Haworth (India) Private Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 520/PUN/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9058 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-11-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 23-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Rule of consistency; Additional evidence; Wholly owned subsidiary
• Section: 143(3); 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 520 /P U N/201 5 / ASSESSMENT YEAR : 2010 - 11 HAWORTH (INDIA) PVT. LTD., NO.47, SPURTANK ROAD, HEAVITREE BUILDING, NO.1A, 1 ST FLOOR, CHETPE T , CHENNAI 600 031. PAN : AAACH8417K . / APPELLANT VS. D CIT , C IRCLE - 1 (2) , PUNE . . / RESPONDENT / APPELLANT BY : SHRI S. P. CHIDAMBARAM / RESPONDENT BY : SHRI S. B. PRASAD, CIT / DATE OF HEARING : 19 . 1 1 .2018 / DATE OF PRONOUNCEMENT: 12 . 1 2 .201 8 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSING OFFICER/TPO/DRP. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED HEREUNDER : - ON THE FACTS AND CIRCUMSTA NCES OF THE CASE, AND IN LAW; I. GROUNDS PERTAINING TO TRANSFER PRICING (TP) 1. THE LD. ASSESSING OFFICER (AO') PURSUANT TO THE DIRECTIONS OF THE HONOURABLE DISPUTE RESOLUTION PANEL (HONBLE PANEL), ERRED IN MAKING A TP ADJUSTMENT OF RS.5,64,99,431 TO THE IN COME OF THE APPELLANT, BY HOLDING THAT THE APPELLANTS INTERNATIONAL TRANSACTIONS PERTAINING TO PROVISION OF MARKETING SUPPORT SERVICES (MSS) AND PAYMENT OF MANAGEMENT SERVICES FEES (MSF) DO NOT SATISFY THE ARMS LENGTH PRINCIPLE ENVISAGED UNDER THE IN COME - TAX ACT, 1961 (THE ACT). ERRONEOUS MODIFICATION TO THE SET OF COMPARABLES SELECTED BY THE APPELLANT IN THE TP STUDY REPORT, FOR THE MSS SEGMENT. 2. THE HONBLE DRP/LD. AO ERRED IN INCLUDING THE FUNCTIONALLY UNCOMPARABLE ASIAN BUSINESS EXHIBITION AND CO NFERENCES LTD. AS A COMPARABLE. ITA NO. 520 /PUN /201 5 2 3. THE HONBLE DRP/ LD. AO ERRED IN EXCLUDING THE FOLLOWING FUNCTIONALLY COMPARABLE COMPANIES/SEGMENTS. EMPIRE INDUSTRIES LIMITED ENTERTAINMENT NETWORK (INDIA) LIMITED HANSA VISION PRIVATE LIMITED ERRONEOUS REJECTION OF FRESH S EARCH CONDUCTED BY THE ASSESSEE IN MSS SEGMENT. 4. THE HONBLE DRP/LD. AO ERRED IN REJECTING THE FRESH SEARCH CONDUCTED BY THE ASSESSEE FOR ITS MSS SEGMENT. ERRONEOUS REJECTION OF CLAIM OF RISK ADJUSTMENT BY THE ASSESSEE FOR MSS SEGMENT 5. THE HONBLE DRP/LD. AO ERRED IN REJECTING THE ASSESSEES CLAIM FOR ECONOMIC ADJUSTMENTS PERTAINING TO RISK BORNE BY ASSESSEE VIS - - VIS THE COMPARABLES. ERRONEOUS COMPUTATION OF ARMS LENGTH PRICE OF MSF PAYMENT OF AE AT NIL 6. THE HONBLE DRP/LD. AO ERRED IN COMPUTING THE ARMS LENGTH PRICE OF THE APPELLANTS INTERNATIONAL TRANSACTION PERTAINING TO PAYMENTS OF MSF TO AE AT NIL. ERRONEOUS REJECTION OF THE USE OF MULTIPLE YEAR FINANCIAL DATA FOR COMPUTATION OF THE OPERATING MARGIN OF THE COMPARABLES 7. THE HONBLE DRP/LD. AO ERRED R EJECTING THE MULTIPLE YEAR FINANCIAL DATA USED BY THE APPELLANT FOR COMPUTING THE OPERATING MARGIN OF THE COMPARABLES. II. GROUNDS PERTAINING TO CORPORATE TAX 8. THE HONBLE DRP/LD. AO ERRED IN DISALLOWING THE WARRANTY PROVISION DEBITED TO PROFIT AND LOSS ACCOUNT (P&L) OF INR 2,00,000 ON AN ADHOC BASIS. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. YOUR APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, WITHDRAW, MODIFY AND/OR SUBSTITUTE, AND TO WITHDRAW THE ABOVE GROUNDS OF APPEAL. AND/OR SUBSTITUTE, AND TO WITHDRAW THE ABOVE GROUNDS OF APPEAL. 3 . FROM THE ABOVE, IT IS EVIDENT THAT THE ISSUE S FOR ADJUDICATION INCLUDE BOTH THE TPO ISSUES AS WELL AS THE CORPORATE ISSUES . WE SHALL NOW TAKE UP THE ISSUE S FOR ADJUDICATION . 4. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING ACT IVITY IN OFFICE FURNITURE. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.4,49,84,045/ - . THE CASE WAS SCRUTINIZED U/S 143(3) R.W.S. 92CA(3) OF THE ACT. THE TPO IN HIS ORDER DATED 28.01.2014 SUGGESTED THE ADDITION S OF RS.400,52,467/ - AND RS. 1,64,46,964/ - IN CONNECTION WITH INTERNATIONAL TRANSACTIONS WITH AES. TOTAL OF THESE TP ADJUSTMENT WORKS OUT TO RS.5,64,99,431/ - SUBSEQUENTLY, IN CONNECTION WITH THE PROPOSED ADDITIONS, THE ASSESSEE FILED OBJECTION BEFORE THE DRP AGAINST THE PROPO SALS IN THE DRAFT ASSESSMENT ORDER OF THE ASSESSING OFFICER DATED 05.03.2014. THE DRP PASSED AN ORDER U/S 144C(5) ITA NO. 520 /PUN /201 5 3 OF THE ACT ON 26.12.2014. EVENTUALLY, THE FINAL ASSESSMENT ORDER DATED 27.02.2015 WAS PASSED U/S 143(3) R.W.S. 144C(13) OF THE ACT. THE TOT AL INCOME WAS COMPUT ED AT RS.10,10,95,830/ - AGAINST THE RETURNED INCOME OF RS.4,49,84,045/ - . ASSESSING OFFICER ADDED RS.4,00,52,467/ - AND RS.1,58,59,317/ - ON ACCOUNT OF MARKET SUPPORT SERVICES (MSS) AND MANAGEMENT SERVICES FEE (MSF) RESPECTIVELY. THE DETAI LS OF ADDITIONS ARE EXTRACTED HERE AS UNDER: 5. SUBJECT TO THE ABOVE REMARKS, THE TOTAL TAXABLE INCOME OF THE ASSESSEE IS COMPUTED AS UNDER : PARTICULAR AMOUNT TOTAL INCOME AS PER RETURN OF INCOME 4,49,84,045/ - ADD: TRANSFER PRICING ADJUSTMENT TO I. MARK ET SUPPORT SERVICES 4,00,52,467/ - II. MANAGEMENT FEES 1,58,59,317/ - ADD : WARRANTY EXPENSES 2,00,000/ - ASSESSED INCOME 10,10,95,829/ - ROUNDED OFF TO 10,10,95,830/ - 4.1 AGGRIEVED WITH THE SAID ORDER, ASSESSEE FILED THE PRESENT APPEAL WITH THE GROUNDS ALR EADY EXTRACTED ABOVE. 