Samsung Heavy Industries India Pvt. Ltd., Noida V. ACIT, Noida

ITA 402/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4264 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary
• Section: 143(3); 92D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I - 2 , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. KULDIP SINGH , JM ITA NO. 402/DEL/2017 : ASSTT. YEAR : 2012 - 13 SAMSUNG HEAVY INDUSTRIES PVT. LTD., C - 28 & 29 , LOGIX CYBER PARK, WINGH - B, 1 ST FLOOR, SECTOR - 62, NOIDA - 201301 VS ACIT, CIRCLE - 3, NOIDA (APPELLANT) (RESPONDENT) PAN NO. A A KCS9098M ASSESSEE BY : SH. GIRISH DAVE, SR. ADV. REVENUE BY : SH. H. K. CHOUDHARY, CIT DR DATE OF HEARING : 09.10 .201 7 DATE OF PRONOUNCE MENT : 01 .01 .201 8 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 29.11.2016 PASSED BY THE AO U/S 144C R.W. S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICE R ( LD. A O ) IS BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TRANSFER PRICING OFFICER ('LD. TPO') ERRED IN GIVING EFFECT TO THE DIRECTIONS OF THE HON'BLE DRP ('LD. DRP') ON FINDINGS WHICH ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 2 ARE ERRONEOUS IN LAW, C ONTRARY TO THE FACTS AND BASED ON MERE CONJECTURES AND SURMISES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP, WITHOUT GIVING ANY COGENT REASONS, ERRED IN CHARACTERIZING THE PROVISION OF ENGINEERING DESIGN SERVICES ('EDS') BY THE APPELLANT AS THAT OF INFORMATION TECHNOLOGY ENABLED SERVICES ('ITES') WITHOUT APPRECIATING THE FACT THAT THE APPELLANT IS A SERVICE PROVIDER INVOLVED IN THE PROVISION OF EDS. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD. AO/LD. TPO BASED ON DIRECTIONS FROM THE HON'BLE DRP ERRED IN ENHANCING THE INCOME OF THE APPELLANT BY INR 22,983,602 HOLDING THAT THE INTERNATIONAL TRANSACTION OF THE APPELLANT PERTAINING TO PROVISION OF EDS DOES NOT SATISFY THE ARM'S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT AND IN DOI NG SO HAVE GROSSLY ERRED IN: 4.1. NOT APPRECIATING THAT NONE OF THE CONDITIONS SET OUT IN SECTION 92C(3) OF THE ACT ARE SATISFIED IN THE PRESENT CASE; 4.2. DISREGARDING THE ALP AS DETERMINED BY THE APPELLANT IN THE TRANSFER PRICING ('TP') DOCUMENTATION M AINTAINED BY IT IN TERMS OF SECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCOME - TAX RULES, 1962 ('THE RULES'); 4.3. DISREGARDING MULTIPLE YEAR/ PRIOR YEARS' DATA AS USED BY THE APPELLANT IN THE TP DOCUMENTATION AND HOLDING THAT CURRENT YEAR [I.E. FINA NCIAL YEAR ('FY') 2011 - 12] DATA FOR COMPARABLE COMPANIES ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 3 SHOULD BE USED DESPITE THE FACT THAT THE SAME WAS NOT NECESSARILY AVAILABLE TO THE APPELLANT AT THE TIME OF PREPARING ITS TP DOCUMENTATION; 4.4. REJECTING, WITHOUT ANY COGENT REASONS, THE QUANTITATI VE SCREENS/FILTERS APPLIED AND SET OF COMPARABLES ARRIVED AT BY THE APPELLANT, FOLLOWING A DETAILED AND ROBUST SEARCH METHODOLOGY CARRIED OUT IN THE TP REPORT, AND PROCEEDING TO ARRIVE AT THE FRESH COMPARABLES SET BY APPLYING CERTAIN ARBITRARILY SELECTED F ILTERS AND ARRIVING AT HIS OWN COMPARABLES