ROXTEC INDIA PRIVATE LIMITED, NEW DELHI V. ACIT, CIRCLE- 21(2), NEW DELHI

ITA 3840/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2660 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 13-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; International transaction; Set aside
• Section: 13; 153; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2 NEW DLEHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.3840/DEL/2017 ASSESSMENT YEAR: 2013-14 ROXTECH INDIA PRIVATE LIMITED, VS. ACIT, CIRCLE 21 (2), 308, HEMKUNT CHAMBERS, NEW DELHI. 89, NEHRU PLACE, NEW DELHI. PAN : AADCR1329K (APPELLANT) (RESPONDENT) APPELLANT BY : MR. VIJAY MEHTA, CA RESPONDENT BY: SH. SUNIL KUMAR, CIT/DR DATE OF HEARING: 04/02/2021 DATE OF ORDER : 22/02/2021 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 11/4/2017 PASSED UNDER SECTION 144C/143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) BY THE LEARNED ASSESSING OFFICER PURSUANT TO THE DIRECTION S DATED 14/3/2017 PASSED BY THE LD. DISPUTE RESOLUTION PANEL (DRP)-2, NEW DELHI (LD. DRP) IN THE CASE OF M/S ROXTEC INDIA PRIVATE LIMIT ED (THE ASSESSEE), FOR THE ASSESSMENT YEAR 2013-14, ASSESSEE PREFERRED THIS APPEAL. 2. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ROXTE C INDIA, THE ASSESSEE) IS A COMPANY INCORPORATED ON 28/9/2005 AN D HAS BEEN ENGAGED IN THE BUSINESS OF ASSEMBLING AND DISTRIBUT ION OF MODULAR 2 SEALING SYSTEM CONSISTING OF MODULES, FRAMES AND WE DGES/COMPRESSION UNITS AND EMPLOYED UNIQUE SELF PROPRIETARY AND MULT I-DIAMETER TECHNOLOGY FOR INDUSTRIAL CABLES AND PIPE TRANSITS. ASSESSEE WAS PRIMARILY ENGAGED IN THE ACTIVITIES LIKE, IMPORT SEALING MODU LES AND WEDGES FROM ITS AES; PROCURE FRAMES FROM LOCAL VENDORS WHO USE THE DESIGN PROVIDED BY ROXTEC GROUP; AND ASSEMBLE SEALING MODULES AND W EDGES INTO CUSTOMISED, READY TO USE PACKS AND SELL IT TO THE C USTOMERS. FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 30.11.2013 DECLARING NIL INCOME WITH A LO SS OF RS. 6,08,28,977/-. DURING THE ASSESSMENT PROCEEDINGS, L EARNED ASSESSING OFFICER FOUND THAT DURING THE FINANCIAL YEAR 2012-1 3, THE ASSESSEE ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS ( ITS) : SI. NO. NATURE OF TRANSACTION VALUE R S.IN CRORES CR.) 1. IMPORT OF MATERIAL (SEMI-FINISHED AND FINISHED GOODS) 8.36 2. EXPORT OF FINISHED GOODS 3.14 3. PROVISION FOR MARKETING SUPPORT SERVICES 0.59 TOTAL 12.09 3. IN VIEW OF THE ABOVE INTERNATIONAL TRANSACTIONS, DETERMINATION OF THE ARMS LENGTH PRICE (ALP) WAS REFERRED TO THE T RANSFER PRICING OFFICER (LD. TPO), AND THE LD. TPO BY ORDER DATED 2 5/10/2016 PROPOSED AN ADJUSTMENT OF RS. 3, 65, 69, 055/-TO BE THE ARM S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION AND THE LEARNED ASSESSING OFFICER VIDE DRAFT ORDER DATED 7/12/2016 CONFIRMED THE PART TRANSFER P RICING ADJUSTMENT IN CONSONANCE WITH THE ORDER OF THE LD. TPO. 4. AGGRIEVED BY SUCH PROPOSAL OF UPWARD ADJUSTMENT, ASSESSEE FILED OBJECTIONS BEFORE THE LD. DRP WHO BY ORDER DATED 14 /3/2017 CERTAIN 3 DIRECTIONS, PURSUANT TO WHICH THE LEARNED ASSESSING OFFICER PASSED THE ORDER UNDER SECTION 144C/143(3) OF THE INCOME TAX A CT, 1961 (FOR SHORT THE ACT) BY REDUCING THE LOSS TO 2, 42, 59, 922/- . AGGRIEVED BY SUCH AN ACTION OF THE LD. DRP AND ALSO THE LEARNED ASSESSIN G OFFICER, ASSESSEE PREFERRED THIS APPEAL ON AS MANY AS 7 GROUNDS. GROU ND NO. 7 IS GENERAL IN NATURE. GROUNDS NO. 3 AND 4 ARE WITHDRAWN BY THE ASSESSEE AT THE TIME OF ARGUMENTS STATING THAT DUE TO THE ORDER DAT ED 28/7/2017 PASSED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 154/ 144C/143(3) OF THE ACT THE NET LOSS WAS DETERMINED AT A RS. 3, 40, 81, 910/-. GROUNDS NO. 1, 2, 5 AND 6, THEREFORE, REQUIRE ADJUDICATION. 5. GROUND NO. 1 RELATES TO THE RE-COMPUTATION OF AL P BY COMBINING BOTH IMPORT OF MATERIAL AND EXPORT OF FINISHED GOOD S AND APPLYING TNMM AND THEREBY UPWARD ADJUSTMENT OF RS. 34,193,86 0. IN RESPECT OF THE IMPORT OF MATERIALS AND EXPORT OF FINISHED GOOD S, THE TPO APPLIED TNMM AS THE MAM FOR BOTH THE AFORESAID TRANSACTIONS ON COMBINED BASIS AND RECOMPUTED THE ALP BY CONSIDERING 5.15% A S ARMS LENGTH MARGIN AND MADE ADDITION OF INR 3.42 CRORES TO THE RETURNED LOSSES, WHICH THE LD. DRP UPHELD AND ACCORDINGLY, THE LD. A O PASSED THE FINAL ORDER IN LINE WITH DRP/TPO DIRECTION. SUBSEQUENTLY , COMPANY FILED A PETITION UNDER RULE 13, REQUESTING FOR RECTIFICATIO N IN THE DRP DIRECTION ON ACCOUNTOF COMPUTATIONAL ERRORS MADE IN THE MARGI NS AT 5.15% AS COMPUTED BY THE TPO VIDE ORDER DATED 10 TH JULY, 2017, AS PER THE DIRECTIONS OF THE DRP TO VERIFY THE COMPUTATIONAL E RRORS, THE TPO WITH REGARD TO IMPORT OF MATERIAL AND EXPORT OF FINISHED GOODS RECOMPUTED THE MARGIN AT 1.82% AND RESTRICTED THE ADDITION TO INR 2.44 CRORES. LEARNED ASSESSING OFFICER, THEREAFTER, PASSED THE O RDER ON 27 TH JULY 2017 GIVING EFFECT TO THE AFORESAID TPO ORDER. 