Hyundai Rotem Company, Delhi V. ACIT (International Taxation), New Delhi

ITA 510/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3430 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Next Hearing Date: 14-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 01-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANANYA KAPOOR ADVOCTE
• Keywords: Transfer pricing; International transaction; Rule of consistency
• Section: 92C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.510/DEL./2016 (ASSESSMENT YEAR : 2011-12) HYUNDAI ROTEM COMPANY, VS. ACIT, CIRCLE 2 (1)(1), N 3, 3 RD FLOOR, NEW DELHI. SOUTH EXTENSION, PARK NO.1, DELHI 110 049. (PAN : AABCK6367L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL KAPOOR, ADVOCATE AND MS. ANANYA KAPOOR, ADVOCTE REVENUE BY : SHRI H.K. CHOUDHARY, CIT DR DATE OF HEARING : 05.10.2017 DATE OF ORDER : 22.11.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, HYUNDAI ROTEM COMPANY (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 30.12.2015, PASS ED BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP /TPO UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE INCOM E-TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2010- 11 ON THE GROUNDS INTER ALIA THAT :- ITA NO.510/DEL/2016 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. ASSESSING OFFICER ('AO') ERRED IN REFERRING THE CASE TO THE LD. TRANSFER PRICING OFFI CER (TPO'), WHICH WAS BAD IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER/DIRECTIONS PASSED BY THE LD. AO / LD. TPO / HON'BLE DISPUTE RESOLUTION PANEL CORP') ARE BAD IN LAW. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO / HON'BLE DRP ERRED IN CONFIRMING THE TRANSFER PRICING ADJUSTMENT AMOUNTING TO INR 17,60,73,335 OF THE APPELLANT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/HON'BLE DRP/LD. TPO ERRED IN LAW AND IN FACTS BY NOT TAKING COGNIZANCE OF THE FACT THAT THE SAME INTERNATIONAL TRANSACTIONS OF APPELLANT HAS BEEN ACCEPTED BY REVENUE AUTHORITIES TO BE AT ARM'S LENGTH IN PREVIOUS YEARS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO / HON'BLE DRP/LD. TPO ERRED IN LAW AND IN FACTS BY NOT TAKING COGNIZANCE OF THE INDIA KOREA TAX TREATY. THE LD. AO / HON'BLE DRP / LD. TPO SHOULD FOLLOW CONSISTENCY IN APPROACH. 6. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO / HON'BLE DRP / LD. TPO ERRED IN MISUNDERSTANDING APPELLANT'S BUSINESS MODEL AND FUNCTIONAL AND RISK PROFILE. 7. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/HON'BLE DRP/LD. TPO ERRED BY NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES, AND MODIFYING THE ECONOMIC ANALYSIS FOR THE DETERMINATION OF THE ALP OF THE APPELLANT'S INTERNATIONAL TRANSACTIONS AND HOLDING THAT THE INTERNATIONAL TRANSACTIONS ARE NOT AT ARM'S LENGTH. ITA NO.510/DEL/2016 3 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO / HON'BLE DRP/LD. TPO ERRED IN CONSIDERING AN INAPPROPRIATE SET OF COMPANIES AS COMPARABLES TO THE 'SUPPORT SERVICES' SEGMENT OF THE APPELLANT. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO / HON'BLE DRP/LD. TPO ERRED IN LAW AND IN FACTS, BY USING INCORRECT FILTE RS. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO / HON'BLE DRP/LD. TPO ERRED IN USING DATA NOT EXISTING AT THE TIME OF PREPARATION OF DOCUMENTATION PRESCRIBED UNDER RULE 10D ('RULE 10D DOCUMENTATION') OF THE INCOME TAX RULES, 1962 ('THE RULES') BY THE APPELLANT. 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ HON'BLE DRP/LD. TPO ERRED IN USING SINGLE YEAR DATA AS AGAINST THE MULTIPLE YEAR DATA USED BY THE APPELLANT, TO COMPUT E THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF THE APPELLANT USING TRANSACTIONAL NE T MARGIN METHOD ('TNMM') METHOD. 12. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ HON'BLE DRP/LD. TPO ERRED IN ADDING THE AMOUNT PERTAINING TO REIMBURSEMENT OF EXPENSES BY AE TO THE OPERATING REVENUE AND OPERATING COSTS OF THE APPELLANT EVEN THOUGH THE SAME WAS IN THE NATURE OF PASS THROUGH COST. 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ HON'BLE DRP/LD. TPO ERRED IN NOT EXCLUDING THIRD PARTY EXPENSES WHILE CALCULATING OPERATING PROFITS/OPERATING COSTS AS PROFIT LEVEL INDICATOR ('PLI'). 14. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ HON'BLE DRP/LD. TPO ERRED IN NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT FOR ITA NO.510/DEL/2016 4 DIFFERENCES IN THE RISK PROFILE OF THE APPELLANT VI S-A- VIS THE COM PARABLES. 15. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ HON'BLE DRP/LD. TPO ERRED BY NOT APPLYING THE PROVISO TO SECTION 92C OF THE A CT AND HAS FAILED TO ALLOW THE APPELLANT THE BENEFIT O F VARIATION OF 5 PERCENT IN DETERMINING THE ARM'S LENGTH PRICE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. HYUNDAI ROTEM COMPAN Y IS A SOUTH KOREAN PART OF THE HYUNDAI MOTOR GROUP PROVIDING TO TAL RAIL BUSINESS SOLUTIONS THROUGHOUT THE WORLD RANGING FRO M MANUFACTURING OF ROLLING STOCK TO THE SUPPLY OF TUR NKEY RAIL SYSTEMS. THE TAXPAYER IS ALSO INTO ADVANCED DEFENC E INDUSTRY PRODUCTS AND SUPPLY OF INDUSTRIAL PLANTS AND ENVIRO NMENT-FRIENDLY FACILITIES. THE TAXPAYER HAS REPUTATION OF AN INTE GRATED HEAVY INDUSTRY COMPANY. MAJOR INTERNATIONAL TRANSACTION OF THE TAXPAYER IS QUA PROVISION OF ADMINISTRATIVE SUPPORT SERVICES . DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER ENTERED INTO IN TERNATIONAL TRANSACTIONS AS UNDER :- SL. NO. NATURE OF TRANSACTION VALUE (RS.) 1 RENDERING OF ADMINISTRATIVE SUPPORT SERVICES 63829826 2 REIMBURSEMENT OF EXPENSES TO AE 2354284 3 REIMBURSEMENT OF EXPENSES BY AE 388153141 ITA NO.510/DEL/2016 5 3. THE TAXPAYER IN ORDER TO BENCHMARK ITS INTERNATI ONAL TRANSACTION USED TRANSACTIONAL NET MARGIN METHOD (T NMM) AS MOST APPROPRIATE METHOD (MAM) AND OPERATING PROFIT / OPERATING COST (OP/OC) HAS BEEN CHOSEN AS PROFIT LE VEL INDICATOR (PLI). THE TAXPAYER CHOSEN 11 COMPARABLES IN ITS T RANSFER PRICING REPORT, BUT SUBSEQUENTLY ON GROUND OF UPDATED FINAN CIAL DATA AVAILABLE FOR FY 2010-11, 5 COMPARABLES HAVE BEEN R EJECTED ON GROUND OF PASSING THE FILTERS USED BY THE TAXPAYER AND ONE ADDITIONAL COMPARABLE WAS TAKEN AND AS SUCH, TOTAL 7 COMPARABLES HAVE BEEN TAKEN. HOWEVER, TRANSFER PRICING OFFICER (TPO) PROPOSED 6 COMPARABLES HAVING AVERAGE MEAN OF 18.22 % AS AGAINST OP/OC OF TESTED PARTY AT 9.01%. HOWEVER, ON THE BA SIS OF OBJECTION RAISED BY THE TAXPAYER, TPO SELECTED 7 CO MPARABLES HAVING AVERAGE OF 16.38% AS AGAINST OP/OC F THE TAX PAYER AT 9.01%. THE TAXPAYER ALSO CLAIMED RISK ADJUSTMENT W HICH HAS BEEN REJECTED BY THE TPO ON FAILURE OF THE TAXPAYER TO D ISCHARGE ITS ONUS. CONSEQUENTLY, TPO PROCEEDED TO CALCULATE THE ARMS LENGTH PRICE (ALP) OF INTERNATIONAL TRANSACTION QUA PROVISION OF SUPPORT SERVICES AS UNDER:- TOTAL COST RS.1,221,612,094 ALP AT A MARGIN OF 16.38% RS.1,421,712,154 PRICE RECEIVED RS.1,245,638,819 ADJUSTMENT U/S 92CA RS.176,073,335 ITA NO.510/DEL/2016 6 AND THEREBY ENHANCED INCOME OF THE TAXPAYER BY RS.1 7,60,73,335/- ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. 4. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D RP BY WAY OF RAISING OBJECTIONS WHICH ARE REJECTED BY THE LD. DRP. FEELING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. AT THE OUTSET, LD. AR FOR THE TAXPAYER TO CUT SH ORT HIS ARGUMENTS CONTENDED THAT HE ONLY PRESSES RELEVANT G ROUNDS NO.3, 12 & 14 AND ALL OTHER GROUNDS ARE ACADEMIC AND GENERAL IN NATURE. GROUNDS NO.3 & 12 7. THE TAXPAYER BY USING TNMM AND OP/OC AS PLI WORK ED OUT ITS NET MARGIN ON COST AS UNDER :- OPERATING REVENUE RS.290,606,669 OPERATING EXPENSE RS.266,579,944 OPERATING INCOME RS.24,026,725 OP/OC 9.01% 8. OUT OF THE INTERNATIONAL TRANSACTIONS, THE TAXPA YER REPORTED TO HAVE SPENT AN AMOUNT OF RS.96,71,69,164/- ON ACCOUN T OF PAYMENT ITA NO.510/DEL/2016 7 OF ARBITRAL AWARD ON BEHALF OF THE AE AND THE SAME HAVE BEEN REIMBURSED BY THE AE TO THE TAXPAYER. THIS TRANSAC TION HAS NOT BEEN BENCHMARKED BY THE TAXPAYER ON THE GROUND THAT IT IS A COST TO COST REIMBURSEMENT. MAJOR COMPONENT OF THIS TRANSA CTION IS REIMBURSEMENT MADE BY THE AE TO THE TUNE OF RS.95,5 0,32,150/- BEING THE PAYMENT MADE BY THE TAXPAYER ON BEHALF OF ITS ASSOCIATED ENTERPRISES (AE) ON ACCOUNT OF ARBITRAL AWARD. 9. UNDISPUTEDLY, THE TAXPAYER PAID AN AMOUNT OF RS.95,50,32,150/- TO DMRC OUT OF REMITTANCE RECEIVE D FROM THE HEAD OFFICE AND THE BALANCE AMOUNT OF RS.15,43,13,6 97/- HAS BEEN ADJUSTED BY DMRC AGAINST OFFSHORE PAYMENT IN COMPLI ANCE TO THE ARBITRATION AWARD DATED 22.07.2010. TPO TAKEN THE VIEW THAT THE AE HAS MADE REIMBURSEMENT TO THE TAXPAYER AS A SUPP ORT THAT HEAD OFFICE WOULD PROVIDE TO ITS PROJECT OFFICE, BUT THE PAYMENT AROSE IN THE COURSE OF BUSINESS WHICH THE TAXPAYER CARRIED O UT IN INDIA AND AS SUCH, THIS TRANSACTION SHOULD FORM PART OF THE M ARGIN CALCULATION AND WOULD BE ADDED TO THE REVENUE AND COST. CONSEQ UENTLY, THE TPO PROPOSED TO CALCULATE THE NET MARGIN AS UNDER : - OPERATING REVENUE RS.1,245,638,819 OPERATING EXPENSE RS.1,221,612,094 OPERATING INCOME RS.24,026,725 OP/OC 1.96% ITA NO.510/DEL/2016 8 10. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FAC TS AND CIRCUMSTANCES OF THIS CASE, THE SOLE QUESTION ARISE S FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER THE TRANSACTION OF MAKING PAYMENT OF RS.95,50,31,150/- (ON ACCOUNT OF ARBITRAL AWARD) BY THE TAXPAYER TO THE DMRC MADE ON BEHALF OF ITS AE AND CONSEQUENTLY REIMBURSED FORMS PART OF THE MARGIN CALCULATION TO BE ADDED TO REVENUE AND COST FOR BENCHMARKING THE INTERNATIONAL TRANSACTION? 11. THE LD. AR FOR THE TAXPAYER DREW OUR ATTENTION TOWARDS ORDER PASSED BY LD. DRP UNDER RULE 13 OF THE INCOME-TAX R ULES, 2009, THE OPERATIVE PART OF WHICH IS REPRODUCED AS UNDER FOR READY PERUSAL:- DECISION OF THE PANEL AFTER CONSIDERING THE RECTIFICATION REQUEST OF THE ASSESSEE THE RELEVANT PARAGRAPH IS CORRECTED AND IS REPLACED WIT H THE FOLLOWING PARAGRAPH : THE PANEL HAS CAREFULLY EXAMINED THE MATTER. THE A RBITRATION AWARD WAS IN RESPECT OF PAYMENT OF CUSTOMS AND EXCI SE DUTY EXEMPTIONS GRANTED BY THE GOVERNMENT OF INDIA IN RE LATION TO RS1 PROJECT. THE PERUSAL OF THE AUDIT REPORT IN RE SPECT OF RS1 PROJECT SHOWS IA(A) THE PROJECT OFFICE IS REGULATE IN DEPOSITING WITH APPROPRIATE AUTHORITIES UNDISPUTED STATUTORY DUE IN CLUDING PROVIDENT FUND, INCOME TAX, SALES TAX, WEALTH TAX, SERVICE TAX, CUSTOM DUTY, CESS AND OTHER MATERIAL STATUTORY DUES APPLICABLE TO IT. FROM THIS IT APPEARS THAT THE CUSTOMS DUTY AND SERV ICE TAX ARE LIABILITIES OF THE PROJECT OFFICE. IF SO THESE SHO ULD FORM PART OF THE COST BASE OF THE ASSESSEE. THE TPO/ASSESSING OFFIC ER IS HOWEVER DIRECTED TO VERIFY FROM RECORD THE FACTS AS TO WHET HER THE LIABILITIES OF PAYMENT OF CUSTOM DUTY AND SERVICE T AX ARE OF THE ASSESSEE OR THE HEAD OFFICE. IN CASE THE LIABILITI ES OF PAYMENT OF ITA NO.510/DEL/2016 9 CUSTOM DUTY AND SERVICE TAX ARE OF THE PROJECT OFFI CE, THEN THE AMOUNT SPENT ON PAYMENT OF CUSTOM DUTIES AND SERVIC E TAX AND THUS ALSO THE EXPENSE ON PAYMENT OF ARBITRATION AWA RD, WILL BE PART OF COST BASE OF THE ASSESSEE FOR PURPOSE OF MA RK-UP, IF NOT THEN IT WOULD NOT BE SO INCLUDED. THE PANEL ACCORD INGLY DISPOSES THE OBJECTION OF THE ASSESSEE. IN THE LIGHT OF ABOVE DIRECTIONS, THE TPO SHOULD AL SO EXAMINE WHETHER THE FOLLOWING EXPENSES REIMBURSED BY THE AE AS DETAILED IN THE TP STUDY REPORT HAVE BEEN INCLUDED IN THE CO ST BASE. ROTEM POS INCURRED MISCELLANEOUS OPERATING EXPENSES ON BEHALF OF ROTEM AND CHARGED BACK THESE EXPENSES TO ROTEM. THE VALUE OF THE CHARGE BACK OF THESE EXPENSES IS A S FOLLOWS :- ASSOCIATED ENTERPRISE PAID BY DESCRIPTION OF SERVICES AMOUNT (INR) ROTEM ROTEM RS 3 PO AMOUNT PAID TO VENDORS ON BEHALF OF HEAD OFFICE 1,928,052 ROTEM ROTEM RS 3 PO SERVICE TAX PAID ON BEHALF OF HEAD OFFICE 10,798,567 ROTEM ROTEM RS 3 PO EXPENSES REIMBURSED TO DMRC ON BEHALF OF HEAD OFFICE 276,166 ROTEM ROTEM RS 3 PO CUSTOM DUTY PAID ON BEHALF OF HEAD OFFICE 35,049,817 ROTEM BMRCL PO TAXES AND DUTIES PAID ON BEHALF OF THE AE 388,153,141 TOTAL 436,205,743 AS THE CITATIONS MENTIONED AGAINST THESE EXPENSES S HOW THAT THEY RELATE TO PAYMENT OF SERVICE TAX, CUSTOM DUTY, AND OTHER TAXES AND DUTIES, THEREFORE, THE TREATMENT TO BE METED OUT TO THESE EXPENSE WOULD BE THE SAME AS TO THE ARBITRATION AWARD. IF THE ASSESSEE HAS ALREADY INCLUDED THESE EXPENSES IN THE COST BAS E FOR PURPOSE OF MARGIN CALCULATION, IT WOULD CLARIFY THE TREATME NT IN REGARD TO THE PAYMENT ON ACCOUNT OF ARBITRATION AWARD, SINCE, THE NATURE OF EXPENSES IN RESPECT OF THE ARBITRATION AWARD AND AB OVE REIMBURSEMENTS ARE THE SAME. IF NOT THEN FOLLOWING A CONSISTENT POLICY THEIR TREATMENT SHOULD BE THE SAME AS IN RES PECT OF ARBITRATION AWARD I.E. THESE SHOULD ALSO FORM PART OF THE COST BASE OR OTHERWISE DEPENDING ON FINDINGS BY THE TPO AS DISCUSSED ABOVE. ITA NO.510/DEL/2016 10 THE TPO IS DIRECTED TO FOLLOW CONSISTENT POLICY IN RESPECT OF TREATMENT OF THESE REIMBURSEMENT AND THE REIMBURSEM ENT OF THE ARBITRATION AWARD. THE ISSUE RAISED BY THE ASSESSEE IN THE APPLICATION FOR RECTIFICATION IS RECTIFIED AS ABOVE. 12. LD. DRP HAS TAKEN THE VIEW THAT, THE NATURE OF EXPENSES IN RESPECT OF ARBITRATION AWARD IS THE SAME WITH REGAR D TO THE PAYMENT OF SERVICE TAX, CUSTOMS DUTY AND OTHER TAXE S AND DUES BUT DIRECTED THE TPO TO FOLLOW CONSISTENT POLICY IN RES PECT OF ARBITRATION AWARD I.E. THESE SHOULD ALSO FORM PART OF THE COST BASED OR OTHERWISE DEPENDING ON THE FINDINGS OF THE TPO A S DISCUSSED ABOVE. HOWEVER, THE LD. AR FOR THE TAXPAYER CONTENDED THAT IN AY 2012-13, NO SUCH ADDITION ON ACCOUNT OF THIS INC OME HAS BEEN MADE IN THE SUBSEQUENT YEARS (ORDER AVAILABLE AT PA VES 1119 TO 1148 OF THE PAPER BOOK VOL.3). 13. LD. TPO WHILE DECIDING THE IDENTICAL ISSUE IN A Y 2012-13 CALLED UPON THE TAXPAYER VIDE LETTER DATED 12.01.20 16 TO EXPLAIN THE FOLLOWING INFORMATION :- (A) THE NATURE OF THESE TRANSACTIONS BETWEEN YOU AN D YOUR AE. (B) THE PARTIES INVOLVED IN THESE TRANSACTIONS FOR THE PAYMENT OF CUSTOM DUTIES AND OTHER TAXES. (C) WHY THESE SHOULD NOT BE CONSIDERED IN YOUR COST BASE FOR THE CALCULATION OF MARGINS AS HELD BY THE TPO IN THE AY 2011-12 WHICH WAS UPHELD BY THE LD. DRP VIDE ORDER DATED 05.11.2015? ITA NO.510/DEL/2016 11 14. SUB-PARA (C) OF PRECEDING PARA 13 COVERS THE CO NTROVERSY AT HAND. PERUSAL OF THE TP ORDER PASSED BY LD. TPO FO R AY 2012-13, AVAILABLE AT PAVES 1119 TO 1148 OF THE PAPER BOOK, GOES TO PROVE THAT THE ONLY ADDITION HAS BEEN MADE ON ACCOUNT OF ADDITION OF TP ADJUSTMENT BY ACCEPTING THE PLI OF THE TAXPAYER WIT HOUT INCLUDING THE EXPENSES IN THE COST BASE FOR THE PURPOSE OF MA RGIN CALCULATION. 15. EVEN OTHERWISE, PERUSAL OF THE TABLE DRAWN BY L D. DRP IN ITS ORDER PASSED UNDER RULE 13 OF THE INCOME-TAX RULES, 2009 AT PAGE 970 OF THE PAPER BOOK VOL.2 SHOWS THAT THE DRP HAS TAKEN THE AMOUNT OF RS.43,62,05,743/- AS VALUE OF THE CHARGED PACK OF EXPENSES WHICH IS NOT THE ACTUAL FACT BECAUSE AS PE R FINANCIAL STATEMENT, AVAILABLE AT PAGE 418 OF THE PAPER BOOK VOL.1, TOTAL COST IS RS.26,66,92,467/- WHICH GOES TO PROVE THAT RS.4 3,62,05,743/- IS NOT PART OF THE COST BASE. THIS ISSUE WAS REQUIRED TO BE RESOLVED BY THE LD. DRP BY PASSING ORDER UNDER RULE 13 OF THE R ULES BY FOLLOWING THE RULE OF CONSISTENCY. 16. SO, FOLLOWING THE RULE OF CONSISTENCY AND IN VI EW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSID ERED VIEW THAT PAYMENT ON ACCOUNT OF ARBITRATION AWARD CANNOT FORM PART OF THE COST BASE FOR PURPOSE OF MARGIN CALCULATION. LD. T PO IS TO EXAMINE THE ISSUE ON FACTUAL BASIS BY FOLLOWING THE RULE OF ITA NO.510/DEL/2016 12 CONSISTENCY IN THE LIGHT OF ITS ORDER PASSED IN AY 2012-13. SO, GROUNDS NO.3 & 12 ARE DETERMINED IN FAVOUR OF THE T AXPAYER FOR STATISTICAL PURPOSES. GROUND NO.14 17. THE TAXPAYER CLAIMED RISK ADJUSTMENT ON THE GRO UND THAT COMPANIES OPERATING IN AN UNCONTROLLED ENVIRONMENT WILL EARN A RISK PREMIUM WHEREAS THE TAXPAYER DOES NOT FACE SOM E RISKS WHICH ARE FACED BY THE COMPARABLES, THE TAXPAYER BEING A CAPTIVE UNIT. HOWEVER, THE LD. TPO REJECTED THE TAXPAYERS CLAIM FOR RISK ADJUSTMENT. 18. LD. DRP FOR THE REVENUE CONTENDED THAT THE RISK HAS TO BE EXPLAINED IN CASE OF EACH COMPARABLE AND ECONOMIC A NALYSIS CANNOT BE THE BASIS FOR RISK ADJUSTMENT IN THE ABSE NCE OF COMPLETE DATA PROVIDED BY THE TAXPAYER. HOWEVER, THE LD. AR FOR THE TAXPAYER CONTENDED THAT THE RISK ADJUSTMENT IS REQU IRED TO BE GIVEN ON EACH COMPARABLE AS HAS BEEN HELD BY THE COORDINA TE BENCH A, PUNE BENCH OF THE TRIBUNAL IN CASE OF HONEYWELL TURBO TECHNOLOGIES (INDIA) PVT. LTD. VS. DCIT IN ITA NO.2584/PUN/2012 ORDER DATED 10.02.2017 BY FOLLOWING THE CASE OF SONY INDIA PVT. LTD. CITED AS 114 ITD 448 BY MAKING FOLLOWING OBSERVATION :- ITA NO.510/DEL/2016 13 33. FURTHER, THE DELHI BENCH OF TRIBUNAL IN THE CA SE OF SONY INDIA PVT. LTD. REPORTED IN 114 ITD 448 HAS ALLOWED 20% RISK ADJUSTMENT CONSIDERING THE FACT TH AT IT MAY NOT BE POSSIBLE TO QUANTIFY RISK ADJUSTMENTS. THE ASSESSEE APPLYING THE SAID RATIO IN THE CASE OF SON Y INDIA PVT. LTD. (SUPRA) HAS WORKED OUT THE RISK ADJUSTMENT ON THE OPERATING MARGINS OF COMPARABLES TO BE ALLOWED WHEN COMPUTED @ 20%. WE DIRECT THE ASSESSING OFFICER TO ALLOW THE RISK ADJUSTMENT AND RE- COMPUTE THE MARGINS OF COMPARABLES BY APPLYING THE RATIO LAID DOWN BY DELHI BENCH OF TRIBUNAL IN THE C ASE OF SONY INDIA PVT. LTD. (SUPRA) AND COMPUTE THE TP ADJUSTMENT, IF ANY, IN THE HANDS OF ASSESSEE. 19. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE B ENCH OF THE TRIBUNAL IN CASE OF ITO VS. M/S. SUPPORTSOFT INDIA PVT. LTD. IN IT (TP) A.NO.1372/BANG/2011 ORDER DATED 28.03.2013 BY RETURNING FOLLOWING FINDINGS :- 27. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THE RIVAL CONTENTIONS, WE FIND THAT THE TRIBUNAL IN THE CASE OF M/S. INTELLINET TECHNOLOGIE S INDIA PVT. LTD. VS. ITO IN ITA 1237/BANG/2007 DATED 30-3-2012 HAS CONSIDERED THIS CONTENTION OF THE ASSESSEE AND HAS HELD THAT THE SINGLE CUSTOMER RISK ATTRIBUTABLE TO THE ASSESSEE IS ONLY AN ANTICIPATED RISK WHEREAS THE RISK ATTRIBUTED BY THE ASSESSEE TO THE COMPARABLES IS EXISTING RISK AND IN SUCH SITUATION THE TPO OUGHT TO HAVE GIVEN THE RISK ADJUSTMENT TO THE NET MARGIN OF THE COMPARABLE FOR BRINGING THEM ON PAR WITH THE ASSESSEE-COMPANY. IN THE SAID CASE ALSO, T HE ASSESSEE HAD CLAIMED RISK ADJUSTMENT AT 5.5% AND TH E TRIBUNAL HAS DIRECTED THE TPO TO CONSIDER THE CONTENTION OF THE ASSESSEE AND DECIDE THE PERCENTAG E ON RISK ADJUSTMENT TO BE MADE IN ACCORDANCE WITH LAW. AS BOTH OF US ARE SIGNATORIES TO THE SAID ORDER, WE RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF M/S.INTELLINET TECHNOLOGIES INDIA PVT. LTD. (SUPRA) REMIT THIS ISSUE ALSO TO THE FILE OF THE AO/TPO FOR RE- ITA NO.510/DEL/2016 14 CONSIDERATION OF THE ISSUE IN ACCORDANCE WITH LAW A ND IN THE LIGHT OF OUR OBSERVATIONS ABOVE. 20. SO, FOLLOWING THE DECISION RENDERED BY COORDINA TE BENCH OF THE TRIBUNAL IN CASE OF M/S. SUPPORTSOFT INDIA PVT. LTD (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE TAXPAYER IN THI S CASE IS ENTITLED FOR RISK ADJUSTMENT TO THE NET MARGIN OF COMPARABLE S FOR BRINGING THEM AT PAR WITH THE TAXPAYER. SO, GROUND NO.4 IS DETERMINED IN FAVOUR OF THE ASSESSEE. 21. RESULTANTLY, APPEAL FILED BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF NOVEMBER, 2017. SD/- SD/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 22 ND DAY OF NOVEMBER, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.