SET INSTEAD; 4.5. EXCLUDING CERTAIN COMPARABLE COMPANIES ON ARBITRARY/FRIVOLOUS GROUNDS EVEN THOUGH THEY ARE COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED; 4.6. I NCLUDING CERTAIN COMPANIES THAT ARE NOT COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED; 4.7. COMPLYING WITH THE DIRECTIONS OF THE ID. DRP AND INCLUDING CERTAIN COMPANIES AS COMPARABLES BASED ON ITS EARLIER R EASONING WITHOUT VERIFYING THE FILTER TEST AS DIRECTED BY THE LD. DRP; 4.8. NOT CONSIDERING THE CORRECT COMPUTATION OF OPERATING PROFIT/TOTAL COST OF CERTAIN COMPANIES USED AS COMPARABLE IN EDS OF THE APPELLANT; 4.9. DISREGARDING THE ADJUSTMENT FOR CAPAC ITY TO THE OPERATING PROFIT TO TOTAL COST EARNED FROM THE INTERNATIONAL TRANSACTION BY THE APPELLANT FOR THE PURPOSE OF COMPARABILITY; ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 4 4.10. DENYING A WORKING CAPITAL ADJUSTMENT TO THE OPERATING PROFIT MARGINS OF THE COMPARABLES, AND IN DOING SO HAVE GROSS LY ERRED IN CONCLUDING THAT THE APPELLANT HAS NOT BEEN ABLE TO DEMONSTRATE THAT THE DIFFERENCE IN THE WORKING CAPITAL DEPLOYED IS MAKING A DIFFERENCE IN THE MARGIN EARNED BY THE APPELLANT AND THE COMPARABLES; 4.11. IGNORING THE BUSINESS/ COMMERCIAL REALIT Y BY NOT ALLOWING A RISK ADJUSTMENT TO THE APPELLANT; 4.12. THE ID. AO/ ID. TPO ERRED IN REJECTING THE ADDITIONAL COMPARABLES PROVIDED BY THE APPELLANT EVEN THOUGH THEY ARE COMPARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED, ASSETS EMPLOYED AND R ISKS ASSUMED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP ERRED IN PROPOSING TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT FOR CONCEALMENT OF PARTICULARS OF INCOME AND FOR FURNISHING INACCURATE PARTICU LARS THEREOF. 6. THE LD. DRP HAS GROSSLY ERRED ON FACTS AND IN LAW BY PROPOSING TO COMPUTE INTEREST UNDER SECTIONS 234A, 234B, AND 234C OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY SATISFACTORY REASONS FOR THE SAME. FURTHER, THE RETURN OF INCOME HAS BEEN FILED DULY ON 29/11/2012; HENCE THE INTEREST UNDER SECTION 234A IS NOT VALID IN LAW. THE APPELLANT PRAYS THAT APPROPRIATE RELIEF BE GRANTED. ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 5 THE ABOVE GROUNDS ARE MUTUALLY EXCLUSIVE AND ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, VARY, OMIT, SUBSTITUTE, WITHDRAW, MODIFY OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL HEREIN OR SUBMIT SUCH FURTHER OBJECTIONS AS MAY BE CONSIDERED NECESSARY AT ANY TIME EITHER BEFORE OR DURING THE COURSE OF HEARING BEFORE THE BENCH OF APPELLATE TRIBUNAL, SO AS TO ENABLE THE LEARNED MEMBERS OF THE BENCH TO DECIDE THIS APPLICATION AND ON THE OBJECTIONS RAISED BY THE APPELLANT, IN ACCORDANCE WITH THE LAW. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT ONLY GRIEVANCE OF THE ASSESSEE R ELATES TO THE ENHANCEMENT OF INCOME BY RS.2,29,83,602/ - BY HOLDING THAT THE INTERNATIONAL TRANSACTION OF THE ASSESSEE PERTAINING TO THE PROVISIONS OF EDS DOES NOT SATISFY THE ARM S LENGTH PRINCIPLE ENVISAGED UNDER THE ACT. 4. FACTS OF THE CASE IN BRIEF AR E THAT THE ASSESSEE COMPANY WAS IN CORPORATED IN INDIA IN JUNE 2007 AND IS A WHOLLY OWNED SUBSIDIARY OF SAMSUNG HEAVY INDUSTRIES CO. LTD., KOREA ( SHI KORE A ), I T ENGAGED IN THE BUSINESS OF PROVIDING ENGINEERING SERVICES, GENERATING ENGINEERING DRAWINGS AND P ROVIDING OTHER IT ENABLED SERVICES TOGETHER REFERRED TO AS ENGINEERING RELATED SERVICE FOR OFFSHORE FACILITIES. THE PRIMARY BUSINESS OF SHI KOREA ENCOMPASSES SHIPBUILDING, ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 6 OFFSHORE FLOATERS, DIGITAL DEVICES FOR SHIPS & CONSTRUCTION AND ENGINEERING SERVIC ES. THE ASSESSEE IN FORM NO. 3ECB REPORT ED THE FOLLOWING INTERNATIONAL TRANSACTIONS: S.NO. NATURE OF TRANSACTION METHOD USED BY ASSESSEE VA LUE OF INTERNATIONAL TRANSACTION (INR) OUTCOME OF TP ORDER (ADJUSTMENT IN INR 1. PROVISION OF ENGINEERING DESIGN AND RELATED SERVICES TRANSACTIONAL NET MARGIN METHOD ( TNMM ) 389,421,515 43,262,688 2. REIMBURSEMENT OF OTHER EXPENSES NA 872,474 ACCEPTED TO BE AT ARM S LENGTH 5. THE SECOND INTERNATIONAL TRANSACTION WAS ACCEPTED TO BE AT ARM S LENGTH. HOWEVER, FOR THE FIRST INTERNATIONAL TRANSACTION RELATING TO PROVISION OF ENGINEERING DESIGN AND RELATED SERVICES VALUING RS.38,94,21,515/ - WAS REFERRED BY THE AO TO THE TPO FOR DETERMINING THE ARM S PRICE. THE ASSESSEE SELECTED TNMM AS THE MOST APPROPRIATE METHOD AND USED OPERATING PROFIT/TOTAL COST (OP/TC) AS THE PROFIT LEVEL INDICATOR (PLI) FOR DETERMINING THE ARM S LENGTH NATURE OF ITS INTERNATIONAL TRANSACTIONS. THE ASSESSEE SELECTED 7 COMPARABLES HAVING AVERAGE OP/TC AT 11.89% IN COMPARISON TO THE ASSESSEE S MARGIN AT 11.27%. HOWEVER, THE TPO DURING THE COURSE OF PROCEEDINGS REVISITED THE ECONOMIC ANALYSIS OF THE INTERNATIONAL TRANSACTION AND PROPOSED THE ADJUSTMENT BY CHANGING THE SET OF COMPARABLES AND COMPUTING THEIR MARGIN. THE TPO REJECTED 3 ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 7 COMPARABLES SELECTED B Y THE ASSESSEE AND RETAINED 4 IN THE FINAL SET OF FOLLOWING 14 COMPARABLES: S. NO. COMPANY'S NAME AVERAGE OP/TC 1 ACCENTIA TECHNOLOGIES LTD. 11. 95% 2 ACROPETAL TECHNOLOGIES LIMITED (ENGINEERING DESIGN SERVICE) 18.30% 3 B N R UDYOG LTD. 40.62% 4 C ADES DIGITECH PRIVATE LIMITED 1.52% 5 E4E HEALTHCARE SERVICES PRIVATE LIMITED 19.85% 6 ECLERX SERVICES LTD. 58.40% 7 GEOMETRIC LTD. - 0.02% 8 INFORMED TECHNOLOGIES INDIA LTD. 19.11% 9 INFOSYS BPO LTD. 36.75% 10 JINDAL INTELLICOM LTD. 0.25% 11 MICROG ENETIC SYSTEMS LTD 6.38% 12 R SYSTEMS INTERNATIONAL LTD - 0.46% 1 3 T C S E - SERVE LTD. 63.69% 14 TATA ELXSI LIMITED 9.15% AVERAGE 20.39% 6. THE TPO IN DETERMINING THE ADJUSTMENT TO THE TRANSFER PRICE OF THE ASSESSEE DENIED NECESSITY OF APPROPRIATE W ORKING CAPITAL ADJUSTMENT TO THE MARGINS OF THE COMPARABLES ON THE GROUND THAT THE ASSESSEE DID NOT DEMONSTRATE ANY NEED FOR WORKING CAPITAL ADJUSTMENT WHEN THE INTEREST PART WAS CONSIDERED AS NON - OPERATIVE. HE ALSO DENIED THE BENEFIT OF RISK ADJUSTMENT . F INALLY , THE TPO CONSIDERED THE AVERAGE MARK - UP ON COST OF 20.39% AS COMPARED TO 11.37% OF THE ASSESSEE AND ACCORDINGLY PROPOSED AN ADJUSTMENT OF RS.4,32,63,688/ - . THE AO PASSED