6. IT IS ARGUED BY THE LD. AR THAT THERE IS NO CORR ELATION WHATSOEVER BETWEEN THE CONCEPT OF RPM/TNMM AS ENVISAGED IN THE ORDER OF 4 TPO/DRP; THE FINDINGS IN THE CASE OF ROTEC INDIA; A ND THE FINAL CONCLUSION DRAWN I.E. TNMM IS THE MAM. 7. HE FURTHER SUBMITTED THAT THE QUANTUM OF EMPLOYE E BENEFIT EXPENSES CANNOT BE COMPARED WITH THE REVENUE AS YEA R BY YEAR THE COMPANY IS EXPERIENCING FALL IN REVENUE ON ACCOUNT OF SLOWDOWN IN THE TELECOM SECTOR; THAT THE HUMAN CAPITAL CANNOT BE RE DUCED IN THE SHORT PERIOD OF TIME; THAT THE INCREASE IN EMPLOYEE COST IN COMPARISON TO PRECEDING YEAR IS NOMINAL; THAT CONSIDERING THE FAC T THAT THE CORE FUNCTION OF ROXTEC INDIA IS SALES AND MARKETING S UCH REDUCTION WAS NEITHER ADVISABLE. HE FURTHER SUBMITTED THAT ALL TH E EMPLOYEES IN THE COMPANY HAVE BEEN UNDERTAKING GENERAL SALESAND MARK ETING ACTIVITIES, THE EXPENSES ARE IN THE NATURE OF RENT, TRAVELING A ND CONVEYANCE HAVE BEEN INCURRED, THESE EXPENSES ARE NORMAL BUSINESS E XPENDITURE AND INCURRING SUCH EXPENDITURE DOES NOT LEAD TO AN AUTO MATIC CONCLUSION THAT ROXTEC INDIA IS CARRYING OUT SUBSTANTIAL VALUE ADDITION/PRODUCTION. AT BEST, IT IS A SURMISE OR ASSUMPTION MADE BY TPO. 8. NEXTLY ARGUED THAT EXPENSES IN THE NATURE OF ADV ERTISING AND SALES PROMOTION HAVE BEEN INCURRED, INASMUCH AS DURING TH E YEAR, ROXTEC INDIA HAS INCURRED INR 35.29 LACS UNDER THE HEAD AD VERTISING AND SALES PROMOTIONS; THAT THESE EXPENSES ARE MAJORLY ON ACCO UNT OF FREE SAMPLES DISTRIBUTED TO THE CUSTOMERS. NO EFFORTS HAVE BEEN MADE BY THE TPO TO DELVE INTO THE EXACT NATURE OF THE EXPENSES AND THE TPO HAS CHOSEN TO RELY ON NOMENCLATURE USED; THAT INCURRING OF SAID E XPENSES ONLY FORTIFIES THE CLAIM OF THE APPELLANT THAT IT IS ENGAGED INTO DISTRIBUTION FUNCTION, THAT CONSIDERING THE QUANTUM OF EXPENDITURE I.E. 35 .29 LACS, SUCH EXPENSES ARE REASONABLE AND NOWHERE CONCLUSIVE OF T HE FACT THAT ROXTEC INDIA IS CARRYING OUT SUBSTANTIAL VALUE ADDITION. 9. HE FURTHER SUBMITTED THAT THE OBSERVATIONS OF TH E LD. TPO THAT ASSEMBLING COMES UNDER DEEMED MANUFACTURING IS BA SED ON THE STATUS 5 GRANTED TO THE COMPANY UNDER EXCISE LAWS, AS UNDER THE EXCISE LAW ASSEMBLING FUNCTION COMES UNDER THE PURVIEW OF DEE MED MANUFACTURING; THAT THE PRIMARY/ PRINCIPLE FUNCTION OF MANUFACTURING THE MODULES, WEDGES/COMPRESSION UNITS AND FRAMES, WHICH REQUIRES USE OF THE SPECIALISED TECHNOLOGY OF ROXTEC GROUP, IS CARR IED OUT BY THE AE OF THE COMPANY AND THE LOCAL VENDOR RESPECTIVELY. THE ROLE OF THE COMPANY IS LIMITED TO M 2 DECISIONS ARE MARKETING OF THE PRODU CTS IN THE SPECIFIED TERRITORY, PROCURING MODULES AND WEDGES FROM THE AE S AND FRAMES FROM THE LOCAL VENDORS; AFFIXING MODULES AND WEDGES INTO FRAMES; AND FINAL DELIVERY TO THE CUSTOMERS AND INVOICING FOR THE SAL ES. HEFURTHERSUBMIT- TED THAT THE LD. TPO WRONGLY OBSERVED THAT IMPORTS HAVE BEEN MADE IN THE NATURE OF RAW MATERIALS. LD. AR ASIDE THE FIN DINGS OF THE LD. DRP ALSO ON SIMILAR GROUNDS. 10. LD. AR HOWEVER, FAIRLY SUBMITTED THAT THIS ISSU E CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2012-13 IN ITA NO. 240/DEL/2017 AND THE TRIBUNAL HAS TAKEN A VIEW AGAINST THE CONTENTIONS OF THE ASSESSE E. LD. AR, HOWEVER, FURTHER SUBMITS THAT HIS CONTENTIONS MAY BE DECIDED ON MERITS FOR THIS YEAR. 11. PER CONTRA, LD. DR SUBMITS THAT INASMUCH AS THE RE IS NO CHANGE IS IN THE FACTS AND CIRCUMSTANCES OR IN LAW, A CONSIDE RED VIEW TAKEN BY THE TRIBUNAL FOR THE IMMEDIATELY EARLIER ASSESSMENT YEA R CANNOT BE BRUSHED ASIDE AND AS A MATTER OF FACT, THE FINDINGS OF THE TRIBUNAL IN ITA NO. 240/DEL/2017 ARE VERY MUCH RELEVANT FOR THIS ASSESS MENT YEAR ALSO. 12. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT IS AN ADMITTED FACT THAT TH E ASSESSEE HAS BEEN RUNNING INTO LOSSES FOR THE LAST 3 SUCCESSIVE ASSES SMENT YEARS AND IN RESPECT OF ONE SUCH ASSESSMENT YEAR THE TRIBUNAL CO NSIDERED THE ISSUE. 