CEVA Freight India Private Ltd., Gurgaon V. DCIT, New Delhi

ITA 4956/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3974 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 25-07-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 23-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C S AGGARWAL
• Keywords: Depreciation; Transfer pricing; Double taxation relief; Opportunity of being heard; International transaction; Rule of consistency; Non-deduction of tax
• Section: 92C; 143(3); 92B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: I-2: NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 4956/DEL/2013 ASSESSMENT YEAR: 2006-07 CEVA FREIGHT INDIA PRIVATE LIMITED (FORMERLY KNOWN AS EGL EAGLE GLOBAL LOGISTICS (INDIA) PVT. LTD.) 1 ST FLOOR, TOWER C, DLF BUILDING NO.10, DLF PHASE II, DLF CYBER CITY, GURGAON. PAN: AAACC2674H VS. DCIT, CIRCLE-11(1), CR BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.S. AGGARWAL, SR. ADVOCATE DEPARTMENT BY : SHRI KUMAR PRANAV, SR. DR DATE OF HEARING : 16.01.2018 DATE OF PRONOUNCEMENT : 18.01.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL BY THE ASSESSEE RELATES TO THE ASSESSME NT YEAR 2006- 07. IT IS A SECOND ROUND OF PROCEEDINGS INASMUCH AS THE TRIBUNAL, VIDE ITA NO.4956/DEL/2013 2 ITS ORDER DATED 19.8.2011, RESTORED THE MATTER TO T HE FILE OF THE DISPUTE RESOLUTION PANEL (DRP) FOR A FRESH DECISION. 2. THE ASSESSEE HAS FILED A FRESH FORM NO. 36B, BEI NG, FORM OF APPEAL TO THE APPELLATE TRIBUNAL AND NAME OF THE AS SESSEE HAS BEEN ACCORDINGLY MODIFIED IN THIS ORDER. 3. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.33,23,41,378. SUCCINCTLY, THE FACTUAL MATRIX OF THIS ISSUE IS THA T THE ASSESSEE REPORTED CERTAIN INTERNATIONAL TRANSACTIONS IN FORM NO. 3CEB . THE ASSESSING OFFICER MADE A REFERENCE TO THE TRANSFER PRICING OF FICER (TPO) FOR DETERMINING THEIR ARMS LENGTH PRICE (ALP). THERE I S NO DISPUTE ON THE INTERNATIONAL TRANSACTION OF `RECEIPT FOR BACK OFFI CE SERVICES AMOUNTING TO RS. 2.28 CRORE, WHICH HAS BEEN ACCEPTE D BY THE TPO AT THE ALP. 4. THE INTERNATIONAL TRANSACTION IN DISPUTE IS FRE IGHT FORWARDING AND LOGISTICS, WITH TRANSACTED VALUE WRONGLY MENTI ONED AT RS.286,89,84,115/- (WHICH IS, IN FACT, THE AMOUNT O F TOTAL REVENUE, INCLUDING FROM NON-AES). THE ASSESSEE SELECTED THE TRANSACTIONAL NET ITA NO.4956/DEL/2013 3 MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR DEMONSTRATING THAT THE ALP OF THIS TRANSACTION WAS AT ALP. THE ASSESSEE SELECTED 16 COMPANIES AS COMPARABLE WITH T HE MULTIPLE YEAR DATA. THE TPO CONSIDERED THE DATA FOR THE CURRENT Y EAR ALONE IN RESPECT OF COMPARABLE COMPANIES TO BENCHMARK THE IN TERNATIONAL TRANSACTION. OUT OF 16 COMPANIES SELECTED BY THE AS SESSEE, THE TPO SHORTLISTED 3 COMPANIES AS COMPARABLES WITH THEIR P ROFIT LEVEL INDICATOR (PLI) OF OPERATING PROFIT/TOTAL COST (OP/ TC) AT 19.27 % AS UNDER :- I. BALMER LAWRIE & CO. LTD. 30.74% II. GATI LTD. 11.17% III. SICAL LOGISTICS LTD. 15.90% ARITHMETIC MEAN 19.27% 5. APPLYING THE AVERAGE OP/TC OF THE THREE COMPANIE S AT 19.27% AS BENCHMARK TO THE TOTAL COSTS INCURRED BY THE ASS ESSEE ON FREIGHT FORWARDING SERVICES AT RS.268,40,99,517/-, THE TPO DETERMINED THE ALP AT RS.320,13,25,493/-. THIS RESULTED IN TO TRAN SFER PRICING ADJUSTMENT AMOUNTING TO RS.33,23,41,378/-. THE ASSE SSING OFFICER IN HIS DRAFT ORDER MADE TRANSFER PRICING ADDITION OF R S.33.23 CRORE. THE ITA NO.4956/DEL/2013 4 ASSESSEE CHALLENGED THE DRAFT ORDER BEFORE THE DRP PRESENTING SEGMENTAL ACCOUNTS, WHICH WERE NOT BEFORE THE TPO. THE DRP DID NOT INTERFERE WITH THE TPOS ORDER BY NOTICING, INTER ALIA , THAT THE KEYS OF ALLOCATION BETWEEN THE SEGMENTS WERE NOT CLEAR AND APPORTIONMENT OF COSTS OF SERVICES WAS NOT VERIFIABLE. WHEN THE MAT TER CAME UP BEFORE THE TRIBUNAL IN THE FIRST ROUND, IT SET ASIDE THE F INAL ASSESSMENT ORDER AND REMITTED THE MATTER TO THE DRP FOR A FRESH DECI SION. THIS IS HOW, THE DRP TOOK UP THE MATTER IN THE CURRENT PROCEEDIN GS AND AGAIN CONFIRMED THE TRANSFER PRICING ADDITION AS MADE IN THE FIRST ROUND. THE ASSESSEE IS AGGRIEVED ON CERTAIN ISSUES OF TRANSFER PRICING ADDITION INCLUDING THE INCLUSION OF BALMER LAWRIE & CO. LTD . AND EXCLUSION OF SOME COMPANIES, WHICH WE WILL DISCUSS HEREINAFTE R. 6. IT IS ESSENTIAL TO RECORD AT THE THRESHOLD THA T THE RESTORATION WAS MADE BY THE TRIBUNAL IN THE FIRST ROUND TO THE DRP BY NOTICING THE LAST PARA OF THE DIRECTION OF THE DRP, WHICH READS : `AR HAS PRESENTED BEFORE US A SEGMENTAL ACCOUNT. THESE ARE NOT BEFORE TPO. THE KEYS OF ALLOCATION ALSO NOT CLEAR. THE APPORTIONMENT OF COS T OF SERVICES IS NOT VERIFIABLE. THE CHOICE OF COMPARABLES WAS NOT AGITA TED..... PRIMA FACIE , IT SUGGESTS THAT THE ASSESSEE PRESENTED SEGMENTAL ACCOUNTS ITA NO.4956/DEL/2013 5 BEFORE THE DRP FOR THE FIRST TIME IN THE FIRST ROUN D AND THE DRP DID NOT PROPERLY DEAL WITH THE SAME, WHICH NECESSITATED THE RESTORATION OF THE MATTER BY THE TRIBUNAL TO THE DRP. HOWEVER, THE LD. AR SUBMITTED BEFORE US THAT SUCH SEGMENTAL ACCOUNTS WERE FURNISH ED AT THE INSTANCE OF THE DRP ONLY AND NOT SUO MOTU BY THE ASSESSEE. ON A PERTINENT QUERY, THE LD. AR STATED THAT THE ASSESSEE IS NOT I NTERESTED IN GOING INTO ANY SEGMENTAL ACCOUNTS AS WAS RECORDED BY THE DRP IN THE FIRST ROUND AND ITS DETERMINATION OF THE ALP SHOULD BE TE STED ON CONSOLIDATED FREIGHT INCOME, WHICH IS ALSO INCLUSIV E OF CONSIGNMENT HANDLING CHARGES, CUSTOM CLEARANCE REVENUE AND STOR AGE AND WAREHOUSING SERVICES ETC. WE FIND THAT ALBEIT A PA RTICULAR GROUND HAS BEEN RAISED W.R.T. THE SEGMENTAL ACCOUNTS AND SOME SUBMISSIONS HAVE ALSO BEEN RECORDED IN THE ASSESSEES WRITTEN SUBMIS SIONS ON THIS SCORE, BUT THE SAME WAS ADMITTED BY THE LD. AR TO BE TREAT ED AS HAVING BECOME INFRUCTUOUS. CONSEQUENTLY, WE ARE DESISTING FROM DEALING WITH THE ISSUE OF SEGMENTAL ACCOUNTS AND CORRESPOND ING GROUND IS DISMISSED AS NOT PRESSED. 7. BEFORE CONSIDERING THE COMPARABILITY OR OTHERW ISE OF THE COMPANIES ASSAILED BEFORE US, LET US FIRST EXAMINE THE FUNCTIONAL ITA NO.4956/DEL/2013 6 PROFILE OF THE ASSESSEE UNDER INTERNATIONAL TRANSAC TION IN DISPUTE. THE ASSESSEE IS A PART OF CEVA GROUP, WHICH, DURING THE YEAR UNDER CONSIDERATION, HAD ITS AES LOCATED IN OVER 100 COUN TRIES WITH AROUND 400 FACILITIES, AGENTS AND DISTRIBUTION CENTRES. TH E ASSESSEE IS ENGAGED IN RENDERING FREIGHT AND FORWARDING SERVICES IN DOM ESTIC AND INTERNATIONAL SECTORS. IT EARNS ITS REVENUE FROM TH E CUSTOMERS IN INDIA, WHOSE CARGOS ARE BOOKED TO BE DELIVERED BY IT OUTSI DE INDIA THROUGH ITS AES NETWORK AND IT ALSO EARNS REVENUE IN RESPEC T OF INBOUND CARGO RECEIVED FROM THE GOODS BOOKED BY ITS AES FROM OUTS IDE INDIA, WHICH HAVE TO BE DELIVERED TO THE CUSTOMERS IN INDIA. THE ASSESSEE OBTAINED THE SERVICES OF ITS AES LOCATED IN DESTINATION COUN TRIES AND SHARED 50% OF THE GROSS PROFIT WITH ITS AES. SIMILARLY, TH E AES ALSO SHARED 50% OF THE GROSS PROFIT IN RESPECT OF THE CARGOS BO OKED BY THEM AND DELIVERED IN INDIA BY THE ASSESSEE. ON A SPECIFIC Q UERY, THE LD. AR SUBMITTED THAT NO SPECIFIC AGREEMENT WAS ENTERED IN TO WITH ANY OF ITS AES TOWARDS 50% GROSS PROFIT SHARING OR FOR THE REN DERING OF ANY SPECIFIC SERVICES. THERE IS NO DISPUTE THAT APART FROM THE INTERNATIONAL TRANSACTIONS OF RECEIPT AND PAYMENT OF FREIGHT CHAR GES INCLUSIVE OF REMUNERATION FOR THE RELATED SERVICES, THE ASSESSEE ALSO ENTERED INTO ITA NO.4956/DEL/2013 7 TRANSACTIONS WITH NON-RELATED PARTIES. ADMITTEDLY, THE ACCOUNTS HAVE BEEN MAINTAINED ON ENTITY LEVEL, WITHOUT THERE BEIN G ANY SEGMENTS, SUCH AS, TRANSACTIONS WITH AES AND NON-AES AND INWA RD FREIGHT OR OUTWARD FREIGHT OR SIMPLICITER FREIGHT AND COSTS/RE VENUE FROM ANCILLARY SERVICES ETC. AS PER THE ASSESSEES TRANSFER PRICIN G STUDY REPORT, A PART OF WHICH HAS BEEN REPRODUCED ON PAGES 7 AND 8 OF TH E TPOS ORDER, THE ASSESSEE AND ITS ASSOCIATED ENTERPRISES ARE IN THE BUSINESS OF PROVIDING SERVICES WITH RESPECT TO AIR AND OCEAN FR EIGHT FORWARDING ONLY. TO SUPPLEMENT THESE ACTIVITIES, THE ASSESSEE PROVIDES CERTAIN ANCILLARY SERVICES LIKE CARGO HANDLING AND LOGISTIC MANAGEMENT ETC. THE SERVICES ARE EITHER OFFERED DIRECTLY TO ASSESSE ES CUSTOMERS OR AS A PART OF THE DELIVERABLES SOLD TO THE OVERSEAS CUSTO MERS BY THE EGL GROUP IN OTHER PARTS OF THE WORLD. SUCH SERVICES IN CLUDE TRANSPORTATION TO THE EXPORTATION POINTS; CUSTOM CL EARANCE AND DOCUMENTATION; CARGO CONSULTATION AND SHIPMENT OF C ARGO; DISPATCH OF DOCUMENTATION; TRACKING THE SHIPMENT AND PROCESS ING THE RECEIPT OF THE SAME; ARRANGING TRANSSHIPMENT OF GOODS AS PER THE INSTRUCTIONS; PREPARING NECESSARY SHIPMENT RELEASE DOCUMENTATION AND INTIMATING THE CONSIGNEE; CUSTOMS CLEARANCE/ TRANSP ORTATION; AND ITA NO.4956/DEL/2013 8 INVENTORY MANAGEMENT AND CONTROL. RENDERING OF SUC H SERVICES IS ALSO SUBSTANTIATED FROM THE ASSESSEES PROFIT & LOS S ACCOUNT, WHICH SHOWS SERVICE INCOME AT RS.286.89 CRORE, WHOSE BI FURCATION HAS BEEN GIVEN IN SCHEDULE J WITH FREIGHT OF RS.235.3 2 CRORE; CONSIGNMENT HANDLING CHARGES OF RS.42.62 CRORE; CUS TOM CLEARANCE SERVICE CHARGES OF RS.4.42 CRORE; STORAGE AND WAREH OUSING SERVICE CHARGES OF RS.2.79 CRORE; AND REIMBURSEMENT OF CUST OM DUTY AMOUNTING TO RS.1.73 CRORE. IT IS, ERGO, PATENT THA T THE ASSESSEE NOT ONLY RENDERS AIR AND OCEAN CARRIAGE SERVICES, BUT A LSO UNDERTAKES RELATED SERVICES, SUCH AS, CUSTOM CLEARANCE, DOCUME NTATION, STORAGE AND HANDLING OF CARGO ETC., COMPENSATION FOR WHICH IS ALSO SEPARATELY AWARDED TO THE ASSESSEE, BUT ALL SUCH RECEIPTS HAVE BEEN CONSIDERED AS A PART AND PARCEL OF FREIGHT RECEIPTS FOR THE PURPO SES OF BENCHMARKING ON CONSOLIDATED BASIS. 8. WITH THE ABOVE BACKGROUND OF THE FUNCTIONAL P ROFILE OF THE ASSESSEE COMPANY IN MIND, LET US FIRST EXAMINE THE ONLY COMPANY, WHOSE INCLUSION HAS BEEN CHALLENGED BY THE ASSESSEE BEFORE US. ITA NO.4956/DEL/2013 9 BALMER LAWRIE & CO. LTD. 9. THIS COMPANY WAS INITIALLY OFFERED BY THE ASS ESSEE AS COMPARABLE IN ITS TRANSFER PRICING STUDY REPORT. HO WEVER, IT WAS SUBMITTED BEFORE THE TPO THAT THE SAME WAS NOT COMP ARABLE AND, HENCE, SHOULD BE EXCLUDED. THIS CONTENTION WAS REJ ECTED BY THE TPO WHO INCLUDED THE SAME IN THE FINAL LIST OF COMPARAB LES. NO RELIEF WAS ALLOWED BY THE DRP. THAT IS HOW, THE ASSESSEE IS B EFORE THE TRIBUNAL SEEKING EXCLUSION OF THIS COMPANY. 10. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL ON RECORD. PAGE 764 ONWARDS OF THE PAPER BOOK IS A COPY OF THE ANNUAL REPORT OF BALMER LAWRIE & CO. LTD. PAGE 804 IS A COPY OF ITS PROFIT & LOSS ACCOUNT, WHICH SHOWS REVENUE FROM SAL E OF MANUFACTURED GOODS, TRADING GOODS, TURNKEY PROJECTS AND SERVICES. THE DIRECTORS REPORT DIVULGES THAT THIS COMPANY HA S SEVERAL UNITS, SUCH AS, INDUSTRIAL PACKAGING, GREASE AND LUBRICANT S, LOGISTICS SERVICES, PROJECT AND ENGINEERING CONSULTANCY, TRAV EL AND TOURS, CONTAINER FREIGHT STATION. IT IS AXIOMATIC THAT THI S COMPANY, ON ENTITY LEVEL, CANNOT BE CONSIDERED AS COMPARABLE WITH THE ASSESSEE COMPANY. ITA NO.4956/DEL/2013 10 THE TPO HAS CONSIDERED LOGISTICS SERVICES SEGMENT OF THIS COMPANY FOR COMPARING IT WITH THE ASSESSEE. IN OUR CONSIDE RED OPINION, EVEN THE SEGMENT OF THIS COMPANY CANNOT BE CONSIDERED AS COMPARABLE FOR THE REASON THAT APART FROM SEPARATE SEGMENT-WISE RE VENUES AND COSTS AVAILABLE IN THE ANNUAL REPORT, THERE IS AN ITEM OF UNALLOCABLE EXPENDITURE OF RS.35.52 CRORE, WHICH HAS BEEN APPO RTIONED BY THE TPO AMONGST ALL THE SEGMENTS, INCLUDING `LOGISTICS SERVICES, ON THE BASIS OF THEIR REVENUE. THIS APPROACH OF BIFURCATI ON OF `UNALLOCABLE EXPENDITURE CANNOT BE COUNTENANCED. UNALLOCATED EX PENSES OBVIOUSLY COMPRISE SEVERAL ITEMS OF EXPENSES OF DIS TINCT NATURE AND HENCE THERE CANNOT BE A UNIFORM KEY OF APPORTIONMEN T. FOR EXAMPLE, `RENT PAID BY AN ASSESSEE CANNOT BE BIFURCATED ON THE BASIS OF REVENUE FROM DIFFERENT SEGMENTS, SUCH AS, MANUFACTU RING, TRADING AND SERVICES. THE EXTENT OF AREA USED BY EACH BUSIN ESS SEGMENT VARIES AS PER THE NATURE OF TRANSACTION, WHICH MAY HAVE NO RELATION WITH THE GROSS REVENUE. FOR EXAMPLE, A MANUFACTURING UNIT WI LL NEED RELATIVELY MORE AREA THAN A TRADING UNIT. SIMILARLY, A SERVICE UNIT WILL NEED STILL LESSER AREA. IN SUCH CIRCUMSTANCES, APPORTIONING CO MMON RENT EXPENDITURE ON THE BASIS OF GROSS REVENUE FROM SUCH VARIED DIVISIONS, ITA NO.4956/DEL/2013 11 WILL GIVE SKEWED RESULTS OF SEGMENT PROFITABILITY. SIMILARLY, CONTRIBUTION OF VARIOUS SEGMENTS TO OTHER ITEMS OF EXPENSES VARIES DEPENDING UPON THE NATURE OF TRANSACTION, EXTENT OF CAPITAL AND LABOUR REQUIRED ETC. ETC. SO ALL COMMON EXPENSES CANNOT B E APPORTIONED IN ONE STROKE IN THE RATIO OF GROSS REVENUE FROM DIFFE RENT SEGMENTS, EACH HAVING ITS OWN SEPARATE FEATURES AND CHARACTERISTIC S. ONE CAN LOGICALLY MAKE ALLOCATION DEPENDING UPON THE NATURE OF EXPEND ITURE AND APPROPRIATE ALLOCATION KEY. SINCE IN THE CASE OF B ALMER LAWRIE, NEITHER THE NATURE OF COMMON UNALLOCATED EXPENSES I S KNOWN, NOR THE INFORMATION CONCERNING THE APPROPRIATE ALLOCATION K EYS IS AVAILABLE, WE CANNOT APPROVE THE ALLOCATION OF COMMON EXPENSES IN THE RATIO OF GROSS REVENUE FROM EACH SEGMENT. THAT BEING THE POS ITION, THE COMPUTATION OF THE PROFIT MARGIN OF THE RELEVANT SE GMENT OF BALMER LAWRIE & CO. SHEDS CREDIBILITY WHICH RENDERS ITS IN CLUSION INVALID. THIS COMPANY IS DIRECTED TO BE EXCLUDED. 11. APART FROM CHALLENGING THE INCLUSION OF BAL MER LAWRIE & CO. P. LTD., THE ASSESSEE HAS ALSO CHALLENGED THE EXCLU SION OF SOME OF THE COMPANIES, WHICH WE WILL DEAL HEREWITH. ITA NO.4956/DEL/2013 12 12. BEFORE TAKING UP SUCH A COMPARISON, IT IS R ELEVANT TO DEAL WITH THE ARGUMENT OF THE RULE OF CONSISTENCY BOLSTERED B Y BOTH THE SIDES. WHEREAS THE CASE OF THE ASSESSEE IS THAT THE TPO WR ONGLY EXCLUDED SOME COMPANIES FROM THE ASSESSEES LIST OF COMPARAB LES, WHICH WERE ACCEPTED AS COMPARABLE IN THE PRECEDING YEAR, THE L D. DR HAS JUSTIFIED THE EXCLUSION OF SOME OTHER COMPANIES ON THE GROUND THAT SUCH COMPANIES WERE EITHER NOT TREATED AS COMPARABLE BY THE ASSESSEE OR ARGUED AGAINST THEIR INCLUSION IN SUBSEQUENT YEARS. 13. WE EXPRESS OUR RESERVATIONS IN CONCURRING W ITH THIS ARGUMENT ADVANCED BY BOTH THE SIDES. A COMPANY CONSIDERED AS COMPARABLE IN A PRECEDING OR A SUCCEEDING YEAR DOES NOT NECESSARI LY BECOME COMPARABLE FOR THE CURRENT YEAR AS WELL AND VICE VERSA . FUNCTIONAL PROFILE OF SUCH COMPANY AND THAT OF THE ASSESSEE HA S TO BE VIEWED INDEPENDENTLY FOR EACH YEAR. SOMETIMES THE NATURE O F ACTIVITY OF THE ASSESSEE OR A COMPARABLE COMPANY UNDERGOES A CHANGE . SUCH A CHANGE MARS THE OTHERWISE COMPARABILITY. MANY A TIM ES, IT SO HAPPENS THAT A COMPANY THOUGH FUNCTIONALLY SIMILAR CEASES T O BE COMPARABLE BECAUSE OF FAILING IN CERTAIN FILTERS, SUCH AS, REL ATED PARTY TRANSACTIONS MORE THAN SPECIFIED PERCENTAGE OR CERTAIN FINANCIAL IMPLICATIONS ITA NO.4956/DEL/2013 13 ARISING OUT OF ACQUISITION AND MERGERS. SIMILARLY, THERE CAN BE SEVERAL OTHER REASONS WHICH LEAD A COMPANY COMPARABLE IN TH E PRECEDING YEAR BECOMING NON-COMPARABLE IN SUCCEEDING AND VICE VERSA . IN OUR CONSIDERED OPINION, THERE CAN BE NO RES JUDICATA IN THE MATTER OF CONSIDERING A COMPANY AS COMPARABLE OR OTHERWISE. O NE NEEDS TO EXAMINE THE COMPARABILITY OF EACH COMPANY DISTINCTL Y IN EACH YEAR. WITH THESE REMARKS, WE NOW ESPOUSE THE COMPANIES, W HOSE EXCLUSION HAS BEEN CHALLENGED BY THE ASSESSEE IN SERIATIM. I) ABC INDIA LIMITED 14. THE ASSESSEE INCLUDED THIS COMPANY IN ITS LI ST OF COMPARABLES WHICH GOT EXCLUDED BY THE TPO ON THE GROUND THAT IT IS ENGAGED IN ROAD TRANSPORT, WHICH IS AGAIN ONLY A PART OF ITS A CTIVITIES. THE OTHER PORTION OF THE INCOME EARNED BY THIS COMPANY IS FRO M PETROL PUMP DIVISION. 15. THE LEARNED AR CONTENDED THAT THIS COMPANY WAS CONSIDERED AS COMPARABLE IN THE IMMEDIATELY PRECEDING YEAR AND HE NCE THE TPO WAS NOT JUSTIFIED IN ELIMINATING IT FROM THE LISTS OF COMPARABLES FOR THE YEAR IN QUESTION. PER CONTRA, THE LEARNED DR HEAVIL Y RELIED ON THE ITA NO.4956/DEL/2013 14 IMPUGNED ORDER TO CONTEND THAT THIS COMPANY WAS RIG HTLY EXCLUDED AS THE ASSESSEE IS ONLY IN THE BUSINESS OF AIR AND OCE AN INBOUND AND OUTBOUND LOGISTICS AND HENCE THIS COMPANY CANNOT BE CONSIDERED AS COMPARABLES. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE DEALT WITH THE CONTENTION SUPRA THAT A COMPANY CANNOT BE TREATED AS COMPARABLE OR N ON-COMPARABLE SIMPLY ON THE BASIS OF ITS INCLUSION OR EXCLUSION I N THE PRECEDING OR SUCCEEDING YEAR. WE NEED TO EXAMINE THE FACTS OF EA CH COMPANY FOR THE RELEVANT YEAR ALONE. SO TO CONTEND THAT SINCE A BC INDIA LIMITED WAS ACCEPTED AS COMPARABLE IN THE PRECEDING YEAR, T HE SAME SHOULD IPSO FACTO BE CONSIDERED SO IN THE INSTANT YEAR, CANNOT BE ACC EPTED. THIS BECOMES MORE GLARING WHEN THE FUNCTIONAL PROFI LE OF THIS COMPANY IS CONSIDERED, WHICH EX FACIE SHOWS STRIKING DISSIMILARITIES RENDERING IT TOTALLY NON-COMPARABLE. THIS COMPANY H AS TWO STREAMS OF INCOME, NAMELY, TRANSPORT DIVISION AND PETROL PUMP DIVISION. OBVIOUSLY PETROL PUMP DIVISION OF THIS COMPANY CAN, BY NO STANDARD, BE CONSIDERED AS A MATCH WITH THE ASSESSEE COMPANY. EVEN THE TRANSPORT DIVISION OF THIS COMPANY CATERS ONLY TO R OAD TRANSPORTATION ITA NO.4956/DEL/2013 15 BUSINESS. AS AGAINST THIS, THE ASSESSEE COMPANY IS ENGAGED IN AIR AND OCEAN FREIGHT FORWARDING AND IS ALSO EARNING REVENU E FROM CERTAIN ANCILLARY SERVICE, LIKE, CARGO HANDLING AND LOGISTI CS MANAGEMENT ETC., REVENUE FROM WHICH HAS BEEN MERGED WITH THE A MOUNT OF FREIGHT. THIS SHARP DISTINCTION IN THE NATURE OF WORK CARRIE D OUT BY ABC INDIA LIMITED EVEN UNDER THE TRANSPORT DIVISION MAKES IT NON-COMPARABLE. FURTHER, A LOOK AT THE ANNUAL REPORT OF THIS COMPAN Y, WHOSE COPY IS AVAILABLE IN THE PAPER BOOK, DIVULGES THAT APART FR OM NET SEGMENTAL REVENUE OF THESE TWO DIVISIONS, THERE ARE CERTAIN C OMMON `UNALLOCATED EXPENSES TO THE TUNE OF RS. 148.31 LA C. THE ASSESSEE COMPUTED PROFIT MARGIN OF THIS COMPANY ON SEGMENT L EVEL BY ALLOCATING COMMON UNALLOCATED EXPENSES IN THE RATIO OF REVENUE FROM TWO DIVISIONS. WHILE APPROVING THE ARGUMENT OF THE LD. AR FOR EXCLUDING BALMER LAWRIE & CO., WE HAVE HELD ABOVE THAT ALLOCATION OF ALL UNALLOCATED EXPENSES CANNOT BE DONE ON THE B ASIS OF GROSS REVENUE OF EACH SEGMENT. SIMILAR POSITION PREVAILS HERE ALSO. WE, THEREFORE, UPHOLD THE ACTION OF THE AUTHORITIES BEL OW IN EXCLUDING THIS COMPANY FROM THE LIST OF COMPARABLES. ITA NO.4956/DEL/2013 16 II) S.E.R. INDUSTRIES LTD. 17. THE TPO EXCLUDED THIS COMPANY ON THE GROUND THAT ITS OPERATIONS DID NOT COVER AIR AND OCEAN CARGO AND, A S SUCH, THE RISKS RELATED TO THE ASSESSEES BUSINESS WERE NOT PRESENT THERE. WHILE DISCUSSING SEVEN COMPANIES, INCLUDING THIS COMPANY, IN A COMBINED MANNER IN PARA 3.3(I) ON PAGES 12 AND 13 OF THE TPO S ORDER, THIS COMPANY WAS HELD TO BE FUNCTIONALLY DIFFERENT NOT ONLY IN CHARACTER BUT ALSO IN QUALITY OF EXECUTION. THE DRP DID NOT APPROVE THE ASSESSEES STANDPOINT OF ITS INCLUSION. 18. HAVING HEARD BOTH THE SIDES AND PERUSED TH E RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ANNUAL REPORT OF THIS C OMPANY IS AVAILABLE ON PAGES 1144 ONWARDS OF THE PAPER BOOK. IT CAN BE SEEN THAT THIS COMPANY IS ENGAGED ONLY IN ROAD TRANSPORT BUSINESS AND HAS FREIGHT INCOME FROM ITS OWN TRUCKS AND CONTAINERS TRUCKS. THIS COMPANY IS NOT ENGAGED IN AIR AND OCEAN TRANSPORTATION AS IS T HE ASSESSEES BUSINESS. IN THE SAME MANNER, UNLIKE THE ASSESSEE, THIS COMPANY IS NOT PROVIDING ANY ANCILLARY SERVICES, SUCH AS, STOR AGE AND WAREHOUSING AND CUSTOM CLEARANCE & DOCUMENTATION ETC. THE ASSES SEES REVENUE ITA NO.4956/DEL/2013 17 FROM THE INTERNATIONAL TRANSACTIONS ALSO INCLUDE RE MUNERATION FOR SUCH INCIDENTAL SERVICES OF STORAGE AND WAREHOUSING AND CUSTOM CLEARANCE ETC. IN THE ABSENCE OF SIMILAR REVENUE EARNED BY S .E.R. INDUSTRIES LTD. AND BECAUSE OF IT BEING ENGAGED ONLY IN ROAD T RANSPORT BUSINESS, WE HOLD THAT THE AUTHORITIES BELOW WERE JUSTIFIED I N EXCLUDING IT ON THE BASIS OF DIFFERENT FUNCTIONAL PROFILE. WE, THEREFOR E, UPHOLD THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARAB LES. III) TRANSPORT CORPORATION OF INDIA LTD. 19. THE TPO EXCLUDED THIS COMPANY ON THE GROUND THAT BESIDES TRANSPORTATION AND XPS CARGO SEGMENTS, THIS COMPANY MADE LARGE- SCALE INVESTMENTS IN REAL ESTATE FOR EXPANDING ITS WAREHOUSING CAPACITIES AND IT ALSO DIVERSIFIED INTO WINDMILL PO WER. THAT IS HOW, THE FUNCTIONAL PROFILE OF THIS COMPANY WAS HELD TO BE DIFFERENT WHILE DISCUSSING SEVEN COMPANIES IN A CONSOLIDATED MANNER ON PAGES 12 AND 13 OF HIS ORDER. THE ASSESSEE IS AGGRIEVED AGA INST THE EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. 20. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND FROM THE ANNUAL REPORT OF THIS C OMPANY, A COPY OF ITA NO.4956/DEL/2013 18 WHICH IS PLACED FROM PAGE 721 ONWARDS OF THE PAPER BOOK, THAT APART FROM TRADING INCOME, THIS COMPANY HAS ALSO EARNED I NCOME FROM SALES, BUS OPERATIONS, COMMISSION AND OTHER SERVICE S. THE LD. DR INVITED OUR ATTENTION TOWARDS THE TRANSFER PRICING STUDY REPORTS OF THE ASSESSEE FOR SUCCEEDING YEARS IN WHICH THE ASSESSEE ITSELF EXCLUDED THIS COMPANY FROM THE LIST OF COMPARABLES. THE ASSE SSEE IS URGING FOR THE INCLUSION OF THIS COMPANY ON THE STRENGTH OF SE GMENTAL RESULTS GIVEN ON PAGE 34 OF THE ANNUAL REPORT. 21. IT IS DISCERNIBLE THAT THOUGH THERE ARE SEP ARATE FIGURES OF REVENUE AND COSTS FROM TRANSPORT DIVISION IN ADDITI ON TO XPS DIVISION, TRADING, DIVISION, POWER DIVISION AND TCI SEA WAYS DIVISION, BUT WE FIND THAT THERE ARE COMMON `UNALLO CATED CORPORATE EXPENSES AMOUNTING TO RS.482.17 MILLION. THE ASSE SSEE HAS COMPUTED THE PROFIT MARGIN OF THE TRANSPORTATION DI VISION OF THIS COMPANY BY ALLOCATING COMMON UNALLOCATED EXPENSES I N THE PROPORTION OF REVENUE FROM ALL THE DIVISIONS. WHILE DEALING WITH BALMER LAWRIE & CO. LTD. ETC. ABOVE, WE HAVE HELD T HAT ALLOCATION OF COMMON EXPENSES ON THE BASIS OF THE REVENUE EARNED FROM DIFFERENT ITA NO.4956/DEL/2013 19 SEGMENTS, CANNOT BE UPHELD. FOLLOWING THE VIEW TAK EN HEREINABOVE, WE HOLD THAT TCI LTD. WAS RIGHTLY EXCLUDED BY THE T PO. IV) DELHI-ASSAM ROADWAYS CORPORATION LTD. 22. THE TPO EXCLUDED THIS COMPANY BY OBSERVING T HAT IT WAS ENGAGED IN PROVIDING ROAD TRANSPORT SERVICES ONLY A ND ITS FAR IS NOWHERE COMPARABLE WITH THE ASSESSEE COMPANY. THE ASSESSEE SEEKS ITS INCLUSION. THE LD. DR POINTED OUT THAT THE ASSE SSEE EXCLUDED THIS COMPANY FROM THE LIST OF COMPARABLES IN THE IMMEDIA TELY SUCCEEDING YEAR ON THE GROUND THAT IT WAS SIMPLY A TRANSPORT AGENCY. 23. AFTER CONSIDERING THE RIVAL SUBMISSIONS AN D PERUSING THE ANNUAL REPORT OF THIS COMPANY, A COPY OF WHICH IS A VAILABLE IN THE PAPER BOOK, IT IS PALPABLE THAT IT HAS OPERATIONAL INCOME ONLY FROM FREIGHT. THIS COMPANY IS ENGAGED IN ROAD TRANSPORT BUSINESS, UNLIKE THE ASSESSEE, WHICH IS PROVIDING AIR AND OCEAN FREI GHT SERVICES APART FROM INCIDENTAL SERVICES, SUCH AS, WAREHOUSING AND CUSTOMS CLEARING ETC. IN A COMPOSITE INTERNATIONAL TRANSACTION. WHI LE DEALING WITH S.E.R. INDIA LTD. ABOVE, WE HAVE HELD THAT A COMPAN Y SIMPLY ENGAGED IN ROAD TRANSPORT BUSINESS CANNOT BE TREATED AS COM PARABLE WITH THE ITA NO.4956/DEL/2013 20 ASSESSEE COMPANY. FOLLOWING THE SAME, WE UPHOLD TH E EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLES. V) PREMIER ROAD CARRIERS LTD. 24. THE TPO EXCLUDED THIS COMPANY ON THE GROUND THAT OUT OF ITS TOTAL INCOME OF RS.43.11 CRORE, THE MAJOR EXPENDITU RE WAS LEASE RENT AMOUNTING TO RS.39.38 CRORE. ANOTHER REASON ADVANC ED BY THE TPO FOR ITS EXCLUSION WAS THAT IT LACKED OWNERSHIP OF A SSETS SINCE THE CLAIM OF DEPRECIATION WAS ONLY TO THE TUNE OF RS.0.26 CRO RE. THE TPO DID NOT CLUB THIS COMPANY WITH THE SEVEN COMPANIES ON P AGES 12 AND 13 OF HIS ORDER WHILE HOLDING THEM FUNCTIONALLY DIFFER ENT. THE ASSESSEE WANTS ITS INCLUSION. 25. HAVING HEARD BOTH THE SIDES AND GONE THROUG H THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE TPO HAS GIVEN ONLY TWO REASONS FOR THE EXCLUSION OF THIS COMPANY. IT CAN BE SEEN FROM THE ANNUAL REPORT OF THIS COMPANY THAT ITS RATIO OF LEASE RENT TO SALES IS 79.01% AS AGAINST THE ASSESSEES SIMILAR RATIO OF 66.56%. SI MILARLY, AS REGARDS LOWER FIXED ASSETS, WE FIND THAT THE RATIO OF THIS COMPANY OF NET FIXED ASSETS TO SALES IS 3.27% AS AGAINST THE ASSESSEE HA VING 0.67%. THERE ITA NO.4956/DEL/2013 21 IS NOT MUCH DIFFERENCE IN THESE TWO FACTORS. SINCE THE TPO HAS NOT TREATED THIS COMPANY AS FUNCTIONALLY DISSIMILAR, WE HOLD THAT THE SAME SHOULD NOT BE EXCLUDED FOR MINOR VARIATIONS IN THE RATIO OF LEASE RENT TO SALES AND NET FIXED ASSETS TO SALES. WE, THEREF ORE, DIRECT THE INCLUSION OF THIS COMPANY IN THE LIST OF COMPARABLE S. VI) ROADWAYS INDIA LTD. 26. THIS COMPANY WAS EXCLUDED BY THE TPO ON THE GROUND OF DECLINING PROFITS. HE RECORDED THAT FOR THE FINANC IAL YEAR 2003-04, THIS COMPANY HAD A MARGIN OF 1.79% AND FOR THE FINA NCIAL YEARS 2004-05 AND 2005-06, 1.17% AND 0.96% RESPECTIVELY. THIS COMPANY WAS NOT HELD TO BE FUNCTIONALLY DIFFERENT. THE LD. DR BROUGHT TO OUR NOTICE THAT THE ASSESSEE ITSELF DID NOT INCLUDE THI S COMPANY IN THE LIST OF COMPARABLES FOR THE ASSESSMENT YEAR 2008-09 AND REJECTED THIS COMPANY BECAUSE OF DIFFERENT FUNCTIONAL PROFILE IN ITS TP STUDY DOCUMENTATION FOR THE ASSESSMENT YEAR 2009-10. 27. HAVING HEARD BOTH THE SIDES AND GONE THROUG H THE RELEVANT MATERIAL ON RECORD, IT IS MANIFEST THAT NO COMPANY CAN BE EXCLUDED SIMPLY ON THE BASIS OF A HIGHER OR LOWER PROFIT MAR GIN REGISTERED IN THE ITA NO.4956/DEL/2013 22 YEAR RELEVANT TO THE ASSESSEE COMPANY. WHEN AVERAG E OF THE PROFIT MARGINS OF THE OTHERWISE FUNCTIONALLY COMPARABLE CO MPANIES IS TAKEN, THE DIFFERENCES DUE TO PARTICULAR HIGHER OR LOWER P ROFIT MARGINS ARE IRONED OUT. THIS PROPOSITION IS BORNE OUT FROM THE JUDGMENT OF THE HONBLE HIGH COURT IN CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) P. LTD. VS. DCIT (2015) 376 ITR 183 (DEL). A COMPANY MAY CALL FOR EXCLUSION IF IT IS CONSISTENTLY POSTING LOSSES DUE TO EXCEPTIONAL REASONS. SINCE THIS COMPANY HAS SIMPLY SHOWN LOWER RATE OF PROFIT IN THREE YEARS, IT CANNOT CALL FOR ELIMINATION. IT IS PERTINENT TO MENTION THAT THE TPO HAS NOWHERE TREATED THIS COMPANY AS FU NCTIONALLY DISSIMILAR. IN THE SAME WAY, THE CONTENTION OF THE LD. DR THAT THE ASSESSEE DID NOT CONSIDER IT AS COMPARABLE IN SUCCE EDING YEARS, CANNOT JUSTIFY EXCLUSION IN THE INSTANT YEAR AS WELL FOR T HE DETAILED DISCUSSION MADE ABOVE. WE, THEREFORE, DIRECT TO INCLUDE IT IN THE LIST OF COMPARABLES. VII) SKYPACK SERVICE SPECIALISTS LTD. 28. THE TPO EXCLUDED THIS COMPANY ON THE GROUND OF PERSISTENT LOSSES/DIMINISHING REVENUE BY NOTICING THAT AS AGAI NST THE PROFIT RATIO ITA NO.4956/DEL/2013 23 OF 2.89% FOR THE FINANCIAL YEAR 2003-04, THIS COMP ANY SHOWED LOSS AT (-) 7.03% FOR THE FINANCIAL YEAR 2004-05 AND LOS S OF 21.15% FOR THE FINANCIAL YEAR 2005-06 RELEVANT TO THE ASSESSMENT Y EAR UNDER CONSIDERATION. THIS COMPANY WAS NOT HELD BY THE TP O TO BE FUNCTIONALLY DIFFERENT. THE ASSESSEE WANTS INCLUSIO N OF THIS COMPANY IN THE LIST OF COMPARABLES. THE LD. DR COUNTERED TH E ARGUMENT BY STATING THAT THE ASSESSEE ITSELF DID NOT INCLUDE IT IN THE LIST OF COMPARABLES FOR THE ASSESSMENT YEAR 2008-09 AND REJ ECTED IT BECAUSE OF DIFFERENT FUNCTIONAL PROFILE IN ITS TP STUDY DOC UMENTATION FOR THE ASSESSMENT YEAR 2009-10. 29. WHILE DEALING WITH ROADWAYS INDIA LTD. ABOV E, WE HAVE HELD THAT EARNING OF LOW PROFIT IN A YEAR CANNOT BE A RE ASON TO EXCLUDE A COMPANY. HOWEVER, ITS EXCLUSION CAN BE JUSTIFIED, I F IT IS IN PERSISTENT LOSSES OVER THE YEARS AND THAT TOO FOR EXCEPTIONAL REASONS. WHEN WE ADVERT TO THE FINANCIALS OF THIS COMPANY, IT EMERGE S THAT IT HAS PROFIT FOR THE F.Y. 2003-04 AND LOSSES HAVE ARISEN ONLY FO R THE F.YS. 2004- 05 AND 2005-06. INCURRING LOSSES IN TWO YEARS CANNO T BE TERMED AS PERSISTENT LOSSES SO AS TO QUALIFY EXCLUSION WITHOU T THERE BEING ANY REFERENCE TO EXCEPTIONAL REASONS FOR SUCH LOSSES. F OLLOWING THE VIEW ITA NO.4956/DEL/2013 24 TAKEN HEREINABOVE FOR ROADWAYS INDIA LTD., WE DIREC T TO INCLUDE THIS COMPANY IN THE FINAL TALLY OF COMPARABLES. 30. AFTER ARGUING THE INCLUSION/EXCLUSION OF C OMPANIES IN THE LIST OF COMPARABLES, THE LD. AR SUBMITTED THAT THE TPO W ENT WRONG IN DETERMINING THE AMOUNT OF TRANSFER PRICING ADJUSTME NT BY CONSIDERING THE ENTITY LEVEL GROSS REVENUE SHOWN BY THE ASSESSE E AT RS.286.89 CRORE. IT WAS SUBMITTED THAT THE TRANSFER PRICING ADJUSTMENT, IF ANY, COULD HAVE BEEN RESTRICTED TO THE AMOUNT OF INTERNA TIONAL TRANSACTIONS AND NOT THE TRANSACTIONS WITH UNRELATED PARTIES. 31. SECTION 92 IS A SUBSTANTIVE PROVISION IN T HIS REGARD. SUB-SECTION (1) OF SEC. 92 PROVIDES THAT ; `ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE. THE TERM INTERNATIONAL TRANSACTION HAS BEEN DEFINED U/S 92B TO MEAN: A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES,.. A CONJOINT READING OF SECTION 92 WITH SECTION 92B CLEARLY BRINGS OUT THAT COMPUTATION OF INCOME AT AL P IS PERMISSIBLE ONLY IN RESPECT OF INTERNATIONAL TRANSACTION, WHICH , IN TURN, MEANS A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES. SIMILAR ITA NO.4956/DEL/2013 25 POSITION HAS BEEN REITERATED IN THE MACHINERY PROVI SION CONTAINED IN SECTION 92C DEALING WITH THE MANNER OF COMPUTATION OF ALP. SUB- SECTION (1) OF SECTION 92C STIPULATES THAT :`THE AR MS LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION SHALL BE D ETERMINED BY ANY OF THE FOLLOWING METHODS... THE NITTY-GRITTY OF THE ABOVE DISCUSSION IS THAT ADDITION BY WAY OF TRANSFER PRICING ADJUSTMENT IS MANDATED ONLY IN RESPECT OF TRANSACTION BETWEEN TWO AES. THE NAT URAL COROLLARY WHICH, THEREFORE, FOLLOWS IS THAT NO INCOME ARISING FROM NON-AE TRANSACTION CAN BE COMPUTED HAVING REGARD TO ITS AL P. IN FACT, PRICE/PROFIT FROM COMPARABLE TRANSACTIONS OF THE AS SESSEE WITH NON- AES, IS ONE OF THE SUBTLE AND MOST RELIABLE MODES F OR DETERMINING ALP IN RESPECT OF INTERNATIONAL TRANSACTIONS. THUS , IT BOILS DOWN THAT THE ACT DOES NOT CONTEMPLATE AN ADDITION BY WAY OF TRANSFER PRICING ADJUSTMENT IN RESPECT OF TRANSACTIONS WITH NON-AES. AS THE AUTHORITIES BELOW HAVE VENTURED TO MAKE A COMPOSITE ADDITION, S O, THAT PART OF THE ADDITION WHICH RELATES TO THE TRANSACTIONS WITH NON -AES IS UNTENABLE AND HENCE CANNOT BE SUSTAINED. WE, THEREFORE, VACAT E THE IMPUGNED ORDERS PRO TANTO. ITA NO.4956/DEL/2013 26 32. TO SUM UP, WE SET ASIDE THE IMPUGNED ORDER O N THE ISSUE OF ADDITION TOWARDS TRANSFER PRICING ADJUSTMENT IN THE INTERNATIONAL TRANSACTION UNDER DISPUTE AND REMIT THE MATTER TO T HE FILE OF AO/TPO FOR FRESH DETERMINATION OF ITS ALP IN CONSONANCE WI TH OUR ABOVE OBSERVATIONS AND DIRECTIONS. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD IN SUCH FRESH PROCEEDINGS 33. A CORPORATE GROUND RAISED IN THE APPEAL IS AG AINST THE DISALLOWANCE OF RS.2,91,95,2107/- U/S 40 (A)(I) OF THE INCOME TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT). 34. BRIEFLY STATED THE FACTS APROPOS THIS GROUND AR E THAT THE ASSESSEE PAID ADMINISTRATIVE FEE OF RS. 2,91,95,207/- TO EGL , US AND EGL SINGAPORE FOR PROVIDING NON-TECHNICAL DAY-TO-DAY AD MINISTRATIVE SUPPORTS FUNCTIONS. SUCH PAYMENT WAS MADE WITHOUT A NY DEDUCTION OF TAX AT SOURCE. ON BEING CALLED UPON TO EXPLAIN AS T O WHY DISALLOWANCE BE NOT MADE U/S 40(A)(I) OF THE ACT FOR NON WITHHOL DING OF TAX, THE ASSESSEE SUBMITTED THAT SECTION 195 OF THE ACT WAS NOT ATTRACTED INASMUCH AS AMOUNT PAID TO NON-RESIDENT GROUP ENTIT IES WAS NOT ITA NO.4956/DEL/2013 27 CHARGEABLE TO TAX IN INDIA IN THEIR HANDS. NOT CONV INCED, THE ASSESSING OFFICER TREATED THE AMOUNT AS PAYMENT OF `ROYALTY FALLING WITHIN THE DEFINITION BOTH UNDER THE ACT AS WELL AS THE RESPEC TIVE DOUBLE TAXATION OF AVOIDANCE AGREEMENTS (DTAA) AND ACCORDI NGLY MADE DISALLOWANCE FOR NON-DEDUCTION OF TAX AT SOURCE. TH E DISALLOWANCE SO MADE WAS SUSTAINED BY THE DRP AS WELL. THIS IS HOW, THE ASSESSING OFFICER IN THE FINAL ASSESSMENT ORDER DATED 10.4.20 13 PASSED UNDER SECTION 143(3) READ WITH SECTION 144C(5) OF THE ACT , IMPUGNED IN THE EXTANT APPEAL, MADE THE ADDITION. 35. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RE LEVANT MATERIAL ON RECORD. IT IS NOTICED THAT WHILE MAKING THE DISA LLOWANCE, THE AUTHORITIES BELOW HAVE TAKEN ASSISTANCE FROM THE SI MILAR VIEW OF MAKING DISALLOWANCE IN THE IMMEDIATELY PRECEDING YE AR. THE TRIBUNAL, WHILE DEALING WITH THE SIMILAR DISALLOWAN CE FOR THE PRECEDING YEAR, IN ITS ORDER DATED 19.1.2017 IN IT A NO. 1527/DEL/2011, HAS HELD THAT SUCH AN AMOUNT PAID B Y THE ASSESSEE IS NOT CHARGEABLE UNDER ARTICLE 12 OF THE DTAA BECAUSE NO SERVICES WERE `MADE AVAILABLE TO THE ASSESSEE BY THE SERVIC E PROVIDERS. A COPY OF SUCH ORDER HAS BEEN PLACED ON RECORD. ON A PERTINENT QUERY, ITA NO.4956/DEL/2013 28 THE LEARNED DR FAIRLY ADMITTED THAT THE FACTS AND C IRCUMSTANCES OF THE GROUND FOR THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING YEAR. RESPECTFULLY FOLLOWING THE PRECEDEN T, WE ORDER FOR THE DELETION OF THE DISALLOWANCE. 36. THE NEXT CORPORATE GROUND TAKEN BY THE ASSE SSEE IS AGAINST THE ALLOWING DEPRECIATION ON COMPUTER PERIPHERALS AT TH E REDUCED RATE. THE ASSESSEE CLAIMED DEPRECIATION @ 60% ON COMPUTER S AND PRINTERS ETC. THE AO REJECTED THE ASSESSEES CLAIM FOR HIGH ER DEPRECIATION ON PRINTERS. THE EXCESS DEPRECIATION AMOUNTING TO RS. 35,279/- WAS DISALLOWED. THE ASSESSEE APPROACHED THE DISPUTE RE SOLUTION PANEL (DRP), WHICH AFFIRMED THE DRAFT ASSESSMENT ORDER. IN THE SECOND ROUND OF PROCEEDINGS PURSUANT TO THE TRIBUNALS ORD ER, THE DRP APPROVED THE AOS POINT OF VIEW. HOWEVER, IT WAS PR AYED BY THE ASSESSEE THAT THE DISALLOWANCE OF EXCESS DEPRECIATI ON IN THE PRECEDING YEAR SHOULD BE GIVEN EFFECT TO BY THE AO BY CORRESP ONDINGLY INCREASING THE WRITTEN DOWN VALUE FOR THE PURPOSE O F GRANT OF DEPRECIATION IN THIS YEAR. THE DRP DIRECTED THE AO TO TAKE CORRECT WRITTEN DOWN VALUE AS SIMILAR DISALLOWANCE WAS MADE BY HIM IN THE EARLIER YEARS. THE ASSESSEE IS AGGRIEVED AGAINST A LLOWING DEPRECIATION ITA NO.4956/DEL/2013 29 ON COMPUTER PRINTERS AT THE LOWER RATE AND ALSO NOT ENHANCING THE OPENING WRITTEN DOWN VALUE WITH THE EXCESS AMOUNT O F DEPRECIATION DISALLOWED IN THE PRECEDING YEAR. 37. IN OUR CONSIDERED VIEW, THE ISSUE OF ALLOWI NG DEPRECIATION AT HIGHER RATE ON COMPUTER PERIPHERALS IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN CIT VS. BSES YAMUNA POWERS LTD. 2010 TIOL-636-HC-DEL-IT AND THE SPECIAL BENCH ORDER OF THE ITAT IN DCIT VS. DATA CRAFT INDIA LTD. (2010) 133 TTJ (MUM) (SB) 37. WE, THEREFORE, DIRECT TO ALLOW DEPRECIATION ON THE COMPUTER PRINTERS AT THE HIGHER RATE AS CLAI MED BY THE ASSESSEE. 38. AS REGARDS THE DIRECTION OF THE DRP FOR SUITA BLY ADJUSTING THE OPENING WRITTEN DOWN VALUE OF COMPUTER PERIPHERALS, WE DIRECT THE AO TO ENHANCE THE WRITTEN DOWN VALUE WITH THE EXCES S AMOUNT OF DEPRECIATION DISALLOWED IN THE PRECEDING YEARS PROV IDED SUCH DECISION OF THE AO WAS ACCEPTED BY THE ASSESSEE. 39. THE LAST GROUND OF THE ASSESSEES APPEAL I S AGAINST THE LEVY OF INTEREST U/S 234A OF THE ACT. THE LD. AR CONTENDED THAT THE RETURN WAS FILED WITHIN THE EXTENDED TIME ALLOWED BY THE C BDT VIDE ORDER ITA NO.4956/DEL/2013 30 U/S 119 OF THE ACT (F.NO.133/38/2006-TPL (PT.). WE DIRECT THE AO TO VERIFY THE ASSESSEES CONTENTION AND SUITABLY AMEND THE CHARGING OF INTEREST U/S 234A, IF WARRANTED. 40. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.01.201 8. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 18 TH JANUARY, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.