4.2 GROUNDS RAISED AT 1 TO 7 AND 9 TO 11 RELATE TO THE SAID TP ADDITIONS ON ACCOUNT OF MSS & MSF . GROUND NO.8 PERTAINS TO A CORPORATE ISSUE RELATING TO DISALLOWANCE ON ACCOUNT WARRANTY PROVISION. THE ASSESSEE ALSO RAISED ADDITION AL GROUNDS NO. 9 TO 11 RELATING TP ISSUES . WE SHALL NOW TAKE UP GROUND - WISE ADJUDICATION IN THE PRECEDING PARAGRAPHS OF THE ORDER. A. TP ISSUES : - 5. GROUND NO.1 IS GENERAL IN NATURE AND, THEREFORE, THE SAME DOES NOT REQUIRE ANY SEPARATE ADJUDICATION. ACCOR DINGLY, THE SAME IS DISMISSED AS GENERAL. 6. GROUND NO.2 RELATES TO THE DECISION OF INCLUSION OF FUNCTIONALLY UNCOMPARABLE COMPANY AS A COMPARABLE. THE BACKGROUND FACTS OF THIS ITA NO. 520 /PUN /201 5 4 ISSUE INCLUDES THAT THE ASSESSEE WAS INCORPORATED IN 1997 AND IS WHOLLY OWNED SUBSIDIARY OF HAWORTH INC. USA. THE ASSESSEE PROVIDES MARKETING AND RELATED SUPPORT SERVICES TO HAWORTH SINGAPORE PTE LTD. THE ASSESSEE ALSO MANUFACTURES CHAIR S AT ITS PLANT AT HINJEWADI, PUNE . HAWORTH INC . IS A GLOBAL LEADER IN THE DESIGN AND MANUFACT URE OF ORGANIC, WORKSPACES IS THE FLAGSHIP COMPANY. THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS WORTH OF RS.27.69 CRORES WITH ITS AES . THE DETAILS OF THE SAID TRANSACTIONS OF THE MOST APPROPRIATE METHOD ADOPTED BY THE ASSESSEE ARE TABULATED IN PARA 5 OF THE ORDER OF THE TPO AND T HE SAID PARA IS EXTRACTED AS FOLLOWS : - SR. NO. PARTICULARS AMOUNT IN RS. METHOD ADOPTED 1 PURCHASE OF RAW MATERIAL 2,38,92,792 TNMM 2 PURCHASE OF DISPLAY MATERIAL/PROTOTYPE 6,98,633 TNMM 3 PURCHASE OF GOODS FOR RESA LE 10,43,71,912 TNMM 4 SALE OF GOODS 1,27,91,584/ - TNMM 5 COMMISSION INCOME FOR MARKETING SUPPORT SERVICES 7,95,52,855 TNMM 6 ALLOCATION OF COSTS FOR MANAGEMENT SERVICES 4,00,52,467 TNMM SERVICES 7 ALLOCATION OF SOFTWARE SUPPORT COST 30,42,590 TNMM 8 REIMBURSE MENT OF EXPENSES PAID 56,99,241 ACTUAL 9 REIMBURSEMENT OF EXPENSES RECEIVED 68,13,787 ACTUAL 7 . FROM THE ABOVE , IT IS EVIDENT THAT THE TOTAL INTERNATIONAL TRANSACTIONS ARE WORTH OF RS.27.69 CRORES. THE BENCHMARKING WAS DONE BY THE ASSESSEE USING T NMM METHOD AS THE MOST APPROPRIATE METHOD. THE PLI SELECTED IS OP/TC AND THE SAME IS COMPUTED AT 11.09% . THE PLI OF 6 COMPARABLES WORKS OUT TO 11.60%. HOWEVER, AS PER THE TPO, T HE AVERAGE PLI DATA OF THE COMPARABLES IS COMPUTED AT 25.76%. THE DATA IS TA BULATED IN SUB - PARA 4.2 OF PARA 5.4 OF THE ORDER OF THE TPO IS RELEVANT AND THE SAME IS EXTRACTED AS FOLLOWS : - S.NO. COMPARABLE PLI AS PER TP REPORT PLI ON FY 2009 - 10 DATA ALONE 1 ASIAN BUSINESS EXHIBITION & CONFERENCES LTD. 20.97% 57.54% 2 IDC (INDIA) LTD. 12.79% 14.85% 3 HANSA VISION PVT. LTD. 3.62% N.A. 4 EMPIRE INDUSTRIES LTD. TRADING 11.60% 22.16% ITA NO. 520 /PUN /201 5 5 & INDENTING SEGMENT 5 ENTERTAINMENT NETWORK (INDIA) LTD. EVENTS SEGMENT. 0.22% - 1.53% 6 PRIYA INTERNATIONAL LTD. INDENTING SEGMENT 20.39% 35.74% MEAN 11.60% 25.75% 8 . INCLUSION OF ASIAN BUSINESS EXHIBITION & CONFERENCES LTD. AT SL. NO.1 ABOVE, AS COMPARABLE BY THE TPO IS MATTER OF DISPUTE RAISED IN GROUND NO.2 BY THE ASSESSEE . ON THE DECISION OF TPO IN I NCLUSION OF THE SAID COMPARABLE, THE CA SE OF THE ASSESSEE IS THAT THE SAME IS NOT FUNCTIONALLY COMPARABLE. THEREFORE, THIS NEEDS TO BE EXCLUDED. WITH THE FUNCTION OF EVENT MANAGEMENT RELATING TO EXHIBITION AND EVENTS, SPONSORSHIP, DELEGATES ATTENDING CONFERENCE ETC . THE SAME DISTINCTLY DIFFERE NT FROM THAT OF THE ASSESSEE. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF FURNITURE ON ONE SIDE AND PROVIDING SUPPORT SERVICES ON THE OTHER TO HAWORTH SINGAPORE PTE LTD. 9 . NARRATING THE DIFFERENCE S IN FUNCTIONS OF THE ASSESSEE VIS - - VIS ASIAN BUSINESS EXHIBITION & CONFERENCES LTD., LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID COMPANY WAS HELD TO BE UNCOMPARABLE BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF TIBCO SOFTWARE INDIA PVT. LTD. (ITA NO.276/PUN/2015) . IN THIS REGARD, THE ASSESSEE MAD E FOLLOWING WRITTEN SUBMISSIONS : - FUNCTIONAL COMPARABILITY : ASIAN BUSINESS EXHIBITION AND CONFERENCES LIMITED IS FUNCTIONALLY DIFFERENT FROM T HE APPELLANT AS IT IS PRIMARILY ENGAGED IN EVENT MANAGEMENT, RELATING TO EXHIBITION AND EVENTS, SPONSORSHIP, D ELEGATES ATTENDING CONFERENCE ETC. THE APPELLANT WOULD LIKE TO PLACE RELIANCE ON THE FOLLOWING PRECEDENTS WHEREIN IT IS HELD THAT ASIAN BUSINESS CANNOT BE ACCEPTED AS A COMPARABLE FOR THE YEAR UNDER CONSIDERATION: TIBCO SOFTWARE INDIA PVT. LTD., (ITA NO.27 6/PUN/2015) AY 2010 - 11 PARA 20 TO 25 @ 25. M/S ALCON LABORATORIES PVT. LTD. (IT(TP)A NO.391/BANG/2015), AY 2010 - 11 PARA 4 & 5. ELECTRONICS FOR IMAGING INDIA (P.) LTD. (IT(TP)A NO.212/BANG/2015, AY 2010 - 11 PARA 53 TO 55. RGA SERVICES INDIA (P.) LTD. (ITA NO .22 AND 244/MUM/2015), AY 2010 - 11 PARA 11 & 12. ITA NO. 520 /PUN /201 5 6 ABNORMAL MARGINS : ASIAN BUSINESS CANNOT BE CONSIDERED AS A COMPARABLE ON THE BASIS OF THE SINGLE YEAR DATA BECAUSE OF SIGNIFICANT FLUCTUATIONS IN THE PROFITABILITY DURING THE PREVIOUS FOUR YEARS: FINANCIAL Y EAR TURNOVER MARGINS 2007 - 08 27.48 15.50% 2008 - 09 45.19 24.55% 2009 - 10 53.18 57.48% 2010 - 11 74.10 19.51% THE ABNORMAL INCREASE IN PROFIT DURING THE FY 2009 - 10 IS DUE TO EXISTENCE OF THE FOLLOWING ABNORMAL FACTORS OR ECONOMIC CIRCUMSTANCES: IT IS NOT K NOWN AS TO HOW, FOR AN INCREASE IN TURNOVER OF 18% FOR FY 2009 - 10, THERE IS AN ABNORMAL INCREASE IN PROFITS OF 152% DURING THE YEAR. HOWEVER, FOR IMMEDIATELY SUCCEEDING FY 2010 - 11, WHEN THERE WAS AN INCREASE IN TURNOVER OF 39% THE MARGINS HAVE DROPPED BY 38%. IT IS UNSURE BY OTHER EXPENSE AMOUNTING TO INR 1.5 CRORES INCURRED DURING FY 2008 - 09 WAS NIL DURING FY 2009 - 10. ALSO, IT IS UNSURE WHY AN ADDITIONAL INCOME ENTRY CHARGES AMOUNTING TO INR 1.27 CRORES EARNED DURING FY 2009 - 10 WAS NOT PRESENT IN THE FI NANCIALS OF FY 2008 - 09. THE COMPANY HAS ALSO MADE INITIAL PUBLIC OFFER OF ITS EQUITY SHARES DURING THE YEAR. ALSO, THE APPELLANT CANNOT BE ESTOPPED FROM TAKING A STAND DIFFERENT FROM THE ONE ADOPTED IN THE TRANSFER PRICING DOCUMENT. THE APPELLANT WOULD LIK E TO PLACE RELIANCE ON THE FOLLOWING DECISIONS WHEREIN IT IS HELD THAT THE APPELLANT CAN REJECT COMPARABLES SELECTED IN THE TRANSFER PRICING DOCUMENTS BASED ON THE DETAILS AVAILABLE LATER ON: RGA SERVICES INDIA (P.) LTD. (ITA NO.22 AND 244/MUM/2015), AY 20 10 - 11 PARA 12. TIBCO SOFTWARE INDIA PVT. LTD., (ITA NO.276/PUN/2015) AY 2010 - 11 PARA 24. 