6 AT THIS JUNCTURE WE DEEM IT NECESSARY TO LOOK AT TH E OBSERVATIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT Y EAR 2012-13, AND SUCH OBSERVATIONS RUN THUS,- 11. THE ASSESSEE HAS RELIED UPON THE DECISION OF ACIT V ERSUS MSS INDIA (PRIVATE) LTD REPORTED AT 123 TTJ 657 TO SUPPORT IT S CASE. WE HAVE CAREFULLY CONSIDERED THE FACTS IN THAT CASE WHEREIN THE METHOD ADOPTED BY THE ASSESSEE WAS COST PLUS METHOD AND AGAINST WH ICH THE LEARNED TRANSFER PRICING OFFICER ADOPTED TRANSACTIONAL NET MARGIN METHOD. ON CAREFUL PERUSAL OF THE FACTS OF THAT DECISION, THEY ARE DISTINCT FROM THE FACTS BEFORE US. IN THAT CASE THE ASSESSEE DETERMIN E THE ARMS-LENGTH PRICE OF ITS TRANSACTIONS WITH FOREIGN ASSOCIATES O N THE BASIS OF COST PLUS METHOD BY OFFERING THE COMPARISON OF GROSS PROFIT M ARKUP MARGIN ON ITS TRANSACTIONS WITH UNRELATED PARTIES WHICH WAS HELD TO BE CORRECT. IN THAT CASE TPO WAS HELD TO BE NOT JUSTIFIED IN REJECTING THE METHOD AND MAKING AN ADJUSTMENT AS PER TRANSACTIONAL NET MARGI N METHOD EVEN IF THEASSESSEE HAD SUFFERED LOSS IN THOSE TRANSACTION WITH ITS ASSOCIATES. IN THE PRESENT CASE BEFORE US THE ISSUE IS WHETHER THE ASSESSEE IS A DISTRIBUTOR OR A MANUFACTURER AND WHETHER RESALE PR ICE METHOD IS APPLICABLE TO THE INTERNATIONAL TRANSACTIONS ENTERE D INTO BY THE ASSESSEE. IT IS NOT THE CASE THAT ASSESSEE HAS RESOLD THE SAM E GOODS WITH ONLY MINOR MODIFICATIONS TO JUSTIFY THE ADOPTION OF RPM AS THE MOST APPROPRIATE METHOD. IN THE PRESENT CASE THE ASSESSE E HAS ASSEMBLED THE GOODS PARTLY PURCHASED FROM ITS ASSOCIATED ENTERPRI SE AND PARTLY DEVELOPED BY ITS OWN VENDOR. THEREFORE, THE DECISIO N RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE DOES NOT HELP THE CASE OF THE ASSESSEE. 12. IN VIEW OF THE ABOVE FACTS WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LEARNED ASSESSING OFFICER/TRANSFER PRICING OFFICER AS WELL AS THE DIRECTION OF THE LEARNED DISPUTE RESOLUTION PANEL IN REJECTIN G THE RESALE PRICE METHOD ADOPTED BY THE ASSESSEE AND ADOPTING TRANSAC TIONAL NET MARGIN METHOD AS THE MOST APPROPRIATE METHOD. 13. IT NOT THE CASE OF THE LD. AR THAT THERE IS ANY CHANGE OF FACTS AND CIRCUMSTANCES OR IN LAW FROM THE ONES RELATING TO THE ASSESSMENT YEAR 2012-13. FACTS AND LAW REMAINED THE SAME, WE ARE OF THE CONSIDERED OPINION THAT THE VIEW TAKEN BY THE TRIBUNAL IN THE EARLIER ASSESSMENT YEAR CANNOT BE DISTURBED TO TAKE A DIFFERENT VIEW. HENCE WHILE RESPECTFULLY 7 FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL FOR THE AS SESSMENT YEAR 2012-13 IN ITA NO. 240/DEL/2017, EXPECTED ABOVE, WE DISMISS GROUND NO. 1. 14. GROUND NO. 2 RELATES TO THE ACTION OF THE LD. T PO OF NOT ALLOWING THE WORKING CAPITAL ADJUSTMENT TO THE APPELLANT, WH ILE APPLYING TNMM, ON ACCOUNT OF DIFFERENCE IN WORKING CAPITAL OF THE COMPARABLE COMPANIES AND THAT OF THE ASSESSEE, AS CONFIRMED BY THE LD. D RP. IT IS THE SUBMISSION OF THE LD. AR THAT THERE ARE SIGNIFICANT DIFFERENCES IN THE WORKING CAPITAL EMPLOYED BY THE COMPANY AND THE COM PARABLE COMPANIES AND THE WORKING CAPITAL ADJUSTMENT WAS AL LOWED TO THE COMPANY IN THE PREVIOUS YEAR, NAMELY, AY 2011-12 & 2012-13) HE FURTHER SUBMITTED THAT THE WORKING CAPITAL ADJUSTMENT HAS B EEN FURTHER CONSIDERED TO BE A LEGITIMATE ADJUSTMENT IN THE THE DECISIONS REPORTED IN DEMAG CRANES & COMPONENTS (INDIA) PVT. LIMITED VS. DCIT MENTOR GRAPHICS (NOIDA) PVT. LTD. (112 ITJ 408) (DELHI ITA T). 15. THERE IS NO DENIAL OF THE FACT THAT IN THE EARL IER ASSESSMENT YEARS, NAMELY, ASSESSMENT YEARS 2011-12 AND 2012-13, BY OR DERS DATED 29/1/2015 AND 23/1/2016, THE COPIES OF WHICH ARE PR ODUCED BEFORE US, THE LD. AR, LD. TPO ALLOWED THE WORKING CAPITAL ADJ USTMENT SINCE THE FACTS AND CIRCUMSTANCES INVOLVED IN THIS YEAR ARE S IMILAR TO THE FACTS AND CIRCUMSTANCES FOR THE EARLIER ASSESSMENT YEARS, THE RE IS NO JUSTIFICATION FOR NOT ALLOWING THE SAME FOR THIS PARTICULAR YEAR. HAVING REGARD TO THIS ANOMALOUS SITUATION, WE ARE OF THE CONSIDERED OPINI ON THAT THE WORKING CAPITAL ADJUSTMENT SHOULD HAVE BEEN ALLOWED FOR THI S YEAR ALSO. WE THEREFORE WHILE ANSWERING GROUND NO. 2 IN FAVOUR OF THE ASSESSEE, DIRECT THE LEARNED ASSESSING OFFICER/LD. TPO TO ALLOW WORK ING CAPITAL ADJUSTMENT TO THE ASSESSEE FOR THIS ASSESSMENT YEAR ALSO. 16. NOW COMING TO GROUND NO. 5 AND 6 THOSE RELATE TO THE RECOMPUTATION OF THE ARMS-LENGTH PRICE BY APPLYING THE ENTITY LEVEL 8 MARGINS OF TESTED PARTY, INSTEAD OF THE SEGMENTAL M ARGINS IN RESPECT OF MARKETING SUPPORT SERVICES AND ALSO BY SELECTING SIX NEW COMPANIES WHY REJECTING TWO COMPANIES SELECTED BY THE ASSESSE E FOR SUCH COMPARISON. 17. ACCORDING TO THE ASSESSEE, THE AE OF THE ASSESS EE MAKES CERTAIN DIRECT SALES IN INDIA, IN RESPECT OF WHICH THE ASSE SSEE ENTERED INTO A CONTRACT FOR PROVIDING THE MARKETING SUPPORT SERVIC ES. THE ASSESSEE IS REMUNERATED AT THE RATE OF 15% OF THE VALUE OF SALE EFFECTED BY AE IN INDIA.LD. TPO, AFTER APPLYING THE ADDITIONAL FILTER S TO THE SEARCH PROCESS, REJECTEDTWO COMPARABLES OUT OF THREE COMPARABLES SE LECTED BY THE COMPANY BY CONSIDERING THE SAME AS FUNCTIONALLY NOT SIMILAR; AND ADDED ADDITIONAL SIX COMPARABLES, AND AS AGAINST THE MARG IN OF 25.06% ON SEGMENTAL LEVEL EARNED BY ASSESSEE, LD. TPO RECOMPU TED THE ALP AT A MARGIN OF 12.73% ON ENTITY LEVEL. CONSEQUENTLY, LD. TPO RECOMPUTED THE ALP BY CONSIDERING 12.73% AS ARMS LENGTH MARGIN AN D MADE ADDITION OF INR 23.75 LACS. 18. IT IS THE SUBMISSION OF THE LD. AR THAT THE FIL TERS PROPOSED BY THE TPO, INTER-ALIA INCLUDES FILTERS FOR SELECTION OF C OMPANIES HAVING INCOME FROM EXPORT >75%; AND THE COMPANIES HAVING EMPLOYEE COST > 25% OF SALES; THAT SUCH FILTERS, HOWEVER, WERE SUBSEQUENTL Y WITHDRAWN/ REJECTED IN THE ORDER AFTER OBSERVING THE SUBMISSION OF THE ASSESSEE WHEREIN THE ASSESSEE OBJECTED THAT ALL THE COMPARABLE SELECTED BY TPO ARE FAILING ONE OF THE ABOVE TWO FILTERS.HE FURTHER DISPUTED THE AD OPTION OF ENTITY LEVEL MARGINS INSTEAD OF SEGMENTAL MARGINS STATING THAT G IVEN THE FACT THAT FUNCTION, ASSET AND RISK (FAR) PROFILE IS DIFFERENT FOR EACH OF THE BUSINESS LINES, THE APPELLANT HAS BENCHMARKED THE TWO SEGMEN TS (VIZ. IMPORT OF SEMI-FINISHED AND FINISHED GOODS AND PROVISION FOR MSS) INVOLVING AE TRANSACTIONS SEPARATELY FOR TRANSFER PRICING PURPOS ES; THAT THE ASSESSEE HAS MAINTAINED PROPER SEGMENTAL RECORDS IN RELATION TO MSS AND FROM 9 SUCH TRANSACTION APPELLANT EARNED MARGIN OF 25.06%; THAT THEY LD. TPO, HOWEVER, WITHOUT GIVING ANY SPECIFIC FINDING REJECT ED THE SEGMENTAL MARGIN AND ADOPTED THE ENTITY LEVEL MARGIN OF THE A PPELLANT; THAT THE ASSESSEE IS EARNING BETTER MARGINS WHEN ENTITY LEVE L MARGINS ARE COMPARED WITH THE MARGINS OF COMPARABLE AS DETERMIN ED BY THE TPO; THAT THE MARGINS OF THE ASSESSEE AT ENTITY LEVEL, WHICH DEPICTS PRIMARILY MARGINS EARNED FROM SALE OF MODULAR SEALING SOLUTIO N CANNOT BE COMPARED WITH THE MARGINS OF THE COMPARABLE COMPANI ES WHICH ARE ENGAGED IN PROVIDING CONSULTANCY SERVICES. HE PLACE D RELIANCE ON THE DECISIONS REPORTED IN M/S SYNVERSE MOBILE SOLUTIONS VS DCIT AND M/S TECHNIMOUNT ICB PVT. LTD VS ACIT IT WAS HELD THAT F OR THE PURPOSE OF BENCHMARKING THE TRANSACTION WITH THE AE THE TPO MU ST CONSIDER THE SEGMENTS PREPARED BY THE ASSESSEE FOR THE PURPOSE O F MAKING ANY ADJUSTMENT. LD. DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 19. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF SUBMISSIONS MADE ON EITHER SIDE. INSOFAR AS THIS ISSUE - WHETHER SE GMENTAL RESULTS HAVE TO BE TAKEN INTO CONSIDERATION OR PROFIT MARGIN AT ENT ITY LEVEL HAS TO BE CONSIDERED, IS CONCERNED, THERE IS NO DISPUTE THAT THE ASSESSEE HAS MAINTAINED SEGMENTAL RECORDS IN RELATION TO THE MAN AGEMENT SUPPORT SERVICES. IT IS NOT DECIPHERABLE FROM THE ORDERS OF THE AUTHORITIES BELOW THAT THESE SEGMENTAL RECORDS ARE REJECTED FOR ANY E XPLICIT REASONS. LD. TPO ADOPTED THE ENTITY LEVEL MARGINS OF THE ASSESSE E AS WELL AS THE COMPARABLES. THERE IS NO DENIAL AS TO THE SUBMISSIO NS OF THE LD. AR THAT THE SEGMENT OF MANAGEMENT SUPPORT SERVICES IS DIFFE RENT FROM OTHER ACTIVITIES PERFORMED BY THE COMPARABLES. 20. IN M/S. SYNVERSE MOBILE SOLUTIONS (SUPRA), THE TRIBUNAL HELD THAT WHERE DIRECT OVERHEADS ATTRIBUTABLE TO THE RESPECTI VE SEGMENTS WERE 10 DULY ALLOCATED BY THE ASSESSEE TO THE SAID SEGMENTS AND EVEN FOR INDIRECT OVERHEADS, ALLOCATION WAS DONE BY APPLYING APPROPRI ATE ALLOCATION KEYS,IN THE ABSENCE OF ANY OBJECTION TO THE SAID ALLOCATION KEYS ADOPTED OR APPLIED BY THE ASSESSEE, IT IS NOT PROPER FOR THE T PO TO RESORT TO THE ENTITY LEVEL MARGIN COMPARISON OF THE ASSESSEE WITH OTHER COMPARABLES. IN TECHNIMOUNT ICB PVT. LTD. (SUPRA), IT WAS HELD T HAT AS PER THE PROVISIONS CONTAINED IN CHAPTER-X VIDE PROVISIONS 9 2-94, INTERNATIONAL TRANSACTIONS ARE TO BE TAKEN INTO CONSIDERATION FOR DETERMINATION OF ARMS LENGTH PRICE AND FOR SUCH PURPOSE WHEREVER IT IS PRACTICABLE AND AVAILABLE, THE SEGMENTAL RESULTS HAVE TO BE CONSIDE RED AND NOT TO THE PROFIT AT ENTITY LEVEL. 