THE DRAFT ASSESSMENT ORDER DATED 18.03.2016 BY MAKING THE ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 8 ADJUSTMENT OF RS.4,32 ,63,688/ - . THEREAFTER, THE ASSESSEE FILED THE OBJECTION BEFORE THE LD. DRP WHO OBSERVED THAT THE TPO H AD GIVEN VALID REASON IN HIS ORDER AND CHARACTERIZED THE ASSESSEE COMPANY AS ITES COMPANY AND HAD REJECTED TP ANALYSIS OF THE ASSESSEE AFTER GIVING REASON S. AS REGARDS TO THE COMPARABLE SELECTED BY THE TPO AND THE REJECTION OF COMPARABLE OF THE ASSESSEE BY THE TPO, THE LD. DRP HELD THAT TCSE - SERVE LTD., ECLERX SERVICES LTD. AND INFOSYS BPO LTD. ARE TO BE RETAINED AS COM PARABLE WHILE THE DIRECTION WAS GIVEN TO VERIFY THE DATA AND EXCLUDE THE COMPARABLE M/S BNR UDYOG LTD. , IF IT FAILS THE RPT FILTER. THE LD. DRP ALSO HELD THAT THE COMPARABLE S NAMELY, M/S CSS TECH AND M/S TCE CONSULTING WERE RIGHTLY EXCLUDED BY THE TPO SINCE THOSE COMPANIES BEING DOMESTIC, HAD DIFFERENT FAR AND ALSO FAILS A VALID FILTER. THE LD. DRP ALSO DIRECTED THE TPO TO VERIFY AS TO WHETHER THE ANOTHER COMPARABLE CHOOSEN BY THE ASSESSEE I.E. M/S CALIBER POINT BUSINESS SOLUTIONS LTD. PASSES THE SAID FILTER. ON THE DIRECTION OF THE LD. DRP, TH E TPO PASSED AN ORDER DATED 29.11.2016 AND REVISED THE EARLIER ADJUSTMENT OF RS.4,32,63,688/ - TO RS.2,29,83,602/ - . A CCORDINGLY, THE AO MADE THE SAID ADJUSTMENT IN THE INCOME DECLARED BY THE ASSESSEE AND WORKED OUT THE TOTAL INCOME OF THE ASSESSEE AT RS.7,1 2,88,722/ - . ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 9 7. BEING AGGRIEVED THE ASSESSEE IS IN APPEAL. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS SQUARELY COVERED VIDE ORDER DATED 22.08.2017 IN ITA NO. 436/DEL/2016 FOR THE ASSESSMENT Y EAR 2011 - 12 (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 8. IN HIS RIVAL SUBMISSIONS, THE LD. CIT DR ALTHOUGH SUPPORTED THE IMPUGNED ORDER PASSED BY THE AO BUT COULD NOT CONT ROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 9. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE M ATERIAL AVAILABLE ON THE RECORD, I T IS NOTICED THAT THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS INVOLVED IN ITA NO. 436/DEL/2016 FOR THE ASSESSME NT YEAR 2011 - 12 WHEREIN THE IDENTICAL ISSUE HAS BEEN SET ASIDE TO THE AO/TPO FOR FRESH DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTIONS OF PROVISIONS OF ENGINEERING AND DESIGN AND RELATED SERVICE WITH CERTAIN DIRECTIONS. THE RELEVANT FINDINGS H AVE BEEN GIVEN IN PARAS 9 TO 19 OF THE AFORESAID ORDER DATED 22.08.2017 WHICH READ AS UNDER: ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 10 9. WE ARE DISINCLINED TO ACCEPT THIS CONTENTION ADVANCED BY THE LD. DR FOR THE OBVIOUS REASON THAT THE TPO HIMSELF DECLINED TO ACCEPT THIS CONTENTION AND CLASSIFI ED THE ASSESSEE S SERVICES AS IT ENABLED SERVICES. ONCE THE TPO HAS TREATED THE NATURE OF SERVICES RENDERED BY THE ASSESSEE AS `I.T. ENABLED AND THE ASSESSEE HAS NOT OBJECTED TO THE SAME IN THE APPEAL BEFORE THE TRIBUNAL, THE LD. DR CANNOT BE ALLOWED TO S ET UP A NEW CASE CONTRARY TO WHAT WAS DONE BY THE TPO BY CLAIMING THAT THE NATURE OF SERVICES SHOULD BE ALTERED AT THIS STAGE FOR EVALUATION OF COMPARABLE COMPANIES IN DISPUTE. WE WILL, THEREFORE, CONFINE OURSELVES IN CONSIDERING THE COMPARABILITY OR OTHER WISE OF THE COMPANIES IN CHALLENGE BEFORE US BY TREATING THE ASSESSEE AS RENDERING `I.T. ENABLED SERVICES , AS WAS DONE BY THE TPO. 10. NOW, WE WILL TAKE UP FOUR COMPANIES, ONE BY ONE, TO SEE WHETHER OR NOT THESE ARE COMPARABLE. AT THIS JUNCTURE, IT IS R ELEVANT TO MENTION THAT THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSESSEE DURING THE YEAR IS ADMITTEDLY SIMILAR TO THAT CARRIED ON IN THE PRECEDING YEAR. THE ASSESSEE HAS RENDERED SERVICES EMANATING FROM AN AGREEMENT ENTERED INTO WITH SHI KOREA DATED 1ST FEBRUARY, 2009. THUS, IT IS OSTENSIBLE THAT THE NATURE OF SERVICES RENDERED BY THE ASSESSEE DURING THE YEAR ARE SIMILAR TO THOSE RENDERED IN THE PRECEDING ASSESSMENT YEAR I.E. 2010 - 11. THE TPO IN THE PRECEDING YEAR, PROCEEDED IN ALMOST THE SAME MANNER, AND CONSIDERED ALL THE FOUR COMPANIES CURRENTLY UNDER CHALLENGE BEFORE US, AS COMPARABLE. THE MATTER TRAVELLED TO THE TRIBUNAL AND THE SAME HAS BEEN DECIDED VIDE ORDER DATED ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 11 13.07.2017 IN ITA NO.576/DEL/2015. A COPY OF SUCH ORDER HAS BEEN PLACED ON RECORD. (I) ACCENTIA TECHNOLOGIES LTD. 11. THE TPO TREATED THIS COMPANY AS COMPARABLE IN THE SAME WAY IT WAS DONE IN THE PRECEDING YEAR. THE TRIBUNAL IN ITS ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR HAS DISCUSSED THE COMPARABILITY OR OTHERWISE OF THIS COMPANY ON PAGE 21 ONWARDS OF ITS ORDER. AFTER RELYING ON CERTAIN DECISIONS, THE TRIBUNAL DIRECTED TO EXCLUDE IT FROM THE LIST OF COMPARABLES ON ACCOUNT OF FUNCTIONAL DISSIMILARITY AND OUTSOURCING OF SUBSTANTIAL AMOUNT OF WORK. WE HAVE GONE THROUGH A COPY OF THE ANNUAL REPORT OF THIS COMPANY FOR THE YEAR UNDER CONSIDERATION, WHOSE COPY HAS BEEN PLACED ON PAGES 500 ONWARDS OF THE PAPER BOOK. THE PROFIT & LOSS ACCOUNT OF THIS COMPANY IS AVAILABLE AT PAGE 542 FROM WHICH IT CAN BE SEEN THAT THERE IS INCOME FROM SALES AND SERVICES TO THE TUNE OF RS.108.31 CRORE. SCHEDULE 8 GIVES A BRIEF DESCRIPTION OF SUCH `INCOME AS INCLUDING MEDICAL TRANSCRIPTION, BILLING AND COLLECTIONS, INCOME FROM CODING, INTEREST ON FD AND INCOME FROM EXCHANGE FLUCTUATION. THUS, INCOME HAS ARISEN IN INDIA NOT ONLY FROM `SERVICES , BUT FROM SALES AS WELL. PAGE 552 OF THE PAPER BOOK INDICATES THAT: THIS COMPANY HAS ONLY ONE SEGMENT OF ACTIVITY, NAMELY, HEALTHCARE MANAGEMENT. PAGE 530 DISCLOSES THAT APART FROM SERVICES, THIS COMPANY IS E ARNING INCOME FROM PRODUCTS AS WELL. SINCE THIS COMPANY IS ENGAGED IN SALE OF PRODUCTS APART FROM RENDERING IT ENABLED SERVICES AND BOTH THESE COMPONENTS OF INCOME LIE IN ONE SEGMENT, IT ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 12 IS NOT POSSIBLE TO BIFURCATE INCOME FROM IT ENABLED SERVICES FROM THE COMMON POOL OF PRODUCTS AND SERVICES, SO AS TO MAKE COMPARISON WITH THE ASSESSEE S INCOME. RESPECTFULLY FOLLOWING THE TRIBUNAL ORDER PASSED FOR THE IMMEDIATELY PRECEDING YEAR, WE ORDER FOR THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. (II) ECLERX SERVICES LTD. 12. THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES ON THE SAME BASIS AS WAS DONE FOR THE PRECEDING YEAR. THE TRIBUNAL ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR HAS DISCUSSED THE FUNCTIONAL PROFILE OF THIS COMPANY . AFTER DISCUSSION, THE TRIBUNAL HAS COME TO HOLD THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT. 13. WE HAVE GONE THROUGH THE ANNUAL REPORT OF THIS COMPANY, A COPY OF WHICH HAS BEEN PLACED ON RECORD. PROFIT & LOSS ACCOUNT OF THIS COMPANY SHOWS INCOME FROM OPERATIONS AT RS.3419.11 MILLION. THE DIRECTOR S REPORT INDICATES THAT THIS COMPANY IS RENDERING FINANCIAL AS WELL AS SALES & MARKETING SERVICES. INCOME FROM BOTH THESE SERVICES HAS BEEN CLUBBED. SUCH SERVICES INCLUDE TRADE PROCESSING SUPPORT, REFERENCE DATA MAINTENANCE, CONTRACT RISK REVIEW, RECONCILIATION AND CONTROLS, MARGIN AND EXPOSURE MANAGEMENT, METRICS AND REPORTING, EXPENSES MANAGEMENT, ACCOUNTING AND FINANCE, CONSULTING SERVICES, ONLINE OPERATIONS & WEB ANALYTICS, CRM & BUSINESS INTELLIGENCE, DA TA MANAGEMENT & REPORTING, COMPETITOR BENCHMARKING & PRICING, QUALITY & COMPLIANCE AND BUSINESS PROCESS ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 13 CONSULTING. THIS COMPANY HAS A SINGLE PRIMARY SEGMENT I.E., DATA ANALYTICS AND PROCESS OUTSOURCING SERVICES. A PLAIN READING OF THE NATURE OF SERVICES CARRIED ON BY THIS COMPANY ABUNDANTLY SHOWS THAT THERE IS A VAST DIFFERENCE WITH THE ACTIVITY CARRIED ON BY THE ASSESSEE. RELYING ON THE VIEW TAKEN BY THE CO - ORDINATE BENCH FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, WE DIRECT TO EXCLUDE THIS COMPANY F ROM THE LIST OF COMPARABLES. (III) TCS E - SERVE LTD. 14. THIS COMPANY WAS ALSO CONSIDERED BY THE TPO AS COMPARABLE IN THE PRECEDING YEAR. THE TRIBUNAL DIRECTED TO EXCLUDE THIS COMPANY, INTER ALIA, ON ACCOUNT OF DIFFERENCE IN FUNCTIONAL PROFILE. 15. WE HAVE GONE THROUGH THE PRINCIPAL ACTIVITIES DONE BY THIS COMPANY IN THE YEAR IN QUESTION WHICH HAVE BEEN SET OUT ON PAGE 88 OF ITS ANNUAL REPORT AS UNDER: - 1. BACKGROUND AND PRINCIPAL ACTIVITIES TCS E - SERVE LIMITED IS ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY - ENABLED SERVICES (ITES)/BUSINESS PROCESS OUTSOURCING (BPO) SERVICES, PRIMARILY TO CITIGROUP ENTITIES GLOBALLY. THE COMPANY S OPERATIONS BROADLY COMPRISE OF TRANSACTION PROCESSING AND TECHNICAL SERVICES. TRANSACTION PROCESSING INCL UDES THE BROAD SPECTRUM OF ACTIVITIES INVOLVING THE PROCESSING, COLLECTIONS, CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITIGROUP TO ITS ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 14 CORPORATE AND RETAIL CLIENTS. TECHNICAL SERVICES INVOLVE SOFTWARE TESTING, VERIFICATION AND VALI DATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES. 16. THE ASSESSEE HAS ALSO MADE AVAILABLE ANNUAL REPORT OF THIS COMPANY FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE PRINCIPAL ACTIVITIES OF THE COMPANY HAVE BE EN SET OUT AT PAGE 105 OF THE ANNUAL REPORT FOR THE PRECEDING YEAR, WHICH ARE IDENTICAL TO THOSE FOR THE INSTANT YEAR. SINCE THE TRIBUNAL, FOR THE IMMEDIATELY PRECEDING YEAR, HAS HELD THIS COMPANY TO BE FUNCTIONALLY DIFFERENT FROM THAT OF THE ASSESSEE, RES PECTFULLY FOLLOWING THE PRECEDENT, WE DIRECT THE EXCLUSION OF THIS COMPANY ON ACCOUNT OF FUNCTIONAL DISSIMILARITY AS THE NATURE OF ACTIVITY CARRIED ON BY THE ASSESSEE DURING THE YEAR ALSO REMAINS SIMILAR TO THAT DONE FOR THE PRECEDING YEAR. (IV) TCS E - SE RVE INTERNATIONAL LTD. 17. THE TPO INCLUDED THIS COMPANY IN THE FINAL ROLL OF COMPARABLES. SIMILAR VIEW WAS TAKEN BY HIM FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE TRIBUNAL, IN AN APPEAL BY THE ASSESSEE, HAS DIRECTED TO EXCLUDE THIS COMPANY IN IT S ORDER FOR THE IMMEDIATELY PRECEDING YEAR. THE PRINCIPAL ACTIVITIES OF THIS COMPANY HAVE BEEN SET OUT ON PAGE 25 OF ITS ANNUAL REPORT FOR THE YEAR, WHICH ARE AS UNDER: - 1. BACKGROUND AND PRINCIPAL ACTIVITIES TCS E - SERVE INTERNATIONAL LIMITED IS ENGAGED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY - ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 15 ENABLED SERVICES (ITES)/BUSINESS PROCESS OUTSOURCING (BPO) SERVICES, PRIMARILY TO CITIGROUP ENTITIES GLOBALLY. THE COMPANY S OPERATIONS BROADLY COMPRISE OF TRANSACTION PROCESSING AND TECHNICAL SERVICES. TRANSACTION PROCESSING INCLUDES THE BROAD SPECTRUM OF ACTIVITIES INVOLVING THE PROCESSING, COLLECTIONS, CUSTOMER CARE AND PAYMENTS IN RELATION TO THE SERVICES OFFERED BY CITIGROUP TO ITS CORPORATE AND RETAIL CLIENTS. TECHNICAL SERVICES INVOLVE SOFTWARE TES TING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DAT A CENTRE MANAGEMENT ACTIVITIES. 18. IT CAN BE SEEN THAT SIMILAR ACTIVITIES WERE DONE BY THIS COMPANY IN THE PRECEDING YEAR AS WELL. SINCE THE NATURE OF ACTIVITIES CARRIED OUT BY THIS COMPANY FOR BOTH THE YEARS ARE SIMILAR AND THE TRIBUNAL, FOR THE IMMEDIATELY PRECEDING YEAR, HAS HELD THIS COMPANY TO BE FUNCTIONALLY DISSIMILAR, WE, THEREFORE, DIRECT TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. 19. TO SUM UP, WE S ET ASIDE THE IMPUGNED ORDER ON THE ISSUE OF ADDITION TOWARDS TRANSFER PRICING ADJUSTMENT AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR FRESH DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION OF PROVISION OF ENGINEERING, DESIGN AND RELATED SERVICE S IN CONSONANCE WITH OUR ABOVE DIRECTIONS. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD IN SUCH FRESH PROCEEDINGS. ITA NO . 402 /DE L/2017 SAMSUNG HEAVY INDUSTRIES PVT. LTD. 16 10. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 22.08.2017 IN ITA NO. 436/DE L/2016 FOR THE ASSESSMENT YEAR 2011 - 12 IN ASSESSEE S OWN CASE. THE MATTER FOR THE YEAR UNDER CONSIDERATION IS RESTORED TO THE FILE OF THE AP/TPO FOR FRESH DETERMINING OF THE ALP ADJUSTMENT IN ACCORDANCE WITH DIRECTION GIVEN FOR THE AFORESAID PRECEDING ASSE SSMENT YEAR 2011 - 12. 11 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . (ORDER PRONOUNCED IN THE COURT ON 01 /01/2018 ) SD/ - SD/ - ( KULDIP SINGH ) (N. K. SAINI) JUDICIAL MEMBE R ACCOUNTANT MEMBER DAT ED: 01 /01/2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR