIS O F THE 16 COMPANIES SELECTED BY THE TPO AS COMPARABLE FOR WOR KING OUT THE AVERAGE OPERATING PROFIT/TOTAL COST MARGIN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , LD.CIT(A) HAS ERRED IN ALLOWING EXCESS CAPACITY ADJUSTMENT AT 28% WITHOUT ANY BASIS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN HOLDING THAT THE INTERNATIONAL TRANSACTION OF THE ASSESSEE WERE ARMS LENGTH ON THE GROUND THAT THE ASSESSEES OPERATING PROFIT/TOTAL COST MARGIN WAS WITHIN + 5% RANGE AS P RESCRIBED UNDER PROVISO TO SECTION 92C(2) OF INCOME TAX ACT, 1961. 3. VERTEX CUSTOMER SERVICES INDIA PRIVATE LIMITED WAS INCORPORATED ON AUGUST 7, 2001 AS A WHOLLY OWNED SUBSIDIARY OF VERT EX INDIA LTD., UK. VERTEX INDIA LTD., UK IN TURN IS JOINTLY HELD BY VERTEX DA TA SCIENCE LTD., UK AND GE EQUITY INVESTMENTS LTD., CAYMAN ISLANDS, WHO, DURIN G THE YEAR HAD 75% AND 25% OWNERSHIP STAKE RESPECTIVELY IN THE COMPANY. THE ASSESSEE IS ENGAGED IN PROVIDING SERVICES IN THE FIELD OF CUSTOMER RELATIONSHIP MANAGEMENT AND IT ENABLED SERVICES TO ITS ASSOCIATED ENTERPRISES (AE S) FROM ITS UNDERTAKING WHICH IS DULY REGISTERED WITH THE SOFTWARE TECHNOLO GY PARKS OF INDIA AND AS SUCH IS ENTITLED TO AVAIL BENEFITS UNDER SECTION 10 A OF THE INCOME TAX ACT, 1961 (ACT). THE ASSESSEE PROVIDES BUSINESS PROCESS OUT SOURCING SERVICES TO CUSTOMERS THROUGH ITS ASSOCIATED ENTERPRISES. THE A SSESSEE COMMENCED ITS OPERATIONS FROM AUGUST 2002 AND FINANCIAL YEAR 2003 -04 WAS THE FIRST FULL YEAR OF OPERATIONS FOR THE ASSESSEE. IN FINANCIAL YEAR 2003-04 THE ASSESSEE PROVIDED BPO/ IT ENABLED SERVICES TO FOUR CLIENTS. AS A PART OF THE BUSINESS MODEL, THE ASSESSEE AES CONTRACT WITH THE THIRD PAR TY CUSTOMERS LOCATED OUTSIDE INDIA FOR THE ONSHORE AND OFFSHORE SERVICES . A PART OR WHOLE OF THE 3 ITA NO. 3752/DEL/2009 OFFSHORE SERVICES ARE THEN OUTSOURCED BY THE AES TO THE ASSESSEE. FOR SUCH SERVICES THE ASSESSEE FOLLOWS A RATE BASED CHARGING MODEL. THE ASSESSEE SELECTED THE TRANSACTIONAL NET MARGIN METHOD (TNMM) , AS THE MOST APPROPRIATE METHOD IN ITS TP DOCUMENTATION FOR ASSESSMENT YEAR 2004-05. IN THE TP DOCUMENTATION ALL THE INTERNATIONAL TRANSACTIONS WE RE AGGREGATED AND THE OPERATING PROFIT EARNED BY THE ASSESSEE AS A WHOLE WAS THEN COMPARED WITH THE OPERATING PROFIT EARNED BY THE COMPARABLE COMPANIES . RATIO OF OPERATING PROFIT TO TOTAL COST (OP/TC) WAS SELECTED AS THE RELEVAN T PROFIT LEVEL INDICATOR (PLI) IN THE TP DOCUMENTATION. THE ASSESSEE CARRIED OUT THE COMPARABLES SEARCH ON PUBLIC AVAILABLE DATABASES, VIZ., PROWESS AND CAPITAL L INE PLUS AND AT THE END OF THE SEARCH PROCESS THE ASSESSEE ARRIVED AT A SET OF 16 COMPARABLE COMPANIES WITH AN AVERAGE OP/TC MARGIN OF 14%. THE OP/TC MARGIN OF COMPARABLES WAS COMPUTED USING MULTIPLE YEAR DATA FOR THE FINAN CIAL YEARS 2001-02, 2002- 03 AND 2003-04 TO THE EXTENT AVAILABLE. IN ITS TP DOCUMENTATION, THE ASSESSEE CARRIED OUT AN EXCESS CAPACITY ADJUSTMENT WHILE COMPUTATION OF ITS OP/TC MARGIN. DURING FINANCIAL YEAR 2003-04, APPROXIMATEL Y 48% OF THE SEATS EMPLOYED BY THE ASSESSEE STOOD UNUTILIZED DUE TO TH E INITIAL STAGE OF ITS OPERATIONS. THEREFORE, DURING FINANCIAL YEAR 2003-0 4, WHILE COMPUTATION OF ITS OP/TC MARGIN, THE ASSESSEE EXCLUDED A PORTION OF CE RTAIN FIXED COSTS LIKE DEPRECIATION, ETC., BASED ON ITS UNUTILIZED SEATS. AFTER CARRYING OUT THE ADJUSTMENT ON ACCOUNT OF EXCESS CAPACITY, THE ASSES SEE ARRIVED AT ITS EFFECTIVE OP/TC MARGIN OF 21% WITH RESPECT TO SERVICES PROVID ED TO AES. AS THE OP/TC MARGIN OF THE ASSESSEE AT 21% WAS HIGHER THAN THE MEAN OP/TC MARGIN OF THE COMPARABLE COMPANIES AT 14%, THE ASSESSEE CONCLUDED THAT THE PRICES OF ITS INTERNATIONAL TRANSACTIONS COMPLIED WITH THE ARMS LENGTH STANDARD PRESCRIBED UNDER THE ACT. 4. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THE FOLLOWING INTERNATIONAL TRANSACTIONS ENTERED INTO B Y THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES (AE) (HEREINAFTER REFERRED TO AS AE) DURING THE 4 ITA NO. 3752/DEL/2009 FINANCIAL YEAR 2003-04, AS REPORTED IN FORM 3CEB, F ILED ALONG WITH THE RETURN OF INCOME. SR. NO. DESCRIPTION OF THE INTERNATIONAL TRANSACTION METHOD USED TO JUSTIFY ARMS LENGTH PRICE AMOUNT (IN RS.) 1 PROVISION OF IT ENABLED SERVICES TO THE ASSOCIATED ENTERPRISES TNMM 55,65,50,411/ - 2 RECHARGES FOR ADMINISTRATION AND COMMUNICTION COSTS TNMM 6,81,54,925/ - 3 ROYALTY AND FEE FOR TECHNICAL SERVICES TNMM 1,51,05,550/ - 4 PURCHASE OF CAPITAL GOODS CUP 75,20,974/ - A REFERENCE WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 92CA (1) OF THE ACT TO THE TRANSFER PRICING OFFICER FOR COMPUTATION OF THE ARMS LENGTH PRICE (ALP) IN RESPECT OF THE ABOVE INTERNATIONAL TRANSAC TIONS. 5. THE TPO MADE THE FOLLOWING DISALLOWANCES A FTER GOING THROUGH THE TRANSFER PRICING DOCUMENTATION AND OTHER DETAILS FI LED BY THE ASSESSEE DURING THE PROCEEDINGS UNDER SECTION 92CA: (A) TPO REJECTED THE EXCESS CAPACITY ADJUSTMENT MADE BY THE ASSESSEE, AND ACCORDINGLY THE TPO RECOMPUTED THE OP/TC MARGIN OF THE ASSESSEE AT 4.51%. (B) TPO APPLIED THE TURNOVER FILTER OF RS. 1 CRORE AND REJECTED TWO COMPANIES, VIZ., TULSYAN TECHNOLOGIES LIMITED AND S UPRAWIN TECHNOLOGIES LIMITED FOR THE PURPOSE OF COMPARABILI TY. 5 ITA NO. 3752/DEL/2009 (C) TPO REJECTED THE MULTIPLE YEAR DATA USED BY THE ASS ESSEE. ACCORDINGLY BY USING DATA FOR FINANCIAL YEAR 2003-0 4 THE TPO ARRIVED AT AN AVERAGE OP/TC MARGIN OF 24.69% FOR TH E COMPARABLES. (D) TPO MODIFIED THE COMPARABLE SET SELECTED BY THE ASS ESSEE BY EXCLUDING 3 COMPANIES FOR WHICH DATA WAS NOT AVAILA BLE FOR FINANCIAL YEAR 2003-04. BASED ON THE ABOVE METHODOLOGY AND COMPARISON OF T HE OP/TC MARGINS OF THE ASSESSEE AND THE COMPARABLE COMPANIE S, THE TPO COMPUTED A TRANSFER PRICING ADJUSTMENT OF RS. 10,73,48,409. 6. UPON PERUSAL OF THE TP ORDER, THE ASSESSEE NOTICED THAT THE TPO HAD NOT INCLUDED DEPRECIATION COST IN THE TOTAL COST OF THE COMPARABLE COMPANIES WHILE COMPUTING THEIR OP/TC. THE ASSESSEE FILED A RECTIFI CATION APPLICATION UNDER SECTION 154 ON JANUARY 19, 2007. THE ASSESSEES CON TENTION WAS ACCEPTED AND AN ORDER UNDER SECTION 154 WAS ISSUED AND THE REVIS ED OP/TC MARGIN OF THE COMPARABLES WAS ARRIVED AT 17.37% AND THE RESULTANT TP ADJUSTMENT WAS REDUCED TO RS. 6,83,73,837. 7. AGGRIEVED BY THE ORDERS OF THE ASSESSING OFF ICER/TPO, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 8. THE REVENUE IS IN APPEAL BEFORE US. 9. AS REGARDS GROUND NO. 1, THE LD. DR SUBMITTED T HAT THE CIT(A) HAS DIRECTED TO INCLUDE M/S. SUPRAWIN TECHNOLOGY AS ITS TURNOVER IN THE F.Y. 2003- 04 IS MORE THAN RS. 1 CRORE. THOUGH THE TURNOVER OF M/S SUPRAWIN TECHNOLOGY IS JUST ABOVE RS. 1 CRORE BUT IT WAS REJECTED AS TH E LOWER TURNOVER FILTER WAS SLIGHTLY MODIFIED BY THE TPO FROM LESS THAN RS. 1 C RORE TO IN THE REGION OF RS. 1 6 ITA NO. 3752/DEL/2009 CRORE WHICH IS A FAIR FILTER AS A COMPANY WITH TURN OVER OF RS.77 CRORE WILL ALSO SUFFER FROM THE SAME DEFICIENCIES AS COMPANY WITH A TURNOVER OF RS. 1 CRORE. THE LD. DR FURTHER SUBMITTED THAT THIS COMPARABLE I S ALSO FIT TO BE REJECTED AS IT IS A PERSISTENT LOSS MAKING COMPANY WITH NEGATIV E NET-WORTH. THE ITAT IN CASE OF NAVISITE INDIA PVT. LTD. [2015] 53 TAXMANN. COM 73 (DELHI - TRIB.) HAS HELD THAT COMPARABLE UNDERGOING DIMINISHING REVENUE /PERSISTENT LOSSES CANNOT BE SELECTED AS COMPARABLE. AFTER CONSIDERING THE AB OVE JUDGMENT, THE ITAT, DELHI IN CASE OF AITHENT TECHNOLOGIES (P.) LTD. V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1) [2016] 74 TAXMANN.COM 214 ( DELHI - TRIB.), APPROVED THE ABOVE FILTER. IN THE CASE OF THE ASSESSEE, FILT ER OF EXCLUSION OF DECLINING REVENUE AND PERSISTENT LOSS MAKING COMPANIES IS APP LICABLE AS THE ASSESSEES NET PROFIT HAS INCREASED VIS-A-VIS A.Y. 2003-04 AND THUS IT CANNOT BE COMPARED WITH DECLINING REVENUES AND PERSISTENT LOSS MAKING COMPANY. 10. AS REGARDS TO GROUND NO. 3, THE LD. DR SUBMITTE D THAT THE CIT(A) ALLOWED AD-HOC ADJUSTMENT OF 28% OF THE FIXED COSTS TO THE ASSESSEE ON ACCOUNT OF UNUTILIZED CAPACITY. NO SUCH UNDER-UTILI ZATION OF CAPACITY IS MENTIONED IN THE AUDITED ACCOUNTS OF THE ASSESSEE A ND IN THE TP STUDY REPORT THE AUDITOR HAS NOT GIVEN ANY BASIS FOR COMPUTING A D-HOC ADJUSTMENT @48%. THE TPO HAS GIVEN DETAILED REASONS FOR REJECTING TH E ABOVE CLAIM OF THE ASSESSEE WHICH THE CIT(A) FAILED TO APPRECIATE. THE CIT(A) HAS NOT GIVEN ANY REASONABLE BASIS OF ARRIVING AT THE AD-HOC ADJUSTME NT PERCENTAGE OF 28%. THE LD. DR FURTHER SUBMITTED THAT IN ANY CASE, ADJUSTME NT FOR CAPACITY UTILIZATION CAN ONLY BE MADE IN CASE OF COMPARABLES AND NO SUCH INFORMATION ABOUT THE COMPARABLES HAVE BEEN PROVIDED BY THE ASSESSEE. THUS, THE ABOVE AD-HOC ALLOWANCE ALLOWED BY THE CIT(A) IN CASE OF T HE ASSESSEE IS AGAINST THE PROVISION OF INCOME TAX ACT AND DESERVE D TO BE SET- ASIDE. 11. WITHOUT PREJUDICE TO THE EARLIER SUBMISSIONS TH E LD. DR SUBMITTED THAT THE ITAT DELHI BENCH IN CASE OF ION TRADING INDIA P RIVATE LTD. V. ITO, ITA 7 ITA NO. 3752/DEL/2009 NO.L035/DEL./2015 (DATED 07.12.2015) HELD THAT NO C APACITY UTILIZATION ADJUSTMENT CAN BE MADE IN CASE OF COMPARABLES IN CA SE OF A CAPTIVE SERVICE PROVIDER. IT IS PERTINENT TO MENTION THAT THE ASSES SEE IS A CAPTIVE SERVICE PROVIDER. THE LD. DR FURTHER RELIED UPON THE ITAT D ECISION IN CASE OF JCB INDIA LTD. V. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCL E [2015] 59 TAXMANN.COM 211 (DELHI - TRIB.) WHEREIN IT IS HELD THAT FIRST Y EAR OF BUSINESS PER SE IS NOT AN EXTRAORDINARY EVENT. 12. AS RELATES TO GROUND NO. 1 RELATING TO THE INCL USION OF SUPRAWIN TECHNOLOGIES, THE LD. AR SUBMITTED THAT THE CIT(A) HAS ALREADY ADJUDICATED THIS MATTER IN THE FAVOUR OF ASSESSEE ON THE ISSUE OF TU RNOVER FILTER. ADDITIONALLY, THE MATTER IS SQUARELY COVERED IN ASSESSEES FAVOUR IN THE MATTER OF RAMPGREEN SOLUTIONS PVT. LTD. (ITA NO. 1066/DEL/2015). 13. AS RELATES TO GROUND NO. 2 RELATING TO COMPARAB LE SELECTION, THE LD. AR SUBMITTED THAT THE LD. DR HAS NOT PRESSED THE GROUN D BEFORE ITAT. HOWEVER, WITHOUT PREJUDICE, THE LD. AR SUBMITTED THAT THE CO MPARABLES REJECTED BY THE CIT(A) HAD SUBSTANTIAL RELATED PARTY TRANSACTIONS, THE FACT WHICH HAD ALREADY BEEN PLACED ON RECORD BEFORE THE CIT(A) DURING THE APPEAL PROCEEDINGS ON WHICH RELIANCE WAS PLACED BY THE CIT(A) WHILE PASSI NG THE ORDER. 14. AS RELATES TO GROUND NO. 3 RELATING TO CAPACITY ADJUSTMENT, THE LD. AR SUBMITTED THAT I N THIS REGARD, THE LD. DR HAS MENTIONED IN HIS SUBMISSION THAT SUCH ADJUSTMENT SHOULD BE MADE TO THE COMPARAB LES AND NOT THE TESTED PARTY WITHOUT GIVING COGNIZANCE TO THE FACT THAT TH E CIT(A) HAS ALREADY MADE THE ADJUSTMENT ON THE COMPARABLES AND ACCORDINGLY A DJUDICATED THE MATTER IN ASSESSEES FAVOUR. THEREFORE, THE LD. AR SUBMITTED THAT THE ISSUE DOES NOT REQUIRE ANY FURTHER DISCUSSION. FURTHERMORE, THE FA CTS OF THE ASSESSEES CASE ARE DIFFERENT FROM THOSE IN THE CASE OF JCB INDIA L TD. VS ACIT (59 TAXMANN.COM 211 DELHI TRIBUNAL) ON WHICH THE LD. DR HAS PLACED RELIANCE. ACCORDINGL Y, THE SAME IS NOT APPLICABLE ON THE ASSESSEES MATTER. AL SO, THE CAPACITY ADJUSTMENT 8 ITA NO. 3752/DEL/2009 HAS BEEN ALLOWED IN OTHER CASES WHEREIN SIMILAR FAC TS WERE THERE IN CASE OF TRANSWITCH INDIA PVT. LTD. VS. DCIT (I.T.A. NO. 608 3/DEL/2010). 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RELATES TO GROUND NO. 1, THE CIT(A) HEL D AS UNDER: 11.2 I HAVE GONE THROUGH THE ABOVE SUBMISSIONS OF THE APPELLANT AND HAVE ALSO GONE THROUGH THE TP REPORT SUBMITTED BY THE APPELLANT. ON GOING THROUGH THE SAME IT IS EVIDENT THAT THE THRES HOLD OF SALES MORE THAN RS. 1 CRORE HAS BEEN APPLIED BY THE APPELLANT AND T HE SAME HAS BEEN ACCEPTED AS APPROPRIATE BY THE TPO 11.2.1 THE APPELLANT HAS RAISED OBJECTIONS AGAINST REJECTION OF THE TWO COMPARABLES NAMELY, TULSYAN TECHNOLOGIES LIMITE D AND SUPRAWIN TECHNOLOGIES LIMITED, WHOSE TURNOVER AS ON 31.03.20 04 WAS RS. 95 LACS AND RS. 1.77 CRORE RESPECTIVELY. CONSIDERING THE FACT THAT THE APPELLANT IN ITS TRA NSFER PRICING DOCUMENTATION HAS USED SALES MORE THAN RS. 1 CRORE AS ONE OF THE FILTER CRITERIA FOR SHORT LISTING COMPARABLE COMPANIES AND THE TPO HAS NOT COMMENTED ON OR CHALLENGED THE APPLICATION OF THIS FILTER BY THE APPELLANT, THEREFORE, I FIND NO REASON IN TPOS ACTION IN NOT SELECTING A COMPARABLE COMPANY HAVING A SALES TURNOVER OF MORE THAN RS. 1 CRORE. 11.2.2 IT IS ALSO NOTED THAT THE TWO COMPANIES UNDE R DISPUTE HAVE NOT BEEN CONTESTED BY THE TPO ON ACCOUNT OF FUNCTIONAL COMPARABILITY VIS A VIS THE APPELLANT. ACCORDINGLY, IT IS UNDERSTOOD THAT B ASED ON THE FUNCTIONAL PROFILE THE TWO COMPANIES ARE ACCEPTED AS COMPARABL ES TO THE APPELLANT BOTH BY THE TPO AND THE APPELLANT. 11.2.3 THEREFORE BASED ON THE FACTS AVAILABLE BEFOR E ME I AM OF THE CONSIDERED VIEW THAT SUPRAWIN TECHNOLOGIES LIMITED WHICH HAS RECORDED SALES OF MORE THAN RS. 1 CR. DURING FINANCIAL YEAR 2003-04 SHOULD BE 9 ITA NO. 3752/DEL/2009 INCLUDED IN THE COMPARABLE SET. HOWEVER THE TPO IS RIGHT IN EXCLUDING TULSYAN TECHNOLOGIES WHICH HAS EARNED SALES TURNOVE R OF LESS THAN RS. 1 CR. (DURING FINANCIAL YEAR 2003-04) FROM THE COMPAR ABLE SET. THE LD. DRS CONTENTION THAT THOUGH THE TURNOVER OF M/S SUPRAWIN TECHNOLOGY IS JUST ABOVE RS. 1 CRORE BUT IT WAS REJECTED AS TH E LOWER TURNOVER FILTER WAS SLIGHTLY MODIFIED BY THE TPO FROM LESS THAN RS. 1 C RORE TO IN THE REGION OF RS. 1 CRORE WHICH IS A FAIR FILTER AS A COMPANY WITH TURN OVER OF RS.77 CRORE WILL ALSO SUFFER FROM THE SAME DEFICIENCIES AS COMPANY WITH A TURNOVER OF RS. 1 CRORE AND THUS THIS COMPARABLE IS ALSO FIT TO BE REJECTED AS IT IS A PERSISTENT LOSS MAKING COMPANY WITH NEGATIVE NET-WORTH, CANNOT BE A CCEPTED AS THE TPO HAS TAKEN A BENCHMARK OF RS. 1 CRORE FILTER. SO FAR AS THE ARGUMENT OF THE LD. DR REGARDING, M/S. SUPRAWIN TECHNOLOGY IS A PERSISTEN T LOSS MAKING COMPANY, WE FIND FROM THE SYNOPSIS TENDERED BY THE LD. DR THAT THE SAID COMPANY HAD PROFIT OF RS. 2.81 CRORE IN F.Y. 2001-02 AND LOSS IN F.Y. 2002-03 AND 2003-04. THUS, OUT OF THREE CONSECUTIVE YEARS INCLUDING AY. 2004-0 5, THE COMPANY MADE PROFIT IN ONE YEAR AND LOSS IN TWO YEARS. THEREFORE, IT IS NOT PERSISTENT LOSS COMPANY AS ARGUED BY THE LD. DR. EVEN IF THE COMPANY IS LOS S MAKING IT CANNOT BE REJECTED ON THAT GROUND IF THE FILTER APPLIED BY TH E TPO IS APPLICABLE IN THE SAID COMPANY. THEREFORE, THERE IS NO NEED TO INTERFERE W ITH THE FINDINGS OF THE CIT(A). GROUND NO. 1 OF THE REVENUES APPEAL IS DIS MISSED. 16. AS RELATES TO GROUND NO. 2, THE REVENUE HAS NOT CONTESTED THE SAME DURING THE HEARING THEREFORE, THE SAME IS DISMISSED . 17. AS RELATES TO GROUND NO. 3, THE CIT(A) HAS ALRE ADY MADE THE ADJUSTMENT ON THE COMPARABLES AND ACCORDINGLY ADJUDICATED THE MATTER IN ASSESSEES FAVOUR. THE CIT(A) HAS GIVEN PROPER REASONS ON THE BASIS OF ARRIVING AT THE UNUTILIZED CAPACITY ADJUSTMENT AND ALSO GIVEN THE D ETAILED COMPUTATION OF THE REVISED OP/TC OF THE COMPARABLES COMPANIES IN HIS ORDER. THUS, THE REVISED AVERAGE COMPARABLES MARGIN OF THE FINAL SET OF COMP ARABLES AFTER MAKING SUCH ADJUSTMENT OF EXCESS CAPACITY WORKS OUT TO BE 7.53% . AS AGAINST THIS, THE 10 ITA NO. 3752/DEL/2009 ASSESSEE EARNED AN OP/TC MARGIN OF 4.51% FOR THE YE AR ENDED MARCH 31, 2004. AS THE OP/TC MARGIN EARNED BY THE ASSESSEE IS WITHIN THE +/- 5% RANGE AS PER THE PROVISO OF SECTION 92C(2) OF THE ARMS L ENGTH MARGIN, THE INTERNATIONAL TRANSACTION OF THE ASSESSEE IS RIGHTL Y HELD TO BE AT ARMS LENGTH BY THE CIT(A). THERE IS NO NEED TO INTERFERE WITH T HE ORDER OF THE CIT(A). THEREFORE, GROUND NO. 3 OF THE REVENUES APPEAL IS DISMISSED. 18. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 19/01/2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 11 ITA NO. 3752/DEL/2009 DATE 1. DRAFT DICTATED ON 31/10/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 31/10/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .01.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .01.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 12 ITA NO. 3752/DEL/2009