21. IN VIEW OF THE UNDISPUTED AVAILABILITY OF THE S EGMENTAL RESULTS IN THE CASE OF THE ASSESSEE AS WELL AS THE COMPARABLE COMPANIES, IN RESPECT OF MANAGEMENT SUPPORT SERVICES, WE ARE OF THE CONSI DERED OPINION THAT THE LD. TPO SHOULD HAVE TAKEN THEM INTO CONSIDERATI ON. FOR THIS PURPOSE, WE SET ASIDE THE ISSUE TO THE FILE OF LD. ASSESSING OFFICER/TPO FOR COMPARISON OF THE SEGMENTAL RESULTS AND NOT THE MAR GIN AT ENTITY LEVEL. 22. NOW COMING TO THE GROUND NO. 6, THE ASSESSEE IS CHALLENGING THE REJECTION OF TWO ENTITIES, NAMELY, BEST MULYANKAN C ONSULTANTS LTD. AND INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. FROM T HE LIST OF COMPARABLES HOLDING THOSE TO BE FUNCTIONALLY DISSIMILAR. IT IS ARGUED BY THE LD. AR THAT THESE TWO ENTITIES ARE ALSO ENGAGED IN THE BUSINESS OF PROVIDING CONSULTANCY SERVICES AND ARE CONSIDERED AS VALID CO MPARABLES FOR EVALUATING MARKET SERVICE SEGMENT BY THE LD. TPO IN THE CASE OF LUFTHANSA TECHNIK SERVICES INDIA PVT. LTD. VS. DCIT IN ITA NO. 5451/DEL/2012. 11 23. IT IS THE SUBMISSION OF THE LD. DR THAT THE FUN CTIONAL PROFILE FOR THE ASSESSMENT YEAR 2013-14 IS NOT CLEARLY DISCERNIBLE FROM THE ORDER OF LUFTHANSA TECHNIK SERVICES INDIA PVT. LTD. (SUPRA) BECAUSE THAT CASE PERTAINS TO THE STATE OF AFFAIRS RELATING TO ASSESS MENT YEAR 2008-09 AND THEREFORE, IT CANNOT BE A GOOD GUIDE FOR THE FUNCTI ONAL PROFILE OF THIS COMPANY FOR THE ASSESSMENT YEAR 2013-14. 24. FROM THE RECORD, IT CAN BE SEEN THAT THE AES OF THE ASSESSEE MAKE CERTAIN DIRECT SALES IN INDIA. THE ASSESSEE ENTERED INTO CONTRACT FROM PROVIDING MARKETING SUPPORT SERVICES. SUCH MARKETIN G SUPPORT SERVICES INCLUDE THE MARKETING OF THE PRODUCTS, COMMUNICATIO N WITH THE CUSTOMERS, PARTICIPATION IN THE CUSTOMER TENDER PRO CESS AND POST SALE SUPPORT SERVICES. MARKETING OF PRODUCT TO THE CUSTO MERS IN INDIA AS DONE BY THE ASSESSEE SUBJECT TO CERTAIN PARAMETERS SET O UT FOR THE GLOBAL CONSULTING POLICIES AND GENERAL GUIDELINES PROVIDED BY THE AES. THAT SERVICE INCLUDES CONDUCTING MARKET RESEARCH AND PRO VIDING INFORMATION OF POTENTIAL CUSTOMERS, AS AND WHEN REQUIRED, USE OF A DVERTISING AND DISTRIBUTION OF PROMOTIONAL MATERIALS ETC. AND PART ICIPATING IN TRADE SHOWS AND EXHIBITIONS, EXHIBITING AND DEMONSTRATING THE PRODUCTS OF THE GROUP. SO ALSO, THE ASSESSEE IS EXPECTED TO COMMUNI CATE THE REQUIREMENT OF THE CUSTOMERS AND THEIR FEEDBACK TO THE AE. FURT HER, THE ASSESSEE IS EXPECTED TO ACT AS A COMMUNICATION CHANNEL AND FACI LITATE PROCEDURAL STEPS SUCH AS DOCUMENTATIONFORMALITIES ETC. BESIDES FOLLOW UP THE POST SALE SERVICE FOR COLLECTION OF THE AMOUNT INVOICED. THE ASSESSEE GETS REMUNERATION OF 15% OF THE VALUE AND SALES EFFECTED BY THE AE IN INDIA. THIS PROFILE OF THE ASSESSEE IS NOT IN DISPUTE FOR COMPARABILITY OR 12 OTHERWISE OF THE ENTITIES WE HAVE TO COMPARE THEIR FUNCTIONAL PROFILE WITH THAT OF THE ASSESSEE. 25. IT IS SEEN FROM THE RECORD THAT THE ASSESSEE HA S NOT PRODUCED THE MATERIAL TO CAPTURE FUNCTIONAL PROFILE OF THESE TWO COMPANIES WITH REFERENCE TO THE AGREEMENTS FOR PROVISION OF SERVIC ES AND THE MATERIAL PRODUCED BEFORE US IN THE SHAPE OF RELEVANT EXTRACT S OF ANNUAL REPORT IS INSUFFICIENT TO REACH A DEFINITE CONCLUSION ON THIS ASPECT. WHEN WE HAVE TO COMPARE THE FUNCTIONAL PROFILE IN THE TEETH OF T HE OBJECTION TAKEN BY THE LD. TPO, TO RETAIN THESE TWO ENTITIESIN THE LIS T OF COMPARABLES, MATER REQUIRES DEEPER ANALYSIS. NO SUCH MATERIAL IS FORTH COMING. HENCE, WE HOLD THAT THE ASSESSEE FAILED TO SUBSTANTIATE THEIR CLAIM THAT BEST MULYANKAN CONSULTANTS LTD. AND INDUS TECHNICAL & FI NANCIAL CONSULTANTS LTD. ARE GOOD COMPARABLES TO THE ASSESSEE. 26. NOW COMING TO SIX COMPARABLES WHICH WERE SELECT ED BY THE LD. TPO ON THE GROUND OF FUNCTIONAL SIMILARITY AND OBJE CTED BY THE ASSESSEE, THESE COMPANIES ARE APITCO LTD., CAMEO CORPORATE SE RVICES LTD., CONCEPT COMMUNICATIONS LTD., JUST DIAL LIMITED, KILLICK AGE NCIES AND MARKETING CONSULTANTS & AGENCIES LTD. FROM THE ARGUMENTS OF T HE LD. AR, WE COULD DECIPHER THAT SUCH AN OBJECTION IS BASED BROADLY ON TWO GROUNDS. FIRSTLY THAT THE COMPARABLESAPITCO LTD., CAMEO CORPORATE SE RVICES LTD. AND KILLICK AGENCIES ARE FUNCTIONALLY DISSIMILAR WHEREA S CAMEO CORPORATE SERVICES LTD., CONCEPT COMMUNICATIONS LTD., JUST DI AL LIMITED AND MARKETING CONSULTANTS & AGENCIES LTD. HAVE A TURNOV ER OF MORE THAN 200 TIMES TO THAT OF THE ASSESSEE. 13 27. IN THE JUDGMENT DATED 18.12.2018 IN CIT VS. PHI LIP MORRIS SERVICES INDIA SA, IN ITA NO. 1468/2018, THE FUNCTIONAL PROF ILE OF THESE THREE COMPANIES, NAMELY, APITCO LTD. CAMEO CORPORATE SERV ICES LTD. AND KILLICKAGENCIES, WAS CAPTUREDAND THE OBSERVATIONS O F THE TRIBUNAL IN RESPECT OF THE COMPARABILITY OF THESE PENNIES WITH THE ENTITIES PROVIDING MANAGEMENT SUPPORT SERVICES, LIKE THE ASSESSEE, AS APPROVED BY THE HONBLE HIGH COURT ARE THAT,- APITCO LTD., XXXXX 13. AS COULD BE SEEN FROM THE ANNUAL REPORT OF THIS COMPANY, IS COMPANY IS ONE OF THE 18 TCOS WAS FORMED BY THE KEY NATIONA L LEVEL FINANCIAL INSTITUTIONS IN ASSOCIATION WITH STATE-LEVEL INSTIT UTIONS AND BANKS, AND ACCORDINGLY BEING A GOVERNMENT ENTERPRISE APITCO LT D., WAS ESTABLISHED TO PROVIDE TECHNICAL SERVICES TO OTHER GOVERNMENT C OMPANIES AND BODY CORPORATE. FURTHER THIS COMPANY IS ENGAGED IN PROVI DING SERVICES SUCH AS ASSET RECONSTRUCTION AND MANAGEMENT, CLUSTERED ALLO TMENT FOR MEGA FOOTMARKS, AND ENVIRONMENT SERVICES, ENERGY- RELATE D SERVICES, INFRASTRUCTURE PLANNING AND DEVELOPMENT, ENERGY AUD IT ETC. AND UNDOUBTEDLY THIS COMPANY IS A HIGH-END CONSULTANCY SERVICE PROVIDER. THE ANNUAL REPORT FURTHER REVEALS THAT THIS COMPANY IS ENGAGED IN PROVIDING HIGH-END TECHNICAL SERVICES ALSO. 14. LD. AR BROUGHT TO OUR NOTICE THAT THEY APITCO L TD., WAS REJECTED BY A CATENA OF DECISIONS RENDERED BY DIFFERENT BENCHES O F THIS TRIBUNAL INCLUDING A COORDINATE BENCH OF THIS TRIBUNAL IN CI ENA INDIA (P) LTD VS. DCIT IN ITA NO. 2948 AND 3224/DE1/2013 FOLLOWING WH ICH IN AVAYA INDIA PRIVATE LIMITED VERSUS DCIT IN ITA NO. 146/DEL/2013 . HE ALSO PLACED RELIANCE ON THE NATION REPORTED IN KOBELCO CRANES I NDIA PRIVATE LIMITED VS. ITO IN ITA NO. 802/DEL/2016. IN INTERNATIONAL S OS SERVICES INDIA PRIVATE LIMITED VERSUS DCIT ITA NO. 1631/DE1/2014 T HIS COMPANY WAS EXCLUDED ON ACCOUNT OF BEING HUNDRED PERCENT GOVERN MENT ORGANISATION AND THE APPEAL AGAINST THIS DECISION OF THE TRIBUNA L WAS DISMISSED BY THE HON'BLE JURISDICTIONAL HIGH COURT.. FURTHER IT COUL D BE SEEN IN VESTEGAARD ASIA PRIVATE LIMITED VERSES DCIT IN ITA NO. 6670/DE L/2015 AND H & M MOURITZ INDIA PRIVATE LIMITED VERSES DCIT IN ITA 28 2/BANKG/2015 IT IS HELD THAT THE APTICO PVT LTD., IS NOT A GOOD COMPAR ABLE WITH ANY COMPANY RENDERING BUSINESS SUPPORT SERVICES ON THE GROUND THAT THIS COMPANY IS A PUBLIC SECTOR UNDERTAKING AND ITS OPER ATIONS ARE MAINLY BASED THE ON THE POLICY REQUIREMENTS OF THE GOVERNM ENT. 14 15. FURTHER RELIANCE IS PLACED BY THE COUNSEL ON TH E DECISION OF THE MUMBAI BENCH OF THIS TRIBUNAL IN TYSOKKRUPP INDUSTR IES INDIA PRIVATE LIMITED VERSES ACIT IN ITA NO. 6460/MUM/2012 WHEREI N IT WAS HELD THAT THIS COMPANY BEING A GOVERNMENT ENTERPRISES IS NOT COMPARABLE WITH A PRIVATE BUSINESS SERVICE PROVIDER BECAUSE IN CASE O F GOVERNMENT ENTERPRISES PROFIT MOTIVE IS NOT IRRELEVANT CONSIDE RATION, AND GOVERNMENT COMPANIES WORK FOR OTHER PUBLIC SECTOR UNDERTAKINGS AND IN THAT SENSE THE RELATED PARTY TRANSACTIONS ARE MUCH MORE THAN T HE FILTER OF 25%. THIS DECISION OF THE TRIBUNAL WAS UPHELD BY THE HON'BLE BOMBAY HIGH COURT IN ITA NUMBER 20/02/2018 OF 2013. 16. THE REASONS RECORDED BY THE TRIBUNAL IN ALL THE DECISIONS REFERRED TO ABOVE HOLD GOOD FOR THE ASSESSEE ALSO INASMUCH AS T HE ASSESSEE IS A PRIVATE COMPANY IN THE FIELD OF PROVIDING BUSINESS SUPPORT SERVICES. WE, THEREFORE, WHILE RESPECTFULLY FOLLOWING THE RATIO L AID DOWN IN THE ABOVE DECISIONS HOLD THAT APITCO LTD., IS NOT A GOOD COMP ARABLE WITH THE ASSESSEE AND IS ACCORDINGLY LIABLE TO BE EXCLUDED. WE, THEREFORE, DIRECTLY LD. TPO TO EXCLUDE THIS COMPANY FROM THE FINALIST O F COMPARABLES TO BENCHMARK THE INTERNATIONAL TRANSACTION RELATING TO THE MARKET SUPPORT SERVICES PROVIDED BY THE ASSESSEE TO ITS AES. CAMEO CORPORATE SERVICES. XXXXX 20. WE HAVE GONE THROUGH THE FINANCIALS OF THIS COM PANY, INCLUDING THE PROFIT AND LOSS ACCOUNT INCORPORATED PAGE NO. 96 AN D SCHEDULED 8 INCORPORATED AT PAGE NUMBER 102 OF THE PAPER BOOK R ELATING TO THE FINANCIALS OF THE COMPARABLE COMPANIES AND FIND THA T THE ENTIRE INCOME OF RS. 24,36,67,920/-WAS SHOWN WITHOUT ANY SEGMENTA L BIFURCATIONS. 21. FURTHER THE COMPARABILITY OF THE CAMEO CORPORAT E SERVICES WITH THE COMPANIES PROVIDING MARKET SUPPORT SERVICES LIKE AS SESSEE WAS CONSIDERED BY A COORDINATE BENCH OF THIS TRIBUNAL I N VESTERGAARD ASIA PRIVATE LIMITED ITA 6670/DE1/2015 BY ORDER DATED 30 /11/2017, IN THE LIGHT OF THE ANNUAL REPORTS OF THE COMPANIES AND TH E DECISION IN ADIDAS TECHNICAL SERVICES PRIVATE LIMITED VS. DCIT IN ITA NO. 862/DE1/2016, DISCUSSED THE DESIRABILITY OF RETAINING THE CAMEO C ORPORATE SERVICES AS ONE OF THE COMPARABLES, AND REACHED A CONCLUSION TH AT THE FUNCTIONAL PROFILE OF CAMEO CORPORATE SERVICES IS SIMILAR TO T HE PROFILE OF TSR DARASHAW LTD. AND NOT TO THE COMPANIES LIKE ASSESSE E IN THIS MATTER. ON THAT GROUND CAMEO CORPORATE SERVICES WAS DIRECTED T O BE EXCLUDED FROM THE LIST OF COMPARABLES. IT IS PERTINENT TO NOTE TH AT IN ADIDAS TECHNICAL SERVICES PRIVATE LIMITED (SUPRA) TSR DARASHAW LTD. WAS CONSIDERED AND REJECTED. THE TRIBUNAL IN VESTERGAARD ASIA PRIVATE LIMITED (SUPRA) FOUND THAT CAMEO CORPORATE SERVICES AND TSR DARASHAW LTD. STAND ON THE 15 SAME FOOTING AND ARE NOT GOOD COMPARABLES TO THE MA RKET SUPPORT SERVICE PROVIDERS. 22. GOING BY THE PROFILE OF CAMEO CORPORATE SERVICE S EXTRACTED BY THE LD. TPO IN HIS ORDER AND ALSO IN VIEW OF THE NONAVAILAB ILITY OF SEGMENTAL INFORMATION IN THE FINANCIALS OF THIS COMPANY COUPL ED WITH THE FINDINGS OF A COORDINATE BENCH OF THIS TRIBUNAL VESTERGAARD (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT CAMEO CORPORATE SERVICES IS NOT A GOOD COMPARABLE TO THE ASSESSEE IN VIEW OF THE FUNCTIONA LITY SIMILARITY. WE, ACCORDINGLY, DIRECT THE LD. TPO TO DELETE THIS COMP ANY FROM THE FINAL SET OF COMPARABLES. KILLIK AGENCIES AND MARKETING LTD. XXXXX 32. FROM THE ANNUAL REPORT OF THIS COMPANY WE FIND THAT KILLIK AGENCIES AND MARKETING LTD. IS A PUBLIC LTD. UNLISTED COMPAN Y ACTING AS AGENT FOR VARIOUS FOREIGN PRINCE FALLS FOR SALE OF DREDGERS, DREDGING EQUIPMENTS, STEERBABLERUDDAR PROPULSION, MARITIME AND AVIATION LIGHTING, ACOUSTIC COMMUNICATION EQUIPMENTS ETC. AND THIS COMPANY ALSO OFFERS AFTER SALE SERVICES. APART FROM THIS THE COMPANY IS INVOLVED I N EXPORT OF MICRO SWITCHES, ENGINEERING ITEMS, ACOUSTIC ITEMS AND HEA DSETS. 33. IT IS BROUGHT TO OUR NOTICE THAT IN THE CASE OF PARAMETRIC TECHNOLOGY INDIA PRIVATE LIMITED, LD. DRP REJECTED THIS KILLIK AGENCIES AND MARKETING LTD TO BE A GOOD COMPARABLE TO THE COMPANIES ENGAGE D IN MARKET SUPPORT SERVICES AND A JURISDICTIONAL TRIBUNAL THAT IS A BENCH OF THE BANGALORE TRIBUNAL UPHELD SUCH A FINDING OF THE LD. DRP. FURTHER THE BANGALORE TRIBUNAL IN THE CASE OF DCIT VS. ARUBA NE TWORKS INDIA PRIVATE LIMITED IN ITA- TP57/BANK/2015 FOUND THAT KILLIK AG ENCIES AND MARKETING LTD IS NOT A MARKETING SUPPORT SERVICE AND IT CANNO T FIND A PLACE IN THE SET OF COMPARABLES FOR SUCH COMPANIES. 34. ON A PERUSAL OF THE PROFILE OF THIS KILLIK AGEN CIES AND MARKETING LTD AND ALSO THE FINDINGS OF THE TRIBUNAL ON THE COMPAR ABILITY OF THIS COMPANY WITH THE COMPANIES RENDERING MARKET SUPPORT SERVICES, WE ARE OF THE CONSIDERED OPINION THAT KILLIK AGENCIES AND MARKETING LTD CANNOT BE A GOOD COMPARABLE TO THE ASSESSEE AND IS LIABLE TO BE EXCLUDED FROM THE FINAL LIST OF COMPARABLES AND, ACCORDINGLY WE D IRECT THE LD. TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES F OR BENCHMARKING THE INTERNATIONAL TRANSACTION OF MARKET SUPPORT SERVICE S. 28. SO ALSO IN KOBELCO CRANES INDIA PVT. LTD., IN I TA NO. 802/DEL/2016, A COORDINATE BENCH OF THIS TRIBUNAL CAPTURED THE FU NCTIONAL PROFILE OF 16 KOBELCO CRANES, WHICH RENDERS THE MARKETING AND SAL ES SUPPORT SERVICES TO ITS PARENT COMPANY. SUCH SUPPORT SERVICES HAVE B EEN SUMMARIZED IN THE ORDER OF TPO AS CUSTOMER SUPPORT SERVICES IN RE LATION TO THE BUSINESS DEALINGS WITH EXISTING CLIENTS AND POTENTIAL CLIEN TS IN INDIA; ADMINISTRATIVE/FACILITATION ASSISTANCE SUCH AS INVE NTORY OF SPARE PARTS, ARRANGING FACILITIES, CUSTOMS CLEARANCE AND PRODUCT SUPPORT (BOTH PARTS AND SERVICE) AND TRAINING TO DEALERS AND CUSTOMERS; ASSISTANCE IN RELATION TO MARKETING/NEW BUSINESS DEVELOPMENT; COMPILATION OF CUSTOMER/MARKET DATA, IDENTIFICATION AND EVALUATION OF POTENTIAL BUSINESS OPPORTUNITIES IN INDIA, ETC. THE TRIBUNAL HELD THAT APITCO IS NOT AT ALL A GOOD COMPARABLE TO THE ENTITY RENDERING MA RKETING SUPPORT SERVICES. IN CORNING SAS INDIA BO VS. DDIT (ITA NO . 5713/DEL/2012, A COORDINATE BENCH OF THIS TRIBUNAL HELD THAT APITCO LTD. IS NOT A GOOD COMPARABLE TO THE ENTITY PROVIDING MARKETING SUPPOR T SERVICES. 29. IN ADIDAS TECHNICAL SERVICES P. LTD. (ITA NO. 1 233/DEL/2015), THE COMPANY IS ENGAGED IN RENDERING SUPPORT SERVICES TO AE WHICH IN TURN RENDERS SOURCING SERVICES TO ADIDAS GROUP COMPANIES FOR INTERNATIONAL PREMIUM RANGE OF FOOTWEAR AND APPARELS AND ACCORDIN GLY THEIR ROLE IS LIMITED TO SUPPORTING ITS AE. IN THAT CASE, A COORD INATE BENCH HELD THAT FOR A COMPANY RENDERING MARKETING SUPPORT SERVICES, API TCO LTD. IS NOT AT ALL A GOOD COMPARABLE. HENCE, WE FIND THAT BECAUSE OF T HE PECULIARITY OF APITCO BEING A GOVERNMENT COMPANY AND ENGAGED IN PR OVIDING TECHNICAL CONSULTANCY RELATING TO ASSET RECONSTRUCTION COMPAN IES, MANAGEMENT SERVICES, MICRO ENTERPRISE DEVELOPMENT, SKILL DEVEL OPMENT ETC. ON THE GOVERNMENT INITIATIVES, WHICH DO NOT FALL IN COMPAR ISON TO THE SERVICES PROVIDED BY THE ASSESSEE,WE ARE OF THE CONSIDERED O PINION THAT APITCO 17 LTD. IS NOT AT ALL A GOOD COMPARABLE AND HAS TO BE DELETED.COMING TO CAMEO CORPORATE SERVICES LTD. AND KILLICK AGENCIES, THESE ENTITIES HAVE ALREADY BEEN HELD TO BE NON-COMPARABLE WITH THE ASS ESSEE LIKE COMPANIES IN THE CASE OF PHILIP MORRIS SERVICES (SU PRA) AND THE SAME ACCORDINGLY DESERVE TO BE DELETED. 30. IN PHILIP MORRIS SERVICES INDIA SA (SUPRA) IT W AS OBSERVED THAT SINCE THE FILTERS THAT HAVE BEEN USED IN T.P. STUDY WERE NOT FOUND TO BE APPROPRIATE IN ENTIRETY AS THERE ARE DIFFERENCES IN THE THRESHOLD LIMITS OF SEVERAL FILTERS AND METHOD OF APPLICATION OF FILTER S, IT HAS RESULTED TO AN INAPPROPRIATE SET OF COMPARABLES AND APPROVED THE F INDING OF THETRIBUNAL THAT THESE THREE COMPANIES ARE NOT AT A LL GOOD COMPARABLE WITH THE MARKET SUPPORT SERVICE ENTITIES LIKE THE A SSESSEE.FINDINGS OF THE TRIBUNAL AND THE HONBLE HIGH COURT IN PHILIP MORRI S SERVICES INDIA SA (SUPRA) IN RESPECT OF THE COMPARABILITY OF THE APIT CO LTD., CAMEO CORPORATE SERVICES LTD. AND KILLICK AGENCIES ARE VE RY MUCH RELEVANT ON THIS ASPECT IN COMPARISON WITH THE ASSESSEE ALSO WH O IS RENDERING ONLY THE MARKETING SUPPORT SERVICES, ON THE GROUND OF DI SSIMILARITY OF FUNCTIONS. WE, THEREFORE, DIRECT THE LEARNED ASSESS ING OFFICER/LD. TPO TO DELETE THIS THE ENTITIES FROM THE LIST OF COMPARABL ES. 31. NOW COMING TO THE ASPECT OF NONCOMPARABLE TEA O F CERTAIN COMPANIES IN VIEW OF THEIR HUGE AND DISPROPORTIONAT E TURNOVER WHEN COMPARED TO THE ENTITIES LIKE ASSESSEE, IT COULD BE SEEN FROM THE FINANCIALS OF THIS CAMEO CORPORATE SERVICES LTD. TH AT THE REVENUES FROM BUSINESS SUPPORT SERVICES BY CAMEO CORPORATE SERVIC ES ARE 75.65 CRORES WHEREAS THE REVENUE OF THE ASSESSEE IS ONLY AT RS.5 8 LACS AND THEREFORE, THE CAMEO CORPORATE SERVICES LTD.S REVENUES ARE MO RE THAN 100 TIMES 18 FROM THE INTERNATIONAL TRANSACTIONS COMPARED TO THE ASSESSEE.IN RESPECT OF CONCEPT COMMUNICATIONS LTD., ITS REVENUE FROM OP ERATIONS IS 125.02 CRORES WHICH IS 200 TIMES THE REVENUE OF THE ASSESS EE FROM INTERNATIONAL TRANSACTIONS. JUST DIAL LIMITEDS REVENUE FROM OPER ATION IS 362.77 CRORES, WHICH IS MORE THAN 600 TIMES THE REVENUE OF THE ASS ESSEE. LASTLY, THE REVENUE OF MARKETING CONSULTANTS AND AGENCIES LTD. FROM OPERATION IS 153 CRORES, WHICH IS 200 TIMES THE REVENUE OF THE A SSESSEE FROM ITS INTERNATIONAL TRANSACTIONS. 32. IT IS, THEREFORE, CLEAR THAT THE REVENUE FROM O PERATIONS OF CAMEO CORPORATE SERVICES LTD. IS 100 TIMES, CONCEPT COMMU NICATIONS LTD IS 200 TIMES, JUST DIAL LIMITED IS 600 TIMES AND MARKETING CONSULTANTS IS ABOUT 200 TIMES FROM THE REVENUE OF THE ASSESSEE FROM ITS INTERNATIONAL TRANSACTIONS. 33. IN CIT VS. PENTAIR, 381 ITR 216 (BOM), THE TRIB UNAL CONSIDERED HCL COMNET SYSTEMS & SERVICES LTD., INFOSYS BPO AND WIP RO LTD., WHICH WERE HAVING HUGE TURNOVER ABOUT 23 TIMES AND 65 TIMES ET C. AND REJECTED THEM TO BE GOOD COMPARABLES BECAUSE OF THE HUGE TUR NOVER GAP. THE TRIBUNAL ALSO PLACED RELIANCE ON THE DECISIONS IN S ONY INDIA (P) LTD. VS. DCIT, 114 ITD 448, E-GAIN COMMUNICATION, 2008 TIOL 282, DELOITTEE CONSULTING INDIA PVT. LTD. VS. DCIT(ITA NO. 1082/HY D/2010 AND GENISYS INTEGRATING SYSTEM (INDIA) (P) LTD. VS. DCIT, 53 SO T 159. THE HONBLE HIGHCOURT APPROVED THE REJECTION OF THE ENTITIES OP ERATING AT LARGE SCALE AND WHOSE TURNOVER IS MORE THAN 23 TO 65 TIMES TO T HE COMPARABLES. THAT BEING SO, THE TURNOVER GAP IN THE CASE OF ASSE SSEE AND THAT THE COMPARABLE, NAMELY, CAMEO CORPORATE SERVICES, CONCE PT COMMUNICATIONS, JUST DIAL LTD. AND MARKETING CONSUL TANTS SERVICES IS 19 RANGING BETWEEN 100 TIMES TO 600 TIMES, WHICH, IN T HE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN PENTAIR (S UPRA) RENDERS THESE FOUR ENTITIES AS NOT COMPARABLE TO THE ASSESSEE. WE , THEREFORE, DIRECT THE ASSESSING OFFICER/TPO TO EXCLUDE THESE FOUR COMPARA BLES. 34. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART AND FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF FEBRUARY, 2021. SD/- SD/- (ANIL CHATURVEDI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 22/02/2021 AKS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI