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ITA 412/DEL/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3211 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Next Hearing Date: 11-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T M SHIVAKUMAR
• Keywords: Depreciation; Transfer pricing; International transaction; Bad and doubtful debts; Capital expenditure
• Section: 143(3); 142(1); 234B; 144; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SH. O. P. KANT, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 412/DEL/2017 (ASSESSMENT YEAR: 2012-13) A APPELLANT BY : SH. NAGESHWAR RAO, ADV. RESPONDENT BY : SH. T.M. SHIVA KUMAR, CIT(DR) DATE OF HEARING : 11.05.2017 DATE OF PRONOUNCEMENT : 18.05.2017 O R D E R PER BEENA A. PILLAI, J.M : 1. THE PRESENT APPEAL HAS BEEN PREFERRED BY ASSESSEE AGAINST FINAL ORDER DATED 28.12.2016, PASSED BY LD. DCIT CIRCLE-1(2), NEW DELHI FOR ASSESSMENT YEAR 2012-13 ON FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), NEW DELHI ('AO') HAS ERRED IN PASSING THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 ('THE ACT') AFTER CONSIDERING THE INCORRECT ADJUSTMENTS PROPOSED BY THE ASSISTANT COMMISSIONER OF INCOME-TAX, TRANSFER PRICING OFFICER - I(1 )(1), NEW DELHI ('TPO') IN HIS APPEAL EFFECT ORDER ADIDAS TECHNICAL SERVICES PVT. LTD. PLOT NO. 53, SECTOR-32, INSTITUTIONAL AREA, GURUGRAM VS. DCIT CIRCLE-1(2) NEW DELHI GIR/PAN: AAACR0240C (APPELLANT) (RESPONDENT) 2 ITA NO. 412/DEL/2073 (AY 2012-13) PASSED IN PURSUANCE OF THE DIRECTIONS OF THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP'). 2. THE LEARNED TPO/AO HAVE ERRED IN CALCULATION OF WORKING CAPITAL ADJUSTED OPERATING MARGIN OVER OPERATING COST OF ICRA MANAGEMENT CONSULTING SERVICES LTD. 3. THE LEARNED TPO/AO HAVE ERRED IN FOLLOWING AN INCONSISTENT APPROACH WITH RESPECT TO TREATMENT OF CERTAIN EXPENSES AS OPERATING/NON-OPERATING IN THE CASE OF COMPARABLES VIS-A-VIS THE ASSESSEE WHILE COMPUTING THEIR OPERATING MARGINS RESPECTIVELY. 4. THE LEARNED AO ERRED IN HOLDING THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF EACH ITEM OF DISALLOWANCE/ADDITIONS AND IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271 OF THE ACT. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO HAS ERRED IN/INITIATING PENALTY UNDER SECTION 271 OF THE ACT, AS CONSEQUENCES OF THE ADDITION MADE IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 144 OF THE ACT; 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO HAS ERRED IN CHARGING INTEREST UNDER SECTION 244A, 234B AND 234D OF THE ACT, AS CONSEQUENCES OF THE ADDITIONS MADE IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT. 2. LD. COUNSEL AT OUTSET SUBMITTED THAT GROUND NO. 1 RAISED IN MEMO OF APPEAL IS GENERAL IN NATURE GROUND NO. 4 , IS PREMATURE AND GROUND NO.5 AND 6 ARE CONSEQUENTIAL IN NATURE. HE THUS SUBMITTED THAT THESE GROUNDS DO NOT REQUIRE ANY ADJUDICATION. LD. COUNSEL SUBMITTED THAT ONLY I SSUE THAT 3 ITA NO. 412/DEL/2073 (AY 2012-13) REQUIRES ADJUDICATION IS IN RESPECT OF GROUND NO. 2 AND GROUND NO. 3. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION ON 29.11.2012 DECLARING A TOTAL INCOM E OF RS. 2,43,08,640/-. THE CASE WAS SELECTED FOR SCRUTINY A ND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ALONGWIT H NOTICE UNDER SECTION 142(1) OF THE ACT ALONGWITH QUESTIONN AIRE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVES OF A SSESSEE APPEARED BEFORE LD. AO FROM TIME TO TIME TO FURNISH SUBMISSIONS AS REQUIRED AND CALLED FOR. 4. LD. DCIT OBSERVED THAT ASSESSEE IS ENGAGED IN BUSI NESS OF PROVIDING SUPPORT SERVICES WITH RESPECT TO FOOTW EAR AND APPAREL MANUFACTURED IN INDIA. IT WAS OBSERVED THAT AS PER FORM 3 CEB, ASSESSEE DURING THE YEAR HAD UNDERTAKEN INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES. LD. AO, THEREFORE, IN ACCORDANCE WITH PROVISIONS OF SEC TION 92CA OF THE ACT, REFERRED MATTER TO TRANSFER PRICING OFF ICER (TPO) FOR DETERMINING ARMS LENGTH PRICE. LD.TPO REJECTED ECON OMIC ANALYSIS UNDERTAKEN BY ASSESSEE AND MADE ADJUSTMENT AMOUNTING TO RS. 1,65,98,268/- WITH RESPECT TO INTE RNATIONAL TRANSACTIONS OF PROVISION OF SUPPORT SERVICES AS UN DER: INTERNATIONAL TRANSACTION METHOD SELECTED ATSPL (TESTED PARTY) COMPARABLES TRANSFER PRICE (INR) MARGIN TYPE OF COMPANIES ARMS LENGTH MARGIN WITHIN5 PERCENT OF TRANSFER PRICE PROVISION OF SUPPORT SERVICE TNMM USING OPERATING PROFIT 250,618,849 8.47 PERCEN COMPANIES ENGAGED IN (2.19) PERCEN 4 ITA NO. 412/DEL/2073 (AY 2012-13) AS A PLI OPERATING COST T PROVIDING SIMILAR SERVICES T REIMBURSEMENT OF EXPENSES BY ATSPL NO BENCHMARKING REQUIRED 8,907528 NA NA NA NA REIMBURSEMENT OF EXPENSE TO ATSPL NO BENCHMARKING REQUIRED 1872458 NA NA NA NA 4. ON THE BASIS OF DIRECTIONS BY DRP, LD. DCIT PROPOS ED FOLLOWING VARIATIONS TO RETURNED INCOME: PARTICULARS AMOUNT(INR INCOME UNDER THE HEAD FROM BUSINESS & PROFESSION(AS PER COMPUTATION OF INCOME BY THE ASSESSEE) 24,308,640 ADD: DIFFERENCE ON ACCOUNT OF ARMS LENGTH PRICE AS PER ORDER OF THE LEARNED TPO 16,598,268 ADD: DIFFERENCE ON ACCOUNT OF VOLUNTARY DISDALLOWANCE OF PROFESSIONAL CHARGES IN RELATION T O LEASE HOLD IMPROVEMENT 64,321 LESS: DEPRECIATION ON AMOUNT DISALLOWED AS CAPITAL EXPENDITURE IN AY 2011-12(WDV AS ON 1.04.2011 OF INR 635,841@10%) 63,584 TOTAL ASSESSED INCOME 40,907,645 5. AGAINST ADJUSTMENTS MADE BY THE LD. DCIT, ASSESSEE IS IN APPEAL BEFORE AS ON 2 ISSUES WHICH ARE AS UNDER: GROUND NO. 2 : BEFORE US ASSESSEE IS AGGRIEVED WITH THE METHOD OF COMPUTATION OF WORKING CAPITAL ADJUSTMENT IN CASE O F M/S ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD., BEIN G ONE OF COMPARABLES FINALIZED BY LD. TPO. LD. COUNSEL SUBMI TTED THAT RECTIFICATION APPLICATION UNDER SECTION 154 OF THE ACT WAS FILED BEFORE LD. DCIT WHICH WAS DISPOSED OF VIDE ORDER DA TED 5 ITA NO. 412/DEL/2073 (AY 2012-13) 02.02.2017, WITHOUT GRANTING ANY RELIEF TO ASSESSEE . LD. COUNSEL SUBMITTED THAT, IN THE FINANCIAL REPORT OF M/S ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD. TRADE RECE IVABLES FOR THE YEAR UNDER CONSIDERATION AS ON 31.03.12 WAS 785.19 LAKHS AND IN THE PRECEDING YEAR IT WAS 820.80 LAKHS . HE PLACED HIS RELIANCE UPON SCHEDULE 8 IN THE FINANCIA LS OF M/S ICRA , PLACED AT PAGE 420 OF PAPER BOOK WHICH IS RE PRODUCED HEREIN: 8. TRADE RECEIVABLES (UNSECURED) OVER 6 MONTHS -CONSIDERED GOOD DUE FROM COMPANIES UNDER THE SAME MANAGEMENT 26.28 0.0 -CONSIDERED GOOD DUE FROM OTHERS 381.74 389.99 -CONSIDERED DOUBTFUL 68.35 72.46 476.37 462.45 OTHERS -CONSIDERED GOOD DUE FROM COMPANIES UNDER THE SAME MANAGEMENT 74.12 0.0 -CONSIDERED GOOD DUE FROM OTHERS 711.07 820.80 785.19 820.00 TOTAL 1, 261.66 1, 283.25 LESS PROVISION FOR DOUBTFUL DEBTS (88.35) (72.46) 6. LD. COUNSEL SUBMITTED THAT BY EXCLUDING THE PROVIS ION FOR DOUBTFUL DEBTS, WORKING CAPITAL ADJUSTMENT OF T HIS COMPARABLE HAS BEEN COMPUTED AT 6.62% BY LD. TPO. H E SUBMITTED THAT LD. TPO, WHILE CALCULATING WORKING C APITAL ADJUSTMENT HAS TAKEN TRADE RECEIVABLES AT NIL, BECA USE OF 6 ITA NO. 412/DEL/2073 (AY 2012-13) WHICH OP/OC COMES TO 6.62%. THE COMPUTATION OF WORK ING CAPITAL AS PER LD.TPO IS REPRODUCED HEREIN: S. N O. COMPA NY NAME SALE S TOTA L COST O. P. PR OFI T AVERA GE INVEN TOR AVERA GE RECEI VABLE AVE RAG E PAY ABLE TOTAL WORKIN G CAPIT AL TO TAL WORKI NG CAPITA L/COST DIFFER ENCE INTE REST ADJUS TMEN T ORIGI NAL OP/ OC A B C= A+ B D E F G=D+ E-F J=I/C K=J( T)- J(C) L M=K *L N 1 I C R A MANAGE MENT CONSULTI NG SERVICES LTD. 24.1 378 22. 638 9 1.49 89 . . 0.4 90 (0.49) 2.6% 4.42 % 12. 60% 0.56 % 6.6 2% 8. LD. COUNSEL SUBMITTED THAT DRP HAD ACCEPTED CONTENTION OF ASSESSEE AND HAD DIRECTED TPO TO ALLO W WORKING CAPITAL BY OBSERVING AS UNDER: THE TPO IS DIRECTED TO ALLOW WORKING CAPITAL ADJUSTMENT. HOWEVER, FOR THIS PURPOSE, THE DRP EAST OF THE VIEW THAT THE AVERAGE OF OPENING AND CLOSING BALANCE OF THE INVENTORY AND OF TRADE RECEIVABLES/VFL, TRADE DEBTORS/CREDITORS, FOR THE RELEVANT YEAR MAY BE ADOPTED WHICH MAY BROADLY GIVE THEIR REPRESENTATIVE LEVEL OF WORKING CAPITAL OVER THE YEAR. EVEN IF THERE IS SOME DIFFERENCE WITH RESPECT TO THE REPRESENTATIVE LEVEL, IT WILL N OT AFFECT THE COMPATIBILITY AT THE SAME METHOD WILL BE APPLIED TO ALL CASES. SAME IS THE CASE WITH SEGMENTAL DATA. 9. LD. COUNSEL SUBMITTED THAT TPO DID NOT PROVIDE ANY REASON FOR NOT COMPUTING WORKING CAPITAL MARGIN OF M/S ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD., AS PER DI RECTION OF DRP. HE THUS REQUESTED TO DIRECT LD. TPO TO RECTIFY ERROR IN 7 ITA NO. 412/DEL/2073 (AY 2012-13) COMPUTATION OF WORKING CAPITAL ADJUSTED MARGIN OF M /S ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD. 10. LD. CIT DR AGREES WITH THE SUBMISSIONS ADVANCED BY LD. COUNSEL REGARDING THE OVERSIGHT THAT HAS CREPT IN T HE COMPUTATION OF WORKING CAPITAL MARGIN. LD. CIT (DR) SUBMITTED THAT FOR THE PURPOSES OF WORKING CAPITAL MARGIN OF M/S ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD., THE ISSUE MAY BE SET ASIDE TO LD. TPO FOR CONSIDERATION AS PER DIRECTION OF DRP. 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 12. IT IS OBSERVED FROM ORDER PASSED BY LD. TPO THAT W HILE COMPUTING WORKING CAPITAL ADJUSTMENT, MARGIN IN THE CASE OF M/S ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD., HAS ATTRIBUTED RECEIPTS, IN THE COLUMN OF AVERAGE RECEI VABLES, WHICH DISTURBED ENTIRE CALCULATION. FROM THE FINANC IAL OF M/S ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD., PLAC ED IN THE PAPER BOOK (THE COMPUTATION HAS BEEN REPRODUCED HEREINABOVE) IT IS OBSERVED THAT THERE ARE SUFFICIE NT TRADE RECEIVABLES DURING THE YEAR UNDER CONSIDERATION. IT HAS BEEN SUBMITTED BY LD. COUNSEL THAT ALL THESE DETAILS WER E BEFORE LD. TPO DURING ASSESSMENT PROCEEDINGS AND AGAIN DURING THE RECTIFICATION PROCEEDINGS UNDER SECTION 154 OF THE ACT. 13. UNDER SUCH CIRCUMSTANCES, AND IN THE INTEREST OF N ATURAL JUSTICE, WE ARE OF THE CONSIDERED OPINION THAT THES E FIGURES NEEDS TO BE CONSIDERED WHILE DERIVING WORKING CAPIT AL ADJUSTMENT OF M/S. ICRA MANAGEMENT CONSULTING SERVI CES 8 ITA NO. 412/DEL/2073 (AY 2012-13) PVT. LTD., ACCORDINGLY, WE SET ASIDE THIS ISSUE TO FILE OF LD. TPO FOR RE-COMPUTING WORKING CAPITAL ADJUSTMENT IN THE LIGHT OF FINANCIAL REPORT OF M/S. ICRA MANAGEMENT CONSULTING SERVICES PVT. LTD., PLACED IN PAPER BOOK AT PAGE 42 0. IN THE RESULT THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 3 14. LD. COUNSEL SUBMITTED THAT LD. TPO COMPUTED NET OPERATING MARGINS OF TWO COMPARABLE COMPANIES, BY E XCLUDING PROVISION OF DOUBTFUL DEBTS FROM OPERATING EXPENSES , THE DETAILS OF WHICH ARE AS UNDER: NAME OF COMPANY POSITION TAKEN BY TPOS WHILE COMPUTING OPERATING MARGIN MARGIN COMPUTED BY TPO IN APPEAL EFFECT ORDER BVG INDIA LIMITED PROVISION FOR DOUBTFUL DEBTS ARE CONSIDERED TO BE NON-OPERATING 23.59% CAMEO CORPORATE SERVICES LIMITED PROVISION FOR DOUBTFUL DEBTS ARE CONSIDERED TO BE NON - OPERATING 4.10% 15. LD. COUNSEL REFERRED TO COMPUTATION ADOPTED BY LD. TPO, IN THE DRAFT ORDER, WHICH HAS BEEN REPRODUCED HEREI NBELOW: BVG INDIA LTD., REVENUE FROM OPERATIONS 5,658,035,427 ADD: OTHER INCOME 25, 262, 980 TOTAL INCOME 5,683,298,407 LESS NONOPERATIONAL INCOME 25, 262, 980 INTEREST ON FIXED DEPOSITS, CURRENT INVESTMENTS 24,201,060 SURPLUS ON DISPOSAL, DISCARD, DEMOLISH MINT AND DESTRUCTION OF DIFFERENT SHAREABLE 371,923 9 ITA NO. 412/DEL/2073 (AY 2012-13) TANGIBLE ASSETS MISCELLANEOUS AND OTHER OPERATING INCOME 698, 997 OPERATING INCOME 5,658,035,427 TOTAL EXPENDITURE 4,799,337,996 LESS: NON OPERATIONAL EXPENSES 253,428,930 INTEREST COSTS 215,822, 284 PROVISION FOR BAD DOUBTFUL DEBTS CREATED 37, 606, 646 OPERATING COST 4,545,909,066 OPERATING PROFIT 1,112,126,361 OPERATING PROFIT/OPERATING COST (%) 24.46% OPERATING PROFIT/OPERATING REVENUE (%) 19.66% CAMEO CORPORATE SERVICES LTD REVENUE FROM OPERATIONS 792, 039, 600 ADD: OTHER INCOME 9, 170, 165 TOTAL INCOME 801, 209, 765 LESS: NON OPERATIONAL INCOME 9, 170, 165 INTEREST INCOME 692, 514 RENTAL INCOME 8, 164, 873 EXCHANGE GAIN/LOSS 312, 778 OPERATING INCOME 792, 039, 600 TOTAL EXPENDITURE 769, 525,957 LESS: NON OPERATIONAL EXPENSES 36, 034, 062 10 ITA NO. 412/DEL/2073 (AY 2012-13) INTEREST AND FINANCIAL CHARGES 32, 966, 458 PROVISION FOR BAD & DOUBTFUL DEBTS 3, 067, 604 OPERATING COST 733,491, 895 OPERATING PROFIT 58, 547, 705 OPERATING PROFIT/OPERATING COST (%) 7.98% OPERATING PROFIT/OPERATING REVENUE (%) 7.39% 16. WHEREAS, LD. COUNSEL SUBMITTED THAT AFTER DRP DIRECTIONS, WHILE COMPUTING ASSESSEES OPERATING PR OFITS, LD.TPO CONSIDERED PROVISION FOR BAD DEBTS AS OPERAT ING EXPENSES. HE RELIED UPON COMPUTATION PLACED AT PAGE 401 OF PAPER BOOK READ WITH, BREAK UP OF OTHER EXPENSES, B EING SCHEDULE 19, FORMING PART OF NOTES TO THE FINANCIAL STATEMENTS AT PAGE 33 OF PAPER BOOK, WHICH IS REPRODUCED HEREI NBELOW: COMPUTATION OF OPERATING PROFITS IN ASSESSEES CASE (PG.401): PARTICULARS POS ORDER/APPEAL EFFECT TO DRP INCOME SERVICE CHARGES 25, 06, 18, 849 OTHER INCOME 8, 66, 214 TOTAL INCOME 25, 14, 85, 063 LESS: NON-OPERATING INCOME LESS: PROVISION IS NO LONGER REQUIRED WRITTEN BACK 8, 55, 809 OPERATING INCOME 25, 06, 29, 254 EXPENDITURE PERSONAL EXPENSES 14, 08, 60, 742 11 ITA NO. 412/DEL/2073 (AY 2012-13) OPERATING AND OTHER EXPENSES 8, 45, 68, 080 DEPRECIATION 1, 52, 99, 083 TOTAL EXPENDITURE 24, 07, 27, 904 LESS: NON-OPERATING EXPENSES LESS: LOSS ON SALE OF FIXED ASSETS 20, 961 LESS: FOREX LOSS 54, 09, 312 OPERATING COSTS 23, 52, 97, 631 OPERATING PROFIT 1, 53, 31, 623 ADIDAS TECHNICAL SERVICES PRIVATE LIMITED NOTES TO THE FINANCIAL STATEMENTS (ALL AMOUNTS IN RUPEES, UNLESS OTHERWISE STATED) 19. OTHER EXPENSES FOR THE YEAR ENDED 31 ARCH 2012 FOR THE YEAR ENDED 31 ARCH 2011 RS. RS. TRAVELLING AND CONVEYANCE 24, 482, 876 24, 220, 797 REPAIR AND MAINTENANCE 7, 389, 450 7, 006, 990 POWER AND FUEL [INCLUDES PRIOR PERIOD EXPENSES OF RS.144,612(PREVIOUS YEAR RUPEES NAIL)] 780, 099 354, 899 RENT 24, 86, 941 27, 616, 133 RATES AND TAXES 434, 224 618, 291 INSURANCE 3, 268, 816 2, 549, 335 INSPECTION FEES 293, 839 144, 110 AUDITORS REMUNERATION (REFER NOTE 24) 1, 044, 330 8 49, 310 LEGAL AND PROFESSIONAL CHARGES [INCLUDES PRIOR PERI OD EXPENSES OF RS.41,545 (PREVIOUS YEAR RUPEES NAIL)] 2, 537, 365 2, 850, 075 COMMUNICATION 6, 913, 387 7, 572, 719 PRINTING AND STATIONARY 1, 211, 960 1, 071, 921 RELOCATION EXPENSES 806, 245 1, 473, 099 ENTERTAINMENT 84, 250 - 12 ITA NO. 412/DEL/2073 (AY 2012-13) BANK CHARGES 87, 920 54, 358 BROKERAGE 115, 300 5000 NET LOSS ON FOREIGN EXCHANGE FLUCTUATION [INCLUDES PRIOR PERIOD EXPENSES OF RS.3,351,265(PREVIOUS YEAR RUPEES NAIL)] 5, 409, 312 585, 159 NET LOSS ON SEAL/RETIREMENT OF FIXED ASSETS 20, 961 - ADVANCE WRITTEN OFF 59, 396 PROVISION FOR DOUBTFUL ADVANCES 3, 815, 829 MISCELLANEOUS EXPENSES [INCLUDES PRIOR PERIOD EXPENSES OF RS.19,744 (PREVIOUS YEAR RUPEES NAIL)] 476, 361 632, 781 84,568,081 77,648,624 17. LD. COUNSEL SUBMITTED THAT DRP IN ITS DIRECTIONS D IRECTED LD.TPO TO CONSIDER CONSISTENT APPROACH, WHILE CONSI DERING EXPENSES AS OPERATING/NON-OPERATING IN THE CASE OF BOTH ASSESSEE AS WELL AS COMPARABLE COMPANIES, WHICH HAS NOT BEEN FOLLOWED BY LD.TPO. 18. ON THE CONTRARY, LD. CIT (DR) SUBMITTED THAT, LD.T PO DID NOT CONSIDER PROVISION FOR DOUBTFUL DEBTS IN THE CA SE OF THESE 2 COMPARABLES AS, IT HAS APPEARED IN THE FINANCIALS O F THESE COMPANIES FOR THE FIRST TIME IN THE YEAR UNDER CONS IDERATION. HE SUBMITTED THAT LD.TPO COMPARED FINANCIALS OF THE SE COMPARABLES WITH THAT OF PRECEDING 3 YEARS FINANCIA LS, BASED ON WHICH LD.TPO EXCLUDED PROVISION FOR DOUBTFUL DEB TS FROM BEING INCLUDED AS OPERATING EXPENSES, AND TREATING IT AS EXTRAORDINARY. HE RELIED UPON THE ORDERS OF LD. TPO . 19. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. IT IS OBSERV ED THAT LD. TPO EXCLUDED PROVISION FOR DOUBTFUL DEBTS IN THE CA SE OF BVG 13 ITA NO. 412/DEL/2073 (AY 2012-13) INDIA LTD AND CAMEO CORPORATE SERVICES LTD., BASED ON FINANCIALS FOR PRECEDING 3 YEARS. IT IS OBSERVED TH AT, ACCORDING TO LD. TPO, PROVISION FOR DOUBTFUL DEBTS HAS APPE ARED FOR THE FIRST TIME THE FINANCIAL FOR THE YEAR UNDER CONSIDE RATION WHICH IS DUE TO EXTRAORDINARY EVENT. IF THAT SO, LD. TPO SHOULD HAVE EXCLUDED THESE COMPARABLES FROM FINAL LIST FOR THE PURPOSES OF COMPUTING PLI. HOWEVER, HE CHOSE TO ONLY EXCLUDE PR OVISION FOR DOUBTFUL DEBTS, BY TREATING IT AS EXTRAORDINARY . WE DO NOT AGREE WITH SUCH COMPARISON BY LD.TPO. LD. COUNSEL H AD RELIED UPON DECISION OF COORDINATE BENCH PASSED IN THE CASE OF TECHBOOKS INTERNATIONAL PVT. LTD., VS DCIT IN ITA N O. 240/DEL/2015 FOR ASSESSMENT YEAR 2010-11. THIS TRIB UNAL VIDE ORDER DATED 06.07.15 HAS OBSERVED AS UNDER: 6.2. BOTH THE PROVISION FOR BAD DEBTS AS WELL AS DOUBTFUL ADVANCES ARE IN THE REALM OF OPERATIONS OF THE BUSINESS. IT IS NOT THE CASE OF EITHER SIDE THAT ASSESSEE MADE IN EXCESS PROVISION. IN OUR CONSIDERED OPINION THE SAME HAS BEEN RIGHTLY TAKEN AS AN ITEM OF OPERATING EXPENSE OF THE ASSESSEE. THE TPO IS DIRECTED TO TREAT THE AMOUNT OF PROVISION FOR DOUBTFUL DEBTS/ADVANCES AS OPERATING IN THE CASE OF THE COMPARABLES AS WELL. TO THE FACTS OF THE PRESENT CASE ALSO THE REVENUE H AS NOT DISPUTED THE PROVISION OF DOUBTFUL DEBTS BEING EXCE SSIVE IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERAT ION. IT IS ALSO OBSERVED THAT THE DRP HAD DIRECTED LD.TPO TO H AVE CONSISTENT TREATMENT IN TERMS OF ITEMS INCLUDABLE/E XCLUDABLE IN NON-OPERATIVE PROFIT, WITH ASSESSEE AS WELL AS W ITH 14 ITA NO. 412/DEL/2073 (AY 2012-13) COMPARABLES WHICH EVIDENTLY HAS NOT BEEN FOLLOWED B Y LD. TPO. RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THIS TRIBUNAL IN THE CASE OF TECHBOOKS INTERNATIONAL PVT. LTD., VS D CIT, WE DIRECT LD. TPO TO TREAT PROVISION OF DOUBTFUL DEBTS IN THE CASE OF BVG INDIA LTD AND CAMEO CORPORATE SERVICES LTD., AS OPERATING AS WELL. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY, 2017. SD/- SD/- (O. P. KANT) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 18.05.2017 @M!T