10 . FURTHER, LD. COUNSEL READ OUT THE RELEVANT PARAGRAPHS FROM THE ABOVE CITED DECISIONS OF THE TRIBUNAL IN VARIOUS CASES. IT IS EVIDENT FROM AB OVE THAT APART FROM FUNCTIONAL DIFFERENCE S THE ASIAN BUSINESS EXHIBITION AND CONFERENCES LTD. SUFFERS FROM THE PROBLEM OF ABNORMAL MARGINS . THEREFORE, IT CANNOT BE CONSIDERED AS A GOOD COMPARABLE . RELYING ON THE DATA MENTIONED ABOVE, LD. COUNSEL READ OUT THE FLUCTUATING MARG IN S VARYING FROM 15.50% TO 57.48%. ON THIS REASONING, T HE SAID CASE IS HELD AS NOT COMPARABLE BY THE TRIBUNAL AND READ OUT THE RELEVANT PARAGRAPHS FROM THE ORDER OF THE TRIBUNAL . 11 . THE LD. DR FOR THE REVENUE ON THE OTHER HAND RELIED HEAVILY ON THE ORDER OF THE ASSESSING OFFICER. ITA NO. 520 /PUN /201 5 7 12 . WE HAVE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE ON THIS ISSUE WITH REGARD TO THE INCLUSION OF ASIAN BUSINESS EXHI BITION AND CONFERENCES LIMITED AS NOT A GOOD COMPARABLE FUNCTIONALLY AS WELL AS ON THE BASIS OF ABNORMAL MARGINS TOO . THERE IS NO DISPUTE ON THE FACT THAT THE FUNCTIONS OF THE ASIAN BUSINESS EXHIBITION AND CONFERENCES LIMITED IS INCLUDED CONDUCTING THE EVENT MANAGEMENT RELATING TO EXHIBITION AND EVENTS, SPONSORSHIP, DELEGATES ATTENDING CONFERENCE ETC . UNLIKE THE CASE OF THE ASSESSEE WHERE IT IS ENGAGED IN MANUFACTURING AND TRADING OF FURNITURE AS WELL AS PROVIDING SUPPORT SERVICES. THESE SERVICES RENDERED BY THE ASSESSEE ARE ENTIRELY DIFFERENT FROM ASIAN BUSINESS EXHIBITION AND CONFERENCES LIMI TED. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, WE PROCEED TO EXTRACT THE CONTENTS OF PARA 25 OF THE ORDER OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF TIBCO SOFTWARE INDIA PVT. LTD. (SUPRA), COPY OF WHICH IS PLACED AT PAGE 23 OF THE PAPER BOOK . THE SAI D PARA READS AS UNDER : - 25. THE TPO IN ORDER TO BENCHMARK THE SEGMENT OF MARKETING SUPPORT SERVICES UNDERTAKEN BY THE ASSESSEE HAD SELECTED ASIAN BUSINESS EXHIBITION AND CONFERENCES LTD. THE ASSESSEE ALSO IN THE TP STUDY REPORT HAD INCLUDED THE SAID CONC ERN AS COMPARABLE ON THE BASIS OF AVERAGE MARGINS OF PRECEDING YEARS. HOWEVER, DURING TP PROCEEDINGS, THE TPO DIRECTED THE ASSESSEE TO APPLY THE MARGINS OF INSTANT ASSESSMENT YEAR AND THE ASSESSEE IN THIS REGARD, FURNISHED CURRENT MARGINS OF SELECTED COMPA NIES. IN RESPECT OF ASIAN BUSINESS EXHIBITION AND CONFERENCES LTD., IT WAS POINTED OUT BY THE ASSESSEE BEFORE THE TPO AND THE DRP THAT THE SAID CONCERN WAS FUNCTIONALLY NOT SIMILAR IN VIEW OF REVENUE EARNED BY THE SAID CONCERN DURING THE YEAR. ANOTHER POIN T WHICH IS RAISED BY THE ASSESSEE IS THAT SIMILAR CONCERN I.E. SPORTING AND OUTDOOR AD AGENCY PVT. LTD. WAS REJECTED BY THE TPO HIMSELF THAT THE ACTIVITIES OF THE SAID CONCERN WERE NOT COMPARABLE TO THE ASSESSEE. WHILE SELECTING THE COMPARABLE COMPANIES, F UNCTIONAL COMPARABILITY OF THE CONCERNS IS THE FIRST STEP WHICH HAS TO BE TAKEN NOTE OF. IN CASE THE CONCERN IS ENGAGED IN A BUSINESS OTHER THAN THE BUSINESS OF TESTED PARTY, THEN SUCH CONCERN CANNOT BE PICKED UP AS COMPARABLE. ADMITTEDLY, THE ASSESSEE IN ITS TP STUDY REPORT HAD SELECTED ASIAN BUSINESS EXHIBITION AND CONFERENCES LTD. AS COMPARABLE. HOWEVER, WHEN IT ANALYZED THE PROFILE OF THE SAID CONCERN FOR THE ACCOUNTING PERIOD, THEN IT HAS FOUND THAT THE REVENUE EARNED BY THE SAID CONCERN WAS FROM EXHIB ITION AND EVENTS I.E. FROM SALE / LEASE OF STALLS SPACE IN EXHIBITION AND EVENTS. THE ASSESSEE ON THE OTHER HAND, IS PROVIDING MARKETING SUPPORT SERVICES TO ITS ASSOCIATE ENTERPRISES AND THE CONCERN ENGAGED IN SALE / LEASING OUT THE STALLS SPACE IN EXHIBIT ION AND EVENTS IS EARNING INCOME IN THE NATURE OF RENT AND THE SAME COULD NOT BE COMPARED WITH THE SERVICES UNDERTAKEN BY THE ASSESSEE. THE TPO HAD ALSO EXCLUDED ANOTHER CONCERN I.E. SPORTING AND OUTDOOR AD AGENCY PVT. LTD. ON THE GROUND THAT ITS INCOME FR OM HOARDING AND MOUNTING CHARGES. ANOTHER ASPECT OF THE ITA NO. 520 /PUN /201 5 8 COMPARABILITY TO BE CONSIDERED IS THE DRASTIC FLUCTUATIONS IN THE OPERATING MARGINS OF SAID CONCERN. THE SAID CONCERN WAS SHOWING LOWER OPERATING MARGINS IN EARLIER AS WELL AS LATER YEARS AS AGAINST T HE OPERATING MARGINS OF 57.48% SHOWN DURING THE YEAR. ON SUCH GROUND, THE SAID CONCERN IS TO BE REJECTED FROM THE FINAL SET OF COMPARABLES ON THE BASIS OF RATIO LAID DOWN BY THE SPECIAL BENCH OF TRIBUNAL IN MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. VS. ACIT (SUPRA). ANOTHER ASPECT WAS RAISED BY BOTH THE TPO AND THE DRP WAS THE SELECTION OF SAID CONCERN BY THE ASSESSEE. HOWEVER, SINCE THE ASSESSEE HAS POINTED OUT THAT DIFFERENCES IN THE SAID CONCERN WHICH ARE MATERIAL ITSELF, THEN EVEN IF THE SAID CONCERN WAS ORIGINALLY PICKED UP AS COMPARABLE BUT THE ASSESSEE COULD NOT BE STOPPED FROM POINTING OUT THAT THE SAID CONCERN WAS WRONGLY TAKEN AS COMPARABLE. ACCORDINGLY, WE DIRECT THE TPO TO EXCLUDE ASIAN BUSINESS EXHIBITION AND CONFERENCES LTD. FROM THE FINAL SET OF COMPARABLES. 