ACIT CIR 6(3), MUMBAI V. GARTNER INDIA RESEARCH & ADVISORY SERVICES P. LTD, MUMBAI

ITA 4719/MUM/2009

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7218 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2004-2005
• Appeal Filed On: 12-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH K DAS LD
• Assessee Lawyers: SHAMINA MENONLD ARS
• Keywords: Transfer pricing; Principle of natural justice; Question of law; Set aside

Judgement Text

1 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T A.NO.4719/MUM/2009 ( / ASSESSMENT YEAR: 2004-05) A CIT CIRCLE - 6(3) 5 TH FLOOR, ROOM NO.522, AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020 / VS. M/S. GARTNER INDIA RESEARCH & ADVISORY SERVICES PRIVATE LTD. RAHEJA TOWERS, 2 ND FLOOR C-30, G BLOCK, BANDRA-KURLA COMPLEX BANDRA (EAST), MUMBAI-400 051. ./ ./PAN/GIR NO. AACCA-0176-C ( /APPELLANT ) : ( / RESPONDENT ) REVENUE BY : SHRI RIGNESH K. DAS- LD. DR ASSESSEE BY : SHRI FARROKH V. IRANI & MS. SHAMINA MENON-LD. ARS !' / DATE OF HEARING : 18/07/2019 #$ !' / DATE OF PRONOUNCEMENT : 30/07/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1. THE CAPTIONED MATTER HAS COME UP FOR FRESH HEARI NG BEFORE THIS BENCH PURSUANT TO THE DIRECTIONS OF HONBLE BOMBAY HIGH C OURT IN ASSESSEES 2 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. APPEAL ITA NO. 2089 OF 2013 DATED 02/12/2015, A COP Y OF WHICH IS ON RECORD. IT TRANSPIRES THAT THE ISSUE OF TRANSFER PR ICING ADJUSTMENT IN REVENUES APPEAL ITA NO. 4719/MUM/2009 WAS REMANDED BACK TO THE FILE OF LD. ASSESSING OFFICER / TPO BY THE TRIBUNAL VIDE PA RA 9 OF ITS ORDER DATED 12/04/2013, THE COPY OF WHICH IS ALSO ON RECORD. AG GRIEVED, THE ASSESSEE CHALLENGED THE DIRECTIONS OF THE TRIBUNAL BEFORE HO NBLE BOMBAY HIGH COURT, WHEREIN THE TRIBUNALS ORDER, ON TRANSFER PR ICING ISSUE, HAS BEEN SET-ASIDE FOR RECONSIDERATION AFTER CONSIDERING THE APPLICABILITY OF DECISION OF TRIBUNAL DATED 24/02/2012 RENDERED IN THE CASE OF M/S FROST & SULLIVAN (I) PVT. LTD. IN THE ABOVE BACKGROUND THE APPEAL HAS COME UP FOR FRESH HEARING BEFORE THE BENCH. 2. AT THE OUTSET, THE OBSERVATIONS / DIRECTIONS OF HONBLE COURT COULD BE EXTRACTED IN THE FOLLOWING MANNER: - 1. THIS APPEAL UNDER SECTION 260-A OF THE INCOME TA X ACT. 1961 (THE ACT), CHALLENGES THE ORDER DATED 12 TH APRIL, 2013 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (THE TRIBUNAL) FOR THE ASSESSMENT YEAR 200 4-05. 2. AT THE HEARING, APPELLANT URGES ONLY THE FOLLOW ING QUESTION OF LAW, FOR OUR CONSIDERATION: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, NON- CONSIDERATION OF SUBMISSIONS OF THE APPELLATE, THE PRECEDENTS CITED BY THE APPELLANT AND NON-CONSIDERATION OF RELEVANT FACTORS HAS RENDERED THE IMPUGNED ORDER PERVERSE?'. 3. ON CONSIDERATION, WE ADMIT THE APPEAL ON THE AF ORESAID QUESTION AS IT GIVES RISE TO A SUBSTANTIAL QUESTION OF LAW. 4. AT THE REQUEST OF THE COUNSEL, THE APPEAL ITSELF IS TAKEN UP FOR FINAL DISPOSAL AS A SCOPE OF THE DISPUTE LIES IN A VERY NARROW COMPASS. 5 THE APPELLANT IS ENGAGED IN THE ACTIVITY OF RESEA RCH, MARKETING AND CONSULTANCY SUPPORT SERVICES IN REGARD TO ECONOMY. DURING THE S UBJECT ASSESSMENT YEAR, THE APPELLANT HAS ENTERED INTO AN INTERNATIONAL TRANSAC TION WITH ITS ASSOCIATED ENTERPRISES (AE)ONE GARTNER IRELAND. THE SERVICES INVOLVED ARE GATHERING RELEVANT ECONOMIC DATA AND COLLATING THEM IN THE FO RMAT REQUIRED BY THE AE AND TRANSMITTING THE SAME. 3 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. 6. AS THE APPELLANT'S ACTIVITY INVOLVED AN INTERNAT IONAL TRANSACTION FOR THE SUBJECT ASSESSMENT YEAR, THE SAME WAS REFERRED TO THE TRANS FER PRICING OFFICER (TPO) FOR DETERMINING THE ARMS LENGTH PRICE (ALP) IN REL ATION TO APPELLANT'S TRANSACTION WITH ITS IRISH AE. THE APPELLANT HAD IN ITS TRANSFE R PRICING STUDY ON THE BASIS OF 10 COMPARABLE HAD BENCH MARKED THE MARGIN AT 9.63% AND ITS MARGIN WAS AT 7.91%. THEREFORE, BEING WITHIN + - 5% OF THE ARITHM ETIC MEAN THE APPELLANT DID NOT CARRY OUT ANY TRANSFER PRICING ADJUSTMENT. 7. HOWEVER, BY AN ORDER DATED 13 TH DECEMBER, 2006, THE TPO DETERMINED THE MARGIN AT 20.42 % ON THE BASIS OF 10 2 SELECTED COMPARABLE. THE ASSESSING OFFICER PASSED A FINAL OR DER CONSEQUENT TO AND IN ACCORDANCE WITH THE ORDER OF THE TPO. 8. BEING AGGRIEVED, THE APPELLANT CARRIED THE ISSUE IN APPEAL TO THE COMMISSIONER OF INCOME TAX (APPEALS) [C1T(A)]. BY AN ORDER DATED 26 TH MAY, 2009, THE CIT (A) ALLOWED THE APPELLANT'S APP EAL. THIS INTER ALIA ON THE GROUND THAT THE TPO'S ORDER HAD REFERRED TO ANNEXURE I IN ITS ORDER CONTAINING DETAIL OF THE COMPARABLE SELECTED BY HIM . HOWEVER, COPY OF THE SAME WAS NOT FURNISHED TO THE APPELLANT EITHER WITH THE ORDER OF TPO OR EVEN THEREAFTER. THUS, THE CIT(A) DURING THE COURSE OF P ROCEEDING BEFORE HIM HAD SPECIFICALLY CALLED UPON THE AO/TPO TO FURNISH THE ANNEXURE I TO THE ORDER PASSED BY THE TPO. HOWEVER, THE SAME WAS NOT FURNIS HED EVEN TO CIT(A). THEREFORE, IN THE ABSENCE OF THE WORKING BEING FURN ISHED, THE CIT(A) CONCLUDED THE NO COMPARABLE EXISTS. THUS, THE ADJUSTMENT ON A CCOUNT OF TRANSFER PRICING WAS DELETED. 9. BEING AGGRIEVED, THE REVENUE FILED AN APPEAL TO THE TRIBUNAL. THE TRIBUNAL BY THE IMPUGNED ORDER, HAS SET ASIDE T HE ORDER DATED 26 TH MAY, 2005 OF THE CIT(A) AND RESTORED THE ISSUE OF ARRIVI NG AT THE ALP TO THE ASSESSING OFFICER/ TPO FOR FRESH CONSIDERATION. WE ARE INFORMED THAT NO PROCEEDINGS HAVE YET BEEN TAKEN : BY THE ASSESSING OFFICER/TPO AFTER THE ORDER DATED 12 TH APRIL, 2013 OF THE TRIBUNAL. 10. THE GRIEVANCE OF THE APPELLANT IS THAT EVEN WHE N THE ISSUE ARISING FOR CONSIDERATION BEFORE THE TRIBUNAL WAS C ONCLUDED IN ITS FAVOUR, THE DECISION OF THE TRIBUNAL IN ACIT V/S. M/S. FROS T & SULLIVAN (I) PVT. LTD. DECIDED ON 24 TH FEBRUARY, 2012 WAS NOT FOLLOWED EVEN WHEN IT CARRI ES OUT THE SAME ACTIVITY AS THE APPELLANT. IN THE CASE OF M/S. FROST & SULLIVAN (SUPRA), THE SAME TPO HAD ON 13 TH DECEMBER, 2006 (SAME DATE ON WHICH THE TPO PASSED AN ORDER IN THE APPELLANT'S CASE) HA D DETERMINED ITS MARGIN AT 20.42% IN RESPECT OF 102 SELECTED COMPANI ES AS COMPARABLE WHICH AGAIN WERE IDENTICAL TO' THE COMPARABLE SELEC TED IN THE CASE OF APPELLANT. THIS WAS EVIDENT FROM THE ANNEXURE-I TO THE TPO ORDER PRODUCED BY THE REVENUE AT THE HEARING BEFORE THE T RIBUNAL. 11. THE APPELLANT SPECIFICALLY RELIED U PON THE IDENTICAL OBSERVATIONS FOUND IN THE ORDERS OF THE TPO DATED 13 TH DECEMBER, 2006 IN EASE OF M/S. FROST & SULLIVAN (SUPRA) AND IN THAT OF THE APPELLANT'S. TH E OBSERVATIONS AS EXTRACTED BY THE TRIBUNAL IN THE CASE OF M/S. FROST & SULLIVAN ( SUPRA) READS AS UNDER:- 4 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. . . .. BY TAKING COMPARABLE MARGINS AS PER ANNEXURE-I, THE TPO NOTED THAT THE OP/TC RATIO COMES TO 20.42% FOR THE SAMPLE SET. FOR THIS PURPOS E A SAMPLE OF 102 COMPANIES FROM ACROSS A WIDE SPECTRUM OF ITES, SOFTWARE CONSULTANC Y, MARKET RESEARCH, BUSINESS PROCESS AND OUTSOURCING ETC. WERE CHOSEN .....' AS EXTRACTED FROM THE ORDER OF THE TPO IN CASE OF A PPELLANT READ AS UNDER: - 'COMPARABLE MARGINS HAVE BEEN CALCULATED AS PER ANN EXURE I. A TOTAL OF 102 COMPARABLE FROM A VERY VIDE SPECTRUM OF ITES, SOFTW ARE CONSULTANCY, BUSINESS RESEARCH AND ANALYTICS, BUSINESS PROCESS OUTSOURCIN G COMPANIES ETC. HAVE BEEN SELECTED TO FIND OUT THE INDUSTRY AVERAGE FOR THE P URPOSES. THE AVERAGE COMES TO 20.42% ON COST.' FROM THE ABOVE, IT IS SUBMITTED THAT ANNEXURE 1 TO THE TPO'S ORDERS DATED 13'' DECEMBER, 2006 IN THE CASE OF THE APPELLANT WAS IDE NTICAL TO THE ORDER DATED 13 LH DECEMBER, 2006 IN THE CASE OF M/S. FROST & SULLIVAN (SUPRA). THIS FACT WAS ALSO POINTED OUT TO THE TRIBUNAL. IT WAS IN THE ABOVE CI RCUMSTANCES THAT THE APPELLANT EXPECTED THE TRIBUNAL IN ALL FAIRNESS TO DECIDE THE ISSUE WHICH AROSE IN THEIR CASE IN ACCORDANCE WITH THE DECISION TAKEN BY THE TRIBUN AL IN M/S. FROST & SULLIVAN (SUPRA). 12 WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL AFT ER RECORDING THE FACT THAT THE APPELLANT IS RELYING UPON THE DECISION OF THE TRIBU NAL IN M/S. FROST & SULLIVAN (SUPRA) DIS-REGARDS THE SAME BY MAKING THE FOLLOWIN G OBSERVATION; - '8.5;- . THE ID. A.R. HAS RELIED UPON THE DECISION OF [LI E TRIBUNAL WHEREIN THOSE 102 COMPARABLE, WERE HELD AS CANNOT BE CONSIDERED AS CO MPARABLE. IT IS TO BE NOTED THAT THE DECISION ON THE ISSUE OF COMPARABILITY IS PURELY FA CTUAL IN NATURE AND IS IN THE CONTEXT OF COMPARABILITY OF THE PARTICULAR ASSESSEE WHICH CANN OT BE APPLIED AS A GENERAL PRINCIPLE. FURTHER, THE COMMISSIONER OF INCOME TAX [APPEALS) H AS ALSO NOT EXAMINED THE ISSUE ON MERIT BECAUSE THE ANNEXURE -I TO THE TP ORDER WAS N OT AVAILABLE.' 13 ONE OF THE ESSENTIAL ELEMENTS OF RULE OF LAW IS EQUALITY OF TREATMENT TO PERSONS IDENTICALLY SITUATED. THE TRIBUNAL HAS BY THE IMPUGNED ORDER ALLOWED THE REVENUE'S APPEAL ON MERITS AND RESTORED THE ISSUE TO THE TPO FOR RE- CONSIDERATION. THIS BECAUSE THE IMPUGNED ORDER FAIL ED TO FOLLOW/ CONSIDER ITS DECISION ON IDENTICAL FACTS IN THE CASE OF M/S. FRO ST & SULLIVAN (SUPRA). THIS CANNOT BE DONE UNLESS THERE WAS SOME GOOD CAUSE FOR NOT FOLLOWING A DECISION OF A CO-ORDINATE BENCH ON THE SAME ISSUE. THE CAUSE , IF ANY, SHOULD BE REFLECTED IN THE IMPUGNED ORDER PASSED BY THE TRIBUNAL. MEREL Y STATING THAT THE ISSUE OF COMPARABLE IS FACTUAL IN NATURE AND CANNOT BE APPLI ED AS A MATTER OF GENERAL PRINCIPLE WOULD NOT BE SUFFICIENT TO DISTINGUISH TH E RELIANCE PLACED BY THE APPELLANT ON THE TRIBUNAL'S DECISION IN M/S. FROST & SULLIVAN (SUPRA). HOWEVER, WHEN ACCORDING TO THE TRIBUNAL, THE FACTS ARE DIFFE RENT IN THE CASE RELIED UPON, IT SHOULD BE POINTED OUT IN THE IMPUGNED ORDER AND NOT IGNORED ON THE BASIS OF GENERALITY. THE FACTS AS DEMONSTRATED BY THE APPELL ANT IS THAT BOTH IN CASE OF 5 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. M/S. FROST & SULLIVAN (SUPRA) AND THAT OF THE APPEL LANT, PRIMA FACIE, APPEAR TO BE IDENTICAL. 14 IN THE ABOVE CIRCUMSTANCES, THE TRIBUNAL IN THE IMPUGNED ORDER OUGHT TO HAVE CONSIDERED THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. FROST & SULLIVAN (SUPRA) IN SOME GREATER DETAIL POINTING OUT THE DIS TINCTIONS BEFORE COMING TO THE CONCLUSION THAT THE SAME CANNOT BE APPLIED IN THE C ASE OF THE APPELLANT. THE TRIBUNAL ON CONSIDERATION OF THE FACTS POINTED OUT BY THE APPELLANT COULD MOST CERTAINLY FOR REASONS TO BE RECORDED YET COME TO CO NCLUSION THAT THE DECISION IN CASE OF M/S. FROST & SULLIVAN (SUPRA) IS NOT APPLIC ABLE TO THE PRESENT FACTS. HOWEVER, BEFORE COMING TO THE CONCLUSION, THE CONTE NTION OF THE APPELLANT MUST BE DEALT WITH SO AS TO ENSURE THAT THE ASSESSEE CON CERNED DOES NOT LEAVE THE PORTALS OF THE TRIBUNAL WITH A FEELING THAT HE HAS RECEIVED UNFAIR TREATMENT, INASMUCH AS HIS SUBMISSION OF BEING COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL WAS NOT CONSIDERED. 15 THE SUBSTANTIAL QUESTION OF LAW AS FORMULATED I S ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE APPELLANT-ASSESSEE AND AGAINST: THE R ESPONDENT-REVENUE ONLY TO THE EXTENT OF THE ISSUE OF TRANSFER PRICING. 16 IN THE ABOVE VIEW, WE SET ASIDE THE ORDER OF TH E TRIBUNAL TO THE EXTENT IT DISPOSES OF THE REVENUE'S APPEAL WITH REGARD TO THE ISSUE OF TRANSFER PRICING AND RESTORE THE ISSUE OF TRANSFER PRICING TO THE TRIBUNAL FOR F RESH DISPOSAL IN ACCORDANCE WITH LAW BY A REASONED ORDER. NEEDLESS TO STATE THAT THE TRIBUNAL WOULD CONSIDER THE APPLICABILITY OF THE DECISION OF THE TRIBUNAL DATED 24 TH FEBRUARY, 2012 RENDERED IN THE CASE OF M/S. FROST & SULLIVAN (SUPRA) TO THE FA CT OF THE PRESENT CASE. 17. APPEAL DISPOSED OF IN ABOVE TERMS. NO ORDER AS TO COSTS. KEEPING IN VIEW THE AFORESAID DIRECTIONS OF THE HON BLE COURT, WE PROCEED TO ADJUDICATE THE ISSUES RAISED IN THE APPEAL. 3.1 THE LD. SR. COUNSEL FOR ASSESSEE, SHRI FARROKH V.IRANI, AT THE OUTSET, DREW OUR ATTENTION TO THE FOLLOWING CHART, TO SUBMI T THAT FACTS IN THE CASE OF THE PRESENT ASSESSEE AND IN THE CASE OF FROST & SULLIVAN (I) PRIVATE LIMITED WERE QUITE IDENTICAL AS EVIDENT FROM THE FOLLOWING TABLE: - NO. PARTICULARS RELEVANT PAGE OF GARTNER INDIAS CIT(A) ORDER FOR A.Y.2004-05 RELEVANT PAGE OF ITAT ORDER IN THE CASE OF FROST & SULLIVAN 1. NATURE OF BUSINESS RESEARCH SUPPORT SERVICES (GATHERING COLLATING RELEVANT DATA USED FOR PREPARING MARKET REPORTS) REF PG.14 MARKETING RESEARCH/MARKETING ANALYSIS SERVICES [REF. PG.21] PG. 41 OF PB 2. SET OF COMPARABLE ADOPTED BY THE TPO - 102 COMPANIES - FROM A VERY WIDE SPECTRUM OF ITES - 102 COMPANIES - FROM A VERY WIDE SPECTRUM OF ITES 6 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. SOFTWARE CONSULTANCY, BUSINESS RESEARCH AND ANALYTICS, BUSINESS PROCESS OUTSOURCING COMPANIES ETC. - [REF. PG. 15[PG-16 OF PB] SOFTWARE CONSULTANCY, BUSINESS RESEARCH AND ANALYTICS, BUSINESS PROCESS OUTSOURCING COMPANIES ETC. [REF.PG.21] PG.41 OF PB 3. OPERATING PROFIT/TOTAL COST RATIO ADOPTED BY TPO 20.42 PERCENT [REF.PG-15] PG.16 OF PB 20.42 PERCENT [REF.PG-21] PG.41 OF PB 4. DATE OF TPOS ORDER 13 TH DECEMBER, 2006 [REF.SR.NO.5 OF THE PAPER BOOK] 13 TH DECEMBER, 2006 [REF.SR.NO.9 PG. 48 OF THE PAPER BOOK] 5. ASSESSMENT YEAR A.Y.2004-05 [REF.PG.1] PG-2 OF PAPER BOOK A.Y.2004-05 [REF.PG.1] PG-40 OF PAPER BOOK 3.2 THE ATTENTION HAS SPECIFICALLY DRAWN TO THE FAC TS THAT SAME TPO PASSED SIMILAR ORDER FOR SAME ASSESSMENT YEAR ON SA ME DATE IN THE CASE OF TWO DIFFERENT ASSESSEES HAVING SIMILAR FUNCTIONA L PROFILE. THE FIRST APPELLATE AUTHORITY, IN BOTH THE CASES, DELETED THE TRANSFER PRICING ADJUSTMENT. ONE OF THE FACTORS THAT LED TO DELETION OF ADJUSTMENT IN ASSESSEES CASE, AS EVIDENT FROM PARA 7.1 OF THE IM PUGNED ORDER, WAS THAT ANNEXURE-1 OF LD. TPOS ORDER CONTAINING DETAILS OF COMPARABLE ENTITIES, WAS NEVER FURNISHED TO THE ASSESSEE AND THE ADDITIO NS WERE MADE IN A CAVALIER MANNER. SIMILAR WAS THE OBSERVATION OF LD. FIRST APPELLATE AUTHORITY IN THE CASE OF M/S FROST & SULLIVAN (I) PRIVATE LIMITED IN ITS ORDER DATED 17/12/2009 WHEREIN AT PARA 12.9, IT WAS NOTED THAT THERE WAS SERIOUS VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE ON TH E PART OF LD. TPO AS ADEQUATE AND PROPER NOTICE AND HEARING WAS NOT PROV IDED TO THE APPELLANT. THE WHOLE EXERCISE OF SELECTING COMPARABLE BY THE T PO WAS HAPHAZARD, ILLOGICAL AND RANDOM WITHOUT ANY FAR. THE REVENUE C ONTESTED THE STAND OF LD. FIRST APPELLATE AUTHORITY, IN M/S FROST & SULLI VAN (I) PVT. LTD., BEFORE THIS TRIBUNAL VIDE ITA NO. 2073/MUM/2010 ORDER DATED 24/ 02/2012, WHEREIN 7 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. VIDE PARAS 9 & 9.1, THE TRIBUNAL DISMISSED THE REVE NUES GROUND, CONCURRING WITH THE STAND OF LD. CIT(A). OUR ATTENTION IS FURT HER DRAWN TO THE FACT THAT THE ASSESSEES MARGIN IS MORE THAN MARGIN OF M/S FR OST & SULLIVAN (I) PVT. LTD. 3.3 IN THE ABOVE BACKGROUND, LD. SR. COUNSEL EMPHAS IZED THAT THE SAID DECISION OF TRIBUNAL IN M/S FROST & SULLIVAN (I) PV T. LTD. SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE ALSO AND THEREFORE, T O MAINTAIN JUDICIAL CONSISTENCY, SIMILAR VIEW SHOULD BE TAKEN IN THE MA TTER BY DISMISSING THE APPEAL INSTEAD OF RESTORING THE SAME BACK TO LOWER AUTHORITIES. 4. THE LD. DEPARTMENTAL REPRESENTATIVE, UPON CONFRO NTATION, COULD NOT POINT OUT ANY DISTINCTION IN THE FACTUAL MATRIX OF THE ASSESSEE AND FACTS IN M/S FROST & SULLIVAN (I) PVT. LTD. HOWEVER, IT HAS BEEN SUBMITTED THAT THE DEPARTMENT IS IN FURTHER APPEAL BEFORE HONBLE BOMB AY HIGH COURT IN THE CASE OF M/S FROST & SULLIVAN (I) PVT. LTD. 5. IN VIEW OF THE ADMITTED POSITION, CONCURRING WIT H THE SUBMISSIONS MADE BY LD. SR. COUNSEL, WE APPLY THE DECISION OF T RIBUNAL RENDERED IN M/S FROST & SULLIVAN (I) PVT. LTD. AND ACCORDINGLY, DISMISS GROUND NO. 2 OF THE REVENUES APPEAL. 6. THE DIRECTIONS OF TRIBUNAL IN M/S FROST & SULLIVAN (I) PVT. LTD ., FOR EASE OF REFERENCE, COULD BE EXTRACTED IN THE FOLLOW ING MANNER: - 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE TPO VIDE NOTICE DATED 24.11.2006 ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE MARK-UP EARNED BY THE ASSESSEE AT 10% UPON COST BE NOT CONS IDERED AS UNDER-PRICING OF THE SERVICES TO THE PARENT COMPANY AS THE INDUSTRY IS E ARNING A MARK-UP OF OVER 30%. FOR THIS PURPOSE, THE AO HAS GIVEN THE LIST OF 149 COMP ANIES AS SAMPLES ACCORDING TO 8 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. WHICH, THE AVERAGE GP /TC COMES TO 28.23%. WE FIND THE TPO AFTER EXCLUDING 47 MORE COMPANIES AS LOSS MAKING COMPANIES AND HOLDING THE SAME AS FUNCTIONALLY DIFFERENT FROM ASSESSEE COMPANY DETERMINED THE OP/ TC AT 20.4 2%. WHILE DOING SO, THE TPO HAS EXCLUDED THE LOSS-MAKING COMPANIES. HE, HOWEVER , HAS NOT EXCLUDED THE PROFIT- MAKING COMPANIES. WE FIND THE AO HAS CONSIDERED COM PANIES WITH HUGE TURNOVER AS COMPARABLES. FOR EXAMPLE, AS AGAINST THE TOTAL TURN OVER OF 10.82 CRORES BY THE ASSESSEE (EXPORT TURNOVER OF RS.7.30 CRORES AND DOM ESTIC TURNOVER OF RS.3.53 CRORES) THE COMPARISON TAKEN BY THE TPO INCLUDES COMPANIES WHOSE TURNOVER ARE AS FOLLOWS: - COMPANIES AMOUNT (IN CRORES) TATA SONS LTD. RS.5869.39 SONATA INFORMATION TECHNOLOGY LTD. RS.141 .79 LARSEN & TOURBO INFOTECH LTD. RS.364.61 TATA TECHNOLOGIES LTD. RS.131.21 BIRLASOFT LTD. RS.168.90 POLARIS SOFTWARE LAB LTD. RS.578.49 WIPRO LTD. RS.5132.70 DIGITAL GLOBAL SOFT LTD. RS.628.09 INFOSYS TECHNOLOGIS LTD. RS.4760.90 I-FLEX SOLUTIONS LTD. RS.684.46 SATYAM COMPUTER SERVICES LTD. RS.2541.54 9.1 SIMILARLY, ALTHOUGH THE TPO HAS EXCLUDED THE LO SS MAKING COMPANIES WE FIND HE HAS NOT EXCLUDED THE HIGH PROFIT MAKING COMPANIES F ROM THE COMPARABLES. WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE ANNEXURE GIVEN BY THE TPO DURING THE ASSESSMENT PROCEEDINGS (A COPY OF WH ICH IS PLACED AT PAPER BOOK PAGE NO. 188 TO 190) IS INCOMPLETE AND SOME FRESH SETS W ERE GIVEN ACCORDING TO WHICH THE AVERAGE ALP MARGIN COMES TO 6.02% AS AGAINST 10% ON COST SHOWN BY THE ASSESSEE. IT IS ONLY AFTER THIS INCOMPLETE LIST SHOWING LESSER P ROFIT THAN THE PROFIT DECLARED BY THE ASSESSEE WAS BROUGHT TO THE NOTICE OF THE TPO THAT HE EXCLUDED THE 47 LOSS MAKING COMPANIES TO DETERMINE THE MEAN AVERAGE PROFIT AT 2 0.42%. WE, THEREFORE, FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE IS NO BASIS FOR ONLY EXCLUDING THE LOSS MAKING COMPANIES AND NOT EXCLUDI NG THE HIGH PROFIT MAKING COMPANIES OR COMPANIES WHICH ARE NOT AT ALL COMPARA BLE CONSIDERING THEIR SIZE, VOLUME OF TURNOVER AND OTHER FACTORS. IN OUR OPINION, THE WHOLE EXERCISE OF SELECTING THE COMPARABLES BY THE TPO IS NOT PROPER AND IS IN A HA PHAZARD MANNER. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED DISCUSSION BY TH E LD. CIT(A) ON THIS ISSUE, WE DO NOT FIND ANY INFIRMITY IN HIS ORDER AND ACCORDINGLY UPH ELD THE SAME. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 7. IN RESULT, THE REVENUES APPEAL QUA GROUND NO. 2 STANDS DISMISSED. 9 ITA NO.4719/MUM/2009 ASSESSMENT YEAR-2004-05 M/S GARTNER INDIA RESEARCH & ADVISORY SERVICES PVT. LTD. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) % %% % / JUDICIAL MEMBER % %% % / ACCOUNTANT MEMBER MUMBAI; DATED : 30/07/2019 SR.PS:-JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #$!' / THE RESPONDENT 3. %% ( ) / THE CIT(A) 4. %% / CIT CONCERNED 5. & '# ( , % ( , / DR, ITAT, MUMBAI 6. ' *+, / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.