13 . ASIAN BUSINESS EXHIBITION AND CONFERENCES LIMITED WAS CONSIDERED BY THE TRIBUNAL OF BANGALORE BENCH. W E ALSO PERUSED THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S ALCON LABORATORIES PVT. LTD. VIDE IT(TP) A NO.391/BANG/2015 DATED 21.11.2017, COPY OF WHICH IS PLACED AT PAGE 55 OF THE PAPER BOOK AND FIND THE CONTENTS OF PARA 5 ARE RELEVANT AND THE SAME ARE EXTRACTED AS UNDER : - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE IN 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THESE TWO TRIBUNAL ORDERS CITED BY THE LEARNED AR OF THE ASSESSEE FOR SAME ASSESSMENT YEAR. WE FIND THAT IN PARA 8 OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF DCIT VS. ELECTRONICS FOR IMAGING INDIA PVT. LTD. (SUPRA), THE PROFILE OF THAT ASSESSEE WAS NOTED AND AS PER THE SAME, THAT ASSESSEE WAS ENGAGED IN SOFTWARE DEVELOPMENT SERVICES AND SALES & MARKETING SUPPORT SERVICES. BOTH WERE BENCHMARKED SEPARATEL Y AND THE PARAS OF THE TRIBUNAL ORDER REFERRED TO BEFORE US ARE IN RESPECT OF MARKETING SUPPORT SERVICES. IN THE PRESENT CASE ALSO, THE DISPUTE IS REGARDING MARKETING SUPPORT SERVICES PROVIDED BY THE ASSESSEE. HENCE, THE PROFILE OF THE PRESENT ASSESSEE AND ELECTRONICS FOR IMAGING INDIA PVT. LTD. IS SAME. HENCE, WE RESPECTFULLY FOLLOW THIS TRIBUNAL ORDER AND HOLD THAT IN THE PRESENT CASE ALSO, THIS COMPARABLE I.E. ASIAN BUSINESS EXHIBITION & CONFERENCES LTD. SHOULD BE EXCLUDED FROM THE FINAL LIST OF COMPARAB LE. 14 . CON SIDERING THE ABOVE DECIDED CASES , WE ARE OF THE OPINION THAT THE ASSESSEE S REQUEST FOR EXCLUSION OF ASIAN BUSINESS EXHIBITION AND CONFERENCE LIMITED WITH THE FUNCTIONS OF EVENT MANAGEMENT CUM EVENT CONFERENCES, IS FAIR AND REASONABLE. ACCO RDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE STANDS ALLOWED. ITA NO. 520 /PUN /201 5 9 15 . GROUND NO. 3 PERTAINS TO EXCLUSION OF THREE OTHER COMPARABLES NAMELY (I) EMPIRE INDUSTRIES LIMITED, (II) ENTERTAINMENT NETWORK (INDIA) LIMITED AND (III) HANSA VISION PRIVATE LIMITED. 1 6. B EFORE US, LD. COUNSEL FO R THE ASSESSEE DID NOT INSIST ON THE CLAIM OF EXCLUSION OF M/S. ENTERTAINMENT NETWORK (INDIA) LIMITED. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 17 . REGARDING THE CORRECTNESS OF TPOS DECISION OF EXCLUSION OF M/S. EMPIRE I NDUSTRIES LIMITED ON ONE SIDE AND M/S. HANSA VISION PRIVATE LIMITED ON THE OTHER, B EFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EMPIRE INDUSTRIES LIMITED IS ENGAGED IN PROVIDING INDENTING SERVICES AND, THEREFORE, THE SAID COMPANY IS COMPARAB LE TO FUNCTION OF THE ASSESSEE . THESE SERVICES BECAME SIMILAR AND COMPARABLE TO EACH OTHER. THEREFORE, IT BECOMES A GOOD COMPARABLE. ON THE ABOVE STATED AKINNESS OF SERVICES, LD. BECOMES A GOOD COMPARABLE. ON THE ABOVE STATED AKINNESS OF SERVICES, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF PUNE BENCH OF THE TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 - 10. BRINGING OUR ATTENTION TO THE SAID DECISION OF THE TRIBUNAL, WHICH IS PLACED AT PAGE 1 OF THE PAPER BOOK, LD. COUNSEL READ OUT THE CONTENTS OF PARA 13 OF THE SAID ORDER AND THE SAME IS EXTRACTED HERE UNDER : - 13. THE ASSESSEE IN GROUND NO.5 HAS PRAYED FOR INCLUDING EMPIRE INDUSTRIES LIMITED IN THE FINAL LIST OF COMPARABLES. THE TPO HAS EXCLUDED THE SAID COMPANY FROM THE LIST OF COMPARABLES AFTER SEGREGATION OF TRADING/DISTRIBUTION ACTIVITIES OF THE A SSESSEE FROM MSS SEGMENT. SINCE, WE HAVE ALREADY HELD THAT DISTRIBUTION ACTIVITIES ARE NOT TO BE EXCLUDED FROM MSS SEGMENT, THE EXCLUSION OF EMPIRE INDUSTRIES LIMITED FROM THE FINAL SET OF COMPARABLES HAS TO BE REVERSED. 18 . FROM THE ABOVE, IT IS EVIDEN T THAT THE FUNCTIONS OF EMPIRE INDUSTRIES LIMITED IS HELD COMPARABLE TO THE SUPPORTING SERVICES RENDERED BY THE ASSESSEE. THEREFORE, THE SAME CONSTRUED BY THE TRIBUNAL IN OWN CASE AS A GOOD COM PARABLE. THE ORDER OF THE TPO STANDS REVERSED AND THE SAME I S ITA NO. 520 /PUN /201 5 10 HELD TO BE RELEVANT FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THIS PART OF THE GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. 19 . REGARDING THE CORRECTNESS OF TPOS DECISION OF EXCLUSION OF M/S. HAN SA VISION PRIVATE LIMITED , T HE CASE OF THE REVENUE IS THAT THE SAME COULD NOT BE A GOOD COMPARABLE WHEN THE RELEVANT DATA IS NOT AVAILABLE ON RECORD. IN THIS REGARD, BRING ING OUR ATTENTION TO THE ORDER OF THE DRP, LD. COUNSEL FOR THE ASSESSEE MENTIONED THAT RELEVANT DATA WAS MADE AVAILABLE BEFORE THE DRP. CONSEQUENTLY, THE DRP IN PARA 2.4.1 TO 2.4.3 DIRECTING THE ASSESSING OFFICER/TPO TO ACCEPT THE COMPANY SUBJECT TO THE SATISFACTION OF THE CONDITIONS/FILTERS SAID BY THE TPO. ON PERUSAL OF THE CONTENTS OF PARA 2.4.3, WE FIND THE SAID PARA IS RELEVANT FOR EXTRACTION, WHICH READ AS UNDER : - 2.4.3 WE HAVE CONSIDERED THE FACTS. WE FIND THAT THE ASSESSEE DID NOT INCLUDE THIS COMPANY IN THE LIST OF THE COMPARABLE COMPANIES BECAUSE ITS ANNUAL REPORT WAS NOT AVAILABLE AT THE TIME OF CONDUCTING OF TP ANNUAL REPORT WAS NOT AVAILABLE AT THE TIME OF CONDUCTING OF TP STUDY. IT IS NOT SELECTED BY CONDUCTING FRESH SEARCH. NOW ITS ANNUAL REPORT IS AVAILABLE. THEREFORE, WE DIRECT THE LEARNED AO TO ACCEPT THIS COMPANY IF IT SATISFIES ALL THE FILTERS USED BY THE LEARNED TPO INCLUDING THAT OF ITS FUNCTIONAL COMPARABILITY BECAUSE ITS ANNUAL REPORT HAS BECOME AVAILABLE NOW AND THE LEARNED TPO HAS NOT EXAMINED COMPARABILITY OF THIS COMPANY. IF THE COMPANY FAILS ANY SINGLE FILTER USED BY THE LEARNED TPO, THEN IT WILL BE EXCLUDED FROM THE LIST OF THE COMPARABLE COMPANIES. 20 . ON P ERUSAL OF THE SAME, THE DIRECTION GIVEN BY THE DRP IS FAIR AND REASONABLE. T HE ASSESSING OFFICER WAS ALREADY DIRECTED TO ACCEPT THE HANSA VISIION PRIVATE LIMITED AS A GOOD COMPARABLE SUBJECT TO THE CONDITIONS SPECIFIED THEREIN. ASSESSING OFFICER IS DIRECTE D TO GIVE EFFECT TO THE ORDERS OF THE DRP. FOR THIS PURPOSE OF GIVING EFFECT, THIS PART OF THE ISSUES STANDS REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR APPROPRIATE ACTION AFTER GIVING OPPORTUNITY TO THE ASSESSEE. ACCORDINGLY, THIS PART OF GROUND IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 520 /PUN /201 5 11 21 . GROUND NO.4 RELATES TO REJECTION OF FRESH SEARCH CONDUCTED TO THE ASSESSEE FOR ITS MSS SEGMENT. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID ISSUE BECOMES ACADEMIC IF RELIEF IS GRANTED ON THE ISSUES MENTIONED IN GROUND NO.2 AND 3 ABOVE. CONSIDERING THE RELIEF ALREADY SPECIFIED IN THE PRECEDING PARAGRAPHS OF THIS ORDER, WE FIND THE SAID GROUND NEEDS TO BE DISMISSED AS NOT PRESSED. 22 . GROUND NO.5 RELATES TO REJECTION OF THE CLAIM RELATING TO THE GRANT OF RISK ADJUSTMENT. THE DRP/ASSESSING OFFICER REJECTED THE ASSESSEES REQUEST FOR ECONOMIC ADJUSTMENTS PERTAINING TO RISK BORNE BY THE ASSESSEE VIS - - VIS COMPARABLES. LD. COUNSEL MENTIONED THAT THE CLAIM OF RISK ADJUSTMENT ARISES FOR THE FIRST TIME IN THIS ASSESSMENT YEAR. THIS CLAIM WAS NOT MADE IN THE EARLIER ASSESSMENT YEARS BEFORE THE REVENUE AUTHORITIES. IN THIS REGARD, LD. AR VEHEMENTLY ARGUED THAT THE ASSESSEE IS A RISK - FREE ENTITY WHEREAS THE COMPARABLES ARE NOT. HENCE, THERE IS REQ UIREMENT FOR GRANT OF WHEREAS THE COMPARABLES ARE NOT. HENCE, THERE IS REQ UIREMENT FOR GRANT OF RISK ADJUSTMENT TO THE COMPARABLES FOR THEM TO BECOME GOOD COMPARABLE S . IN THIS REGARD, LD. COUNSEL RELIED ON THE CONTENTS OF RULE 10B OF THE INCOME TAX RULES, 1962 ONE SIDE AND VARIOUS DECISIONS SUCH AS HELLOSOFT INDIA PVT. LTD. (IT A NO.645/HYD/2009 AND 1411 OF 2010) AND SONY INDIA PRIVATE LIMITED VS. ADDL. CIT (ITA NO.4008, 4994/DEL/2010) ON THE OTHER. LD. COUNSEL SUBMITTED THAT THE RISK ADJUSTMENTS ARE REQUIRED TO BE GIVEN WHEN THE COMPARABLES ARE RISK BEARING ENTITIES UNLIKE THE ASSESSEE. BRINGING OUR ATTENTION TO THE CONTENTS OF PAGE 32 OF THE ORDER OF THE DRP WHERE THE DRP DISCUSSED THIS ISSUE BEFORE DENYING THE RISK ADJUSTMENTS, LD. COUNSEL FIND S FAULT WITH THE ORDER OF THE DRP/TPO AND SUBMITTED THAT THE ORDER OF THE DRP/TPO/A SSESSING OFFICER ON THIS ISSUE NEEDS REVERSED. ITA NO. 520 /PUN /201 5 12 23 . ON H EARING BOTH THE SIDES , ON THE NEED FOR GRANTING RISK ADJUSTMENT, WE ARE OF THE OPINION THAT THE SAID RULE 10B OF THE RULES PROVIDES THE LAW FOR GRANT OF RISK ADJUSTMENT . THIS ISSUE WAS DECIDED BY THE TRIBUNAL AND THE DECISION IN THE CASE OF SONY INDIA PRIVATE LIMITED (SUPRA) IS RELEVANT AND PROVIDE NEEDFUL GUIDANCE IN SUCH MATTERS . WE ALSO CONSIDERED THE ASSESSEE S REQUEST FOR GRANTING SOME ADJUSTMENT ON AD - HOC BASIS. CONSIDERING THE ABOVE, IN PRINC IPLE, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO RISK ADJUSTMENTS. A QUANTUM OF SUCH ADJUSTMENTS HAS TO BE DECIDED BY THE ASSESSING OFFICER/TPO/DRP AFTER CONSIDERING THE FACTS OF THE PRESENT CASE AND ALSO IN THE LIGHT OF JUDGEMENTAL LAW IN EXI STENCE . THE ASSESSEE IS DIRECTED TO PROVIDE THE REQUISITE DATA BEFORE THE ASSESSING OFFICER/TPO FOR ADJUSTING THE REASONABLE INFERENCE TO THE EXTENT OF RISK ADJUSTMENT. ACCORDINGLY, THIS PART OF GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 24 . GROUND NO. 6 RELATES TO DETERMINATION OF ALP OF THE TRANSACTION OF MSF CHARGES . THE ASSESSING OFFICER/TPO MADE ADJUSTMENT ON ACCOUNT OF MANAGEMENT SERVICE FEES AMOUNTING TO RS.4,00,52,467/ - . THIS AMOUNT WAS PAID TO HAWORTH HONG KONG LIMITED PURSUANT TO A CONTRACT. THIS COMPANY PROVIDES CERTAIN SUPPORT SERVICES IN THE NATURE OF ADMINISTRATIVE AND MARKETING SUPPORT, COORDINATING STRATEGIES, HELP IN FINANCING ETC. THIS SERVICE FEES WAS CHARGED BY IT COMPRISING OF ONLY COST WITHOUT ANY MARK - UP. THE CASE OF THE RE VEN UE IS THAT THE ASSESSEE IS NOT POSITION TO FURNISH THE DETAILS FOR HELPING THE TPO TO CONDUCT THE BENCHMARKING OF THE TRANSACTIONS. CONSIDERING THE NON - SUBMISSION OF DETAILS, THE ASSESSING OFFICER DENIED THE CLAIM OF MS C HARGES PAID AND TREATED THE ALLOWA BLE EXPENDITURE IS NIL ON THIS COUNT. THE DRP DEALT WITH THIS ISSUE IN PARA ITA NO. 520 /PUN /201 5 13 2.2.6 OF ITS ORDER. N UMBER OF DECISIONS WERE RELIED BY THE DRP BEFORE CONFIRMING THE ORDER OF THE TPO/ASSESSING OFFICER. 25 . BEFORE US, LD. COUNSEL FOR THE ASSESSEE MADE FOLLOWIN G WRITTEN SUBMISSIONS. THE SAME ARE EXTRACTED HEREUNDER : - TH E APPELLANT HAS AVAILED CERTAIN SUPPORT SERVICES SUCH AS GLOBAL SOURCING, PRODUCT DEVELOPMENT, MARKETING, HUMAN RESOURCE SERVICES, INFORMATION TECHNOLOGY, ETC. FROM ITS GROUP COMPANIES. THE AE S CHARGE ALL THE GROUP COMPANIES FOR PROVIDING SUCH SERVICES ON COST TO COST BASIS WITHOUT ANY MARKUP. THE APPELLANT HAS BENCHMARKED THE INTERNATIONAL TRANSACTIONS INCLUDING MANAGEMENT CHARGES ON AN AGGREGATE BASIS UNDER TRANSACTIONAL NET MARGIN METHOD ( TNMM) UNDER THE MANUFACTURING AND TRADING SEGMENT. THE MARGIN OF THE APPELLANT IN THE MANUFACTURING AND TRADING SEGMENTS WERE HIGHER THAN THE MARGIN OF THE COMPARABLE COMPANIES. HENCE, THE PAYMENT IS AT ARMS LENGTH. THE TPO HAS ACCEPTED TNMM FOR BENCH MARKING THE OTHER INTERNATIONAL TRANSACTIONS. HOWEVER IN RESPECT OF MANAGEMENT CHARGES, THE TPO PROPOSED TO BENCHMARK THE SAME SEPARATELY. THE TPO HAS BENCHMARKED THE MANAGEMENT CHARGES SEPARATELY, PURPORTEDLY USING CUP AND DETERMINED THE ALP TO BE NIL WI THOUT CONDUCTING ANY INDEPENDENT CUP ANALYSIS TO DETERMINE THE PRICE CHARGED BY INDEPENDENT THIRD PARTIES UNDER COMPARABLE UNCONTROLLED SITUATION. FURTHER, IN ABSENCE OF COMPARABLE COMPANIES, CUP CANNOT BE CONSIDERED AS THE MOST APPROPRIATE METHOD. METHOD. ALSO, THE MANAGEMENT SERVICES RENDERED BY THE AES ARE INTRICATELY INTERCONNECTED WITH THE OVERALL MANUFACTURING AND TRADING OPERATIONS, AND IT IS NOT POSSIBLE TO DISAGGREGATE THEM INTO INDEPENDENT TRANSACTION AND DETERMINE THE ALP OF EACH SUCH TRANSACTIONS UNDER CUP SEPARATELY. ALSO, THE TPO STATED THAT THE APPELLANT DID NOT SUBMIT ANY EVIDENCES TO RECEIPT OF SERVICES, COSTS INCURRED AND ITS NEED AND BENEFIT. THE APPELLANT HAS NOW SUBMITTED EVIDENCES SUCH AS EMAIL EVIDENCES, THIRD PARTY INVOICES AND COST ALLOCATI ON WORKINGS TO PROVE THE RECEIPT OF SERVICES, ITS NEED AND BENEFITS. ALSO, IT IS TO BE NOTED THAT THESE COSTS ARE ALLOCATED TO ALL THE GROUP COMPANIES ON A SCIENTIFIC BASIS. IN THE APPELLANTS OWN CASE FOR AY 2009 - 10 IN ITA NO.281/PUN/2014 AT PARA 15 AND F OR AY 2011 - 12 IN ITA NO.109/PUN/2016 PARA THIS HONBLE ITAT HAS REMANDED THE MATTER RELATING TO MANAGEMENT CHARGES BACK TO THE TPO TO DETERMINE THE MATTER AFRESH IN THE LIGHT OF THE ADDITIONAL EVIDENCES FILED. 2 6. FROM THE ABOVE, IT IS EVIDENT THAT THE S IMILAR ISSUE WAS A SUBJECT - MATTER OF THE ADJUDICATION BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009 - 10. THE TRIBUNAL PASSED THE ORDER VIDE ITA NO.281/PUN/2014 FOR ASSESSMENT YEAR 2009 - 10 AND ITA NO.109/PUN/2016 FOR ASSESSMENT YEAR 2011 - 1 2. WE HAVE PERUSED THE SAID ORDER OF THE TRIBUNAL AND FIND THE TRIBUNAL REMANDED THIS ISSUE FOR ITA NO. 520 /PUN /201 5 14 BOTH THE ASSESSMENT YEARS TO THE FILE OF THE TPO TO DETERMINE THE MATTER AFRESH IN THE LIGHT OF THE ADDITIONAL EVIDENCES FILED BEFORE HIM. WE PERUSED THE OR DER OF THE TRIBUNAL AND FIND THE ISSUE OF ADJUSTMENTS ON ACCOUNT OF MANAGEMENT SERVICE FEES WAS DEALT WITH IN PARA 6 OF THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2011 - 12 (SUPRA). WE PROCEED TO EXTRACT THE RELEVANT PARA 6 OF THE SAID ORDER, WHICH READ S AS UNDER : - 6. THE TPO HAS MADE ADJUSTMENT IN RESPECT OF MANAGEMENT SERVICE FEES ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SHOW NEED FOR SERVICES AND BENEFIT RECEIVED . THE TPO AND THE DRP HAVE CATEGORICALLY OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY SUPPORTING DOCUMENTS TO SUBSTANTIATE ANY SERVICES RENDERED BY THE AE AND THE BENEFITS DERIVED BY THE ASSESSEE FROM SUCH SERVICES. THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING 182 PAGES AS ADDITIONAL EVIDENCE IN THE FORM OF THIRD PARTY INVOICES , E - MAIL CORRESPONDENCE, REPORT ON MANAGEMENT CHARGES AND COST ALLOCATION WORKINGS IN SUPPORT OF THE SERVICES RECEIVED AND TO SUBSTANTIATE THE BENEFITS D ERIVED BY THE ASSESSEE/APPELLANT. THE LD. AR OF THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT OF THE FINANCE DIRECTOR OF THE ASSESSEE COMPANY CITING REASONS FOR NON - FURNISHING OF SUPPORTING DOCUMENTS BEFORE THE AUTHORITIES BELOW. THE RELEVANT EXTRACT OF THE AFF IDAVIT READS AS UNDER : UNDER : 6. I UNDERSTAND THAT THE DETAILS/EVIDENCES COULD NOT BE FURNISHED DURING THE ASSESSMENT PROCEEDINGS FOR THE FOLLOWING REASONS: A. DURING THE YEAR 2012, THERE WAS LABOUR UNREST AND PROTEST BY THE LABOUR UNION IN THE PUNE FACTORY O F THE APPELLANT. B. OWING TO THE ABOVE AND ALSO DUE TO OTHER BUSINESS REASONS, THE APPELLANT DECIDED TO MOVE THE FACTORY FROM PUNE TO CHENNAI. C. DURING THE MIDDLE OF YEAR 2013, POST IDENTIFYING THE PLACE IN CHENNAI, THE APPELLANT ANNOUNCED THE CLOSURE O F THE FACTORY AT PUNE AND ALSO ANNOUNCED VOLUNTARY RETIREMENT SCHEME FOR ITS EMPLOYEES. D. POST ANNOUNCEMENT OF THE CLOSURE OF THE FACTORY AT PUNE, THE THEN FINANCE DIRECTOR AND CERTAIN OTHER EMPLOYEES RESIGNED FROM THE OFFICE OF THE APPELLANT. E. SUBSEQ UENTLY, THE APPELLANT APPOINTED ANOTHER DIRECTOR, MR. ARAVIND DEVARAKONDA, DURING JULY 2013 IN PLACE OF ERSTWHILE DIRECTOR. HOWEVER, SINCE HE WAS NEW TO THE ORGANISATION AND ALSO THERE WERE NO RELEVANT SUPPORT STAFF IN PUNE OFFICE, WAS NOT IN A POSITION TO COLLATE THE NECESSARY INFORMATION. FURTHER, DUE TO LABOUR UNREST AND UNION ISSUES, ENTRY OF PEOPLE INTO THE FACTORY WAS OFTEN INTERRUPTED. F. BY DECEMBER 2014, THE APPELLANT ENTIRELY SHIFTED ITS FACTORY FROM PUNE TO CHENNAI. IT IS ALSO UNDERSTOOD THAT SE VERAL DOCUMENTS WERE MISPLACED DURING THE PROCESS OF SHIFTING THE OFFICE FROM PUNE TO CHENNAI. G. IN FACT THE STATUTORY AUDIT FOR THE FINANCIAL YEAR 2013 - 14 AND FINANCIAL YEAR 2014 - 15 WAS DELAYED AND WAS CONCLUDED ONLY IN SEPTEMBER, 2016. 7. IN THE MEANW HILE, DRP PROCEEDINGS TOOK PLACE DURING DECEMBER 2015 AND FOR THE AFORESAID REASONS THE EVIDENCES COULD NOT BE FURNISHED EVEN AT THAT STAGE AS WELL. HENCE, THE DRP CONFIRMED THE ADDITION MADE BY THE TPO AND UPHELD THE DISALLOWANCE MADE WITH RESPECT TO THE MSF CHARGES VIDE ITS DIRECTION DATED 09.12.2015. ITA NO. 520 /PUN /201 5 15 8. DURING SEPTEMBER 2016, I WAS APPOINTED AS THE FINANCE DIRECTOR AND SUBSEQUENTLY DUE TO MY RENEWED EFFORTS WE WERE ABLE TO COLLATE THE RELEVANT DOCUMENTS. IN FACT, I HAD TRAVELLED TO THE REGIONAL HEADQUAR TERS (MALAYSIA) DURING JANUARY 2017 FOR MEETING THE RELEVANT PERSONNEL AT THE REGIONAL HEADQUARTERS AND SEEKING THEIR SUPPORT THEREOF. PURSUANT TO THESE EFFORTS UNDERTAKEN, I WAS ABLE TO COLLATE NECESSARY DOCUMENTS IN CONNECTION WITH RECEIPT OF MANAGEMENT CHARGES IN THE MID OF 2017. SINCE THE INFORMATION WAS COLLATED FOR ASSESSMENT YEARS STARTING FROM ASSESSMENT YEAR 2009 - 10, THE DETAILS RELATING TO THE PRECEDING ASSESSMENT YEARS, I.E., AY 2009 - 10 AND AY 2010 - 11 WERE COLLATED AND FILED IN THE YEAR 2017. SI MILARLY, THE EVIDENCES RELATING THE SUBJECT ASSESSMENT YEAR WAS COLLATED AND WAS FILED AS ADDITIONAL EVIDENCE ON 23 MARCH 2018 BEFORE THIS HON BLE INCOME TAX APPELLATE TRIBUNAL. AFTER EXAMINING THE CONTENTS OF THE AFFIDAVIT WE ARE SATISFIED THAT THE ASSE SSEE WAS PREVENTED FROM FURNISHING THE NECESSARY DOCUMENTS TO SUBSTANTIATE ITS CLAIM ON ACCOUNT OF LABOUR UNREST RESULTING IN ASSESSEE SHIFTING ITS FACTORY FROM PUNE TO CHENNAI. IN THE LIGHT OF BONAFIDE REASONS, WE ADMIT THE ADDITIONAL EVIDENCES FILED BY A SSESSEE IN THE PAPER BOOK. WE FURTHER OBSERVE THAT IN ASSESSMENT YEAR 2009 - 10 SIMILAR ADJUSTMENT REJECTING ALP OF THE MANAGEMENT SERVICE FEES PAID BY THE ASSESSEE TO ITS AE WAS MADE. THE TRIBUNAL AFTER ADMITTING ADDITIONAL EVIDENCE RESTORED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER/TPO FOR EXAMINATION AND DECIDING THE ISSUE AFRESH. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL IN ITA NO. 281/PUN/2014 (SUPRA) READS AS UNDER : 15. THE ASSESSEE HAS PAID MANAGEMENT SERVICE FEE TO ITS AE HAWORTH HONG KONG LTD. THE MANAGEMENT TEAM OF HAWORTH GROUP IS PROVIDING GUIDELINES AND STRATEGIC DIRECTIONS TO THE GROUP AS WHOLE INCLUDING THE ASSESSEE. IT HAS BEEN CONTENDED THAT THE SALARY AND OVERHEADS ARE POOLED IN HAWORTH HONG KONG LTD. THEN THE COSTS ARE OVERHEADS ARE POOLED IN HAWORTH HONG KONG LTD. THEN THE COSTS ARE ALLOCA TED TO ALL GROUP ENTITIES ON THE BASIS OF SALES. THE LD. AR POINTED THAT CHARGES ARE ALLOCATED ON COST BASIS ALONE AND NO MARK UP IS CHARGED BY HAWORTH HONG KONG LTD. THE ASSESSEE HAS GIVEN THE DETAILS OF BENEFITS DERIVED BY THE ASSESSEE FROM THE MANAGEMEN T SERVICE RENDERED BY ITS AE HAWORTH HONG KONG LTD. AT PAGE 282 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO FILED ADDITIONAL EVIDENCE IN RESPECT OF MANAGEMENT SERVICES PROVIDED BY ITS AE. IN VIEW OF FRESH EVIDENCE FURNISHED BY ASSESSEE, WITHOUT COMMENTING ON THE MERITS, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO FILE OF ASSESSING OFFICER/TPO FOR DE NOVO ADJUDICATION. THE ASSESSING OFFICER SHALL CONSIDER FRESH DOCUMENTS FILED BY ASSESSEE AND ALL OTHER RELEVANT DOCUMENTS. THE ASSESSING OFFICER SHALL ALSO GRANT OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE ISSUE, IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUND NO. 7 RAISED IN THE APPEAL BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. THUS, IN VIEW OF THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AND THE DECISION OF CO - ORDINATE BENCH IN ASSESSEE S OWN CASE IN ASSE SSMENT YEAR 2009 - 10, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER/TPO TO RE - ADJUDICATE THE ISSUE AFTER CONSIDERING THE ADDITIONAL EVIDENCE FILED BY TH E ASSESSEE BEFORE THE TRIBUNAL. NEEDLESS TO SAY, THE TPO/ASSESSING OFFICER SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE ISSUE DE - NOVO, IN ACCORDANCE WITH LAW. THE GROUND NO. 1 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 27 . LIKE IN A.YS. 2009 - 10 & 2011 - 12, ASSESSEE FURNISHED AFFIDAVIT DATED 25.07.2018 AND NEW EVIDENCES FOR DECIDING THE ISSUE IN THE YEAR TOO AND ITA NO. 520 /PUN /201 5 16 REQUESTED FOR REMANDING THIS ISSUE TOO TO THE FILE OF THE ASSESSING OFFICER/TPO. F ROM THE ABOVE, IT IS EVIDENT THAT THE TRIBUNAL REMANDED THE MATTER TO THE FILE OF THE TPO/ASSESSING OFFICER AFTER CONSIDERING THE CONTENTS OF THE AFFIDAVIT AND ADDITIONAL EVIDENCES FILED BEFORE THE TRIBUNAL. WITH THE SIMILAR DIRECTION , WE REMAND THIS ISSU E TO THE FILE OF THE ASSESSING OFFICER/TPO. TPO/ASSESSING OFFICER SHALL MAKE USE OF THEM DURING THE REMAND PROCEEDINGS AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, THE GROUND NO.6 STANDS ALLOWED FOR STATISTICAL PURPOSES. 28 . GROUND NO.7 RELATES TO THE REJECTION OF MULTIPLE YEAR FINANCIAL DATA. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND FOR WHICH LD. DR HAS NO OBJECTION. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THIS GROUND SHO ULD BE DISMISSED AS NOT PRESSED. B. CORPORATE ISSUE : - 29 . GROUND NO.8 RELATES TO THE DISALLOWANCES OF WARRANTY PROVISION OF RS. 2 LAKHS . THE DRP/ASSESSING OFFICER DISALLOWED THE CLAIM OF THE WARRANTY PROVISION DEBITED TO PROFIT AND LOSS ACCOUNT AMOUNT ING TO RS.2,00,000/ - FOR WANT OF COMPLIANCE OF THE ASSESSEE TO THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT, 245 ITR 428 QUA THE ASCERTAINMENT OF LIABILITY BY WAY OF ACTUARIAL/SCIENTIFIC METHOD. 30 . BE FORE US, LD. COUNSEL FOR THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSIONS : - TH E APPELLANT PROVIDES WARRANTY SERVICES SUCH AS FREE REPLACEMENT OF PARTS AND REPAIRS FOR A PERIOD OF 10 YEARS AFTER SALES. FOLLOWING THE MATCHING CONCEPT PRINCIPLE, PROVISI ON FOR WARRANTY IS MADE IN THE RELEVANT YEAR IN WHICH SALES IS RECORDED. ALSO, RECORDING OF WARRANTY IN THE YEAR IN WHICH IT IS CLAIMED WOULD VIOLATE THE PRINCIPLES OF MERCANTILE ACCOUNTING. ITA NO. 520 /PUN /201 5 17 THEREFORE, AS THE PROVISION WAS MADE ON A SCIENTIFIC BASIS, AFTE R CONSIDERING THE HISTORICAL TREND AND EXPERIENCES, THE SAME SHOULD BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE TAXABLE INCOME. THE APPELLANT WOULD LIKE TO PLACE RELIANCE ON THE FOLLOWING JUDICIAL PRECEDENT IN THIS FAVOUR: ROTORK CONTROLS INDIA PVT. LTD. VS. CIT 314 ITR 62 (SC). THIS HONBLE ITAT IN ASSESSEES OWN CASE FOR AY 2011 - 12 IN ITA NO.109/PUN/2016 PARA 8 WHEREIN THE ISSUE WAS REMANDED BACK TO AO FOR FRESH CONSIDERATION. 31 . FROM THE ABOVE, IT IS EVIDENT THAT THE SIMILAR ISSUE WAS THE SUBJECT - MA TTER OF ADJUDICATION B EFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 - 12 VIDE ITA NO.109/PUN/2016. PARA 8 OF THIS ORDER WAS PERUSED AND FIND THE TRIBUNAL REMANDED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS. THE CONTENTS OF PARA 8 ARE RELEVANT AND THE SAME ARE EXTRACTED HEREUNDER : - 8. WHILE PASSING DRAFT ASSESSMENT ORDER THE ASSESSING OFFICER MADE ADDITION OF THE ENTIRE CLOSING BALANCE OF THE PROVISION RS.39,05,668/ - ON THE GROUND THAT THE ASSESSEE HAS NOT UTILIZED PROVISION IN THE PAST YEARS AND EVEN IN THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL PROVISION HAS NOT BEEN UTILIZED. THE PROVISION CANNOT BE ALLOWED TILL THE TIME IT IS ACTUALLY UTILIZED. THE DRP GRANTED PART RELIEF TO THE ASSESSEE BY RESTRICTING ACTUALLY UTILIZED. THE DRP GRANTED PART RELIEF TO THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO THE EXTENT OF PROVISION CREATED DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL I.E. RS.11,82,576/ - . THE LD. AR HAS POINTED THAT THE PROVISION FOR WARRANTY HAS BEEN UTILIZED TO THE EXTENT OF RS.24,66,660/ - DUR ING THE FINANCIAL YEAR 2011 - 12. WE FIND THAT SIMILAR SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE DRP. HOWEVER, THE CONTENTIONS OF THE ASSESSEE HAVE NOT BEEN VERIFIED. WE FURTHER OBSERVE THAT THOUGH THE ASSESSEE HAS BEEN CONSISTENTLY CREATING PROVISION IN THE PAST AND THE SAME (UNUTILIZED AMOUNT) HAS BEEN ALLOWED TO CARRY FORWARD IN THE NEXT FINANCIAL YEAR. WE FIND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY COGENT REASON FOR DEVIATING FROM THE PRINCIPLE OF CONSISTENCY IN ALLOWING SUCH PROVISION IN THE PAST. IN THE BACKDROP OF THESE FACTS WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH. ACCORDINGLY, GROUND NO. 2 RAISED IN THE APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 32 . FRO M THE ABOVE, IT IS EVIDENT THAT THE TRIBUNAL HELD THAT THE ASSESSING OFFICER FAILED TO GIVE COGENT REASON FOR DEVIATING FROM T HE PRINCIPLES OF CONSISTENCY AND THE SAME WAS NOT APPROVED. FOR THE SAKE OF PRINCIPLE OF CONSISTENCY, WE ALSO REMAND THIS ISSUE T O THE FILE OF THE ASSESSING OFFICER WITH SIMILAR DIRECTION. ACCORDINGLY, GROUND NO.8 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 520 /PUN /201 5 18 33 . GROUND NO.9 RELATES TO THE CLAIM OF INCLUSION OF ALTERNATE BRAND SOLUTIONS (INDIA) LIMITED AS A GOOD COMPARABLE. THIS COMPARABL E WAS IDENTIFIED BY THE ASSESSEE AND REQUESTED FOR INCLUSION FOR THE FIRST TIME BEFORE THE DRP. DRP ACCEPTED THE REQUEST OF THE ASSESSEE. HOWEVER, W HILE FINALIZING THE ASSESSMENT ORDER, THE ASSESSING OFFICER/TPO DID NOT CONSIDER THE DIRECTION OF THE DRP. IN THIS BACKGROUND OF THE FACTS, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DIRECTION NEEDS TO BE GIVEN EFFECT BY THE ASSESSING OFFICER/TPO WHILE FINALIZING THE ASSESSMENT ORDER ON THE ADJUSTMEN TS TO BE MADE TO THE ASSESSMENT. WE FIND NO REASON AS TO WHY THE ASSESSING OFFICER/TPO FAILED TO COMPLY WITH THE SAID DIRECTION OF THE DRP. THEREFORE, WE DIRECT THE ASSESSING OFFICER/TPO TO CONSIDER THE ALTERNATE BRAND SOLUTIONS (INDIA) LIMITED AS A GOOD COMPARABLE WHILE DETERMINED THE ADJUSTMENTS. DURING THE REMAND PROCEEDINGS, ASSESSING OFFICER SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH SET PRINCIPLE OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO.9 IS ALLOWED FOR STATISTICAL PURPOSES. 34 . GROUND NO.10 RELATES TO NON - INCL USION OF HANSA VISION PRIVATE LIMITED AS A GOOD COMPARABLE. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ARGUMENTS MADE BY HIM WHILE DEALING WITH THE GROUND NO.3 ABOVE WHERE WE DIRECTED THE ASSESSING OFFICER TO COMPLY WITH THE DIRECTION OF THE DRP IN INCLUSION OF THE HANSA VISION PRIVATE LIMITED FOR BENCHMARKING THE TRANSACTIONS. CONSIDERING OUR DECISION IN THE CONTENTS OF GROUND NO.3, THE GROUND NO.10 BECOMES ACADEMIC AND THE SAME IS ALLOWED IN FAVOUR OF THE ASSESSEE. 35 . GROUND NO.11 RELATES INCLUSION OF QUADRANT COMMUNICATION LTD. AS A GOOD COMPARABLE. AS PRONOUNCED IN THE OPEN COURT, W E DO NOT APPRECIATE THE ASSESSEES MANNER OF CONTINUOUSLY BRINGING NEW COMPARABLE ITA NO. 520 /PUN /201 5 19 BEFORE THE TPO/ DRP AND INCOME TAX APPELLATE TRIBUNAL E TC. THIS ATTEMPT OF THE A SSESSEE IS CONTINUOUSLY RAISING NEW COMPARABLE BEFORE THE DRP AND BEFORE US IS NOT APPRECIABLE ATTEMPT OF THE ASSESSEE. THE ASSESSEE FAILED TO GIVE ANY REASON FOR NOT RAISING THE SAME BEFORE THE DRP/TPO. SUCH ATTEMPT OF ASSESSEE IS INVALID, IN PRINCIPLES AS THE REASONS FOR NOT RAISING SUCH NEW COMPARABLES BEFORE THE TPO/DRP IS NOT SUBMITTED BEFORE US. THEREFORE, WE PROCEED TO REJECT THE ASSESSEES ATTEMPT IN THIS REGARD. ACCORDINGLY, GROUND NO.11 IS DISMISSED. 3 6. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 12 TH D AY OF DECEMBER , 2018 . SD/ - SD/ - (SUSHMA CHOWLA) ( D.KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE ; DATED : 12 TH DECEMBER , 2018 . SUJEET / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE DRP , PUNE; 4. THE ADDL. CIT (TP) - I, PUNE; 5. , , A / DR A , ITAT, PUNE; 6. / GUARD FILE . // / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE .