Premier Exploration Services Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5293/DEL/2012

• Counselvise Citation: 529320114 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 20-02-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 16-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: VED JAIN MRS RANO JAIN; V CHAURASIA CAS
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 143(3); 80HHC; 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.5293/DEL./2012 (ASSESSMENT YEAR : 2008-09) M/S. PREMIER EXPLORATION SERVICES PVT.LTD., VS. ITO , WARD 14 (3), 507, BHIKAJI CAMA BHAWAN, NEW DELHI. BHIKAJI CAMA PLACE, NEW DELHI 110 066. (PAN : AACCP6976F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, MRS. RANO JAIN & SHRI V. CHAURASIA, CAS REVENUE BY : SHRI PEEYUSH JAIN, CIT DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE ITO, WARD 14(3), NEW DELHI DATED 19.09.2012 PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE RETURN OF INCOME WAS FILED ON 30.09.2008. TH E INCOME DECLARED WAS RS.3,76,23,937/-. THE ASSESSEE IS ENGA GED IN THE BUSINESS OF PROVIDING TECHNICAL AND ADMINISTRATIVE SERVICES REL ATING TO OIL AND GAS EXPLORATION AND DRILLING ACTIVITIES. THE ASSESSING OFFICER REFERRED THE CASE TO TPO ON 25.08.2010 U/S 92CA OF THE INCOME-TAX ACT , 1961 WITH THE ITA NO.5293/DEL/2012 2 APPROVAL OF CIT, DELHI-V NEW DELHI. DURING THE YEAR , THE ASSESSEE ENTERED INTO THE INTERNATIONAL TRANSACTION WITH ITS ASSOCIATE ENTERPRISES (AES). A REFERENCE WAS MADE TO TPO TO DETERMINE ARM S LENGTH PRICE OF TRANSACTIONS WITH THE AES. THE TRANSACTIONS UNDERTA KEN BY THE ASSESSEE WITH THE AES WERE AS UNDER :- S.NO. INTERNATIONAL TRANSACTION METHOD USED BY ASSESSEE VALUE IN TRANSACTION (INR) 1. PROVISION OF ADMINISTRATIVE AND TECHNICAL SUPPORT SERVICES TNMM 240,127,068 2. CHARGE BACK OF EXPENSES BORNE BY PESPL ON BEHALF OF AR --------- 14,937,677 3. CHARGE BACK OF EXPENSES BORNE BY AES ON BEHALF OF PESPL --------- 74,023,785 IN THE CASE OF PROVISION OF ADMINISTRATIVE AND TECH NICAL SUPPORT SERVICES, BY ADOPTING THE METHOD OF TRANSACTION NET MARIN MET HOD (TNMM), THE VALUE OF TRANSACTION WAS SHOWN AS RS.24,01,27,068/- . THE BORROWING COST INCURRED BY THE ASSESSEE WAS SHOWN AS RS.22,17,06,9 42/-. THUS, THE BORROWING MARGIN WAS SHOWN AT RS.1,84,20,126/-. THE OPERATING PROFIT TO TOTAL COST (OP/TC) RATIO WAS 8.30%. THE ASSESSEE HA S CHOSEN THE TNMM WITH OP/TC RATIO AS THE PROFIT LEVEL INDICATOR (PLI ) TO BENCHMARK ITS INTERNATIONAL TRANSACTION WITH THE AES. THE ASSESSE E CHOSE 14 COMPARABLES AND USED THREE YEARS DATA. THE PLI RATI O OF THE COMPARABLE SELECTED BY THE ASSESSEE WAS COMPUTED AT 11.25% AND THE ASSESSEE ITA NO.5293/DEL/2012 3 JUSTIFIED THAT THE TRANSACTIONS WITH THE AES WERE A T ARMS LENGTH. THE TRANSFER PRICING OFFICER (TPO) HAS ADOPTED THE CURR ENT YEAR DATA AND REJECTED THE SEARCH PROCESS UNDERTAKEN BY THE ASSES SEE TO IDENTIFY THE COMPARABLES. THE TPO SELECTED SEVEN COMPARABLES WIT H THE MEAN PLI OF 31.9% AND ACCORDINGLY, PROPOSED AN ADJUSTMENT OF RS .5,23,70,900/- AFTER RE-COMPUTING THE ALP OF INTERNATIONAL TRANSACTIONS. AFTER DRPS DIRECTION, THE ADJUSTMENT U/S 92CA WAS MADE OF RS.3 ,99,21,602/-. NOW ASSESSEE IS IN APPEAL BEFORE US BY TAKING FOLLOWING GROUNDS OF APPEALS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER UNDER SECTI ON 143(3) READ WITH SECTION 144C OF THE ACT IS BAD BOT H IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER HAS ERRED BOTH ON FACTS A ND IN LAW IN ASSESSING THE INCOME AT RS.7,78,65,553 AS AGAINST INCOME OF RS.3,76,23,936 DECLARED BY THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER HAS ERRED BOTH ON FACTS A ND IN LAW IN MAKING AN ADDITION OF RS.3,99,21,602 AS DIFFERENCE IN ARM'S LENGTH PRICE. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN N OT EXCLUDING THE SAKET PROJECTS LIMITED AS COMPARABLE DESPITE THE APPELLANT COMPANY BRINGING SUFFICIENT MATERIAL AND EVIDENCES ON RECORD TO THE EFFECT THAT LINE OF ACTIVITIES OF SAKET PROJECTS LTD. IS TOTALLY DIF FERENT FROM THAT OF BUSINESS CONSULTANCY. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED DRP HAS ERRED IN HOLDING THAT ASSESSEE HAS ITA NO.5293/DEL/2012 4 OBJECTED TO THE INCLUSION OF SAKET PROJECTS LTD. SO LELY ON THE GROUND OF ABNORMAL MARGIN. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF THE APPELLANT THAT THE TNMM (OPITC) IN THE CASE OF ICRA MANAGEMENT CONSULTANT SERVICES LIMITED SHOULD BE 2.15%, NOT 4.18% AS TPO HAS NOT EXCLUDED NON-OPERATING INCOME OF RS.0.34 MILLION. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF THE APPELLANT THAT TNMM(OPITC) COMPARED BY TPO BASED ON THE PUBLISHED ACCOUNTS OF EDUCATIONAL CONSULTANTS (P) LTD. NEED TO BE ADJUSTED BY THE PROFIT OVERSTATED B Y RS.2.72 CRORES AS STATED BY THE AUDITORS IN THEIR A UDIT REPORT. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP AND THE AO HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT THAT THE LD. TPO HAS ERRED BOTH ON FACTS AND IN LAW IN N OT APPLYING THE COMPARABILITY CRITERION/FILTERS UNIFOR MLY. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF THE APPELLANT THAT SEGME NT ACCOUNTS SHOULD NOT BE CONSIDERED WHEN DIRECT COMPARABLES ARE AVAILABLE. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER HAS ERRED BOTH ON FACTS A ND IN LAW IN APPLYING ARM'S LENGTH PRICE FOR DETERMINA TION OF INCOME OF THE APPELLANT BASED ON THE DATA OF COMPARABLES WHICH ARE NOT COMPARABLE WITH THE LEVEL OF OPERATION OF THE APPELLANT. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED, BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE EXCEPTIONAL COMPARABLE HAVING 'ABNORMAL ITA NO.5293/DEL/2012 5 PROFIT/LOSSES' SHOULD BE EXCLUDED WHILE DETERMINING THE ARMS' LENGTH PRICE. 11. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LAW IN EXCLUDING A SUM OF RS.29,86,257/- IN THE REVENUE INCOME ( THE ASSESSEE WHILE WORKING OUT THE TNMM DESPITE THE FACT THAT THE SAME BEING DIFFERENCE IN FOREIGN EXCHANGE FLUCTUATION WILL GO TO ENHANCE THE REVENUE RECEIPT AND AS SUCH IS TO BE TAKEN INTO ACC OUNT WHILE COMPUTING TNMM. 12. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE THE AO HAS ERRED IN NOT EXCLUDING GAIN ON ACCOUNT O F FOREIGN EXCHANGE FLUCTUATIONS WHILE COMPUTING TNMM(OP/OC) OF ALL THE COMPARABLES. 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CALCULATION OF THE ASSESSEE FOR MAKIN G APPROPRIATE ADJUSTMENT TO ACCOUNT FOR VARYING RISK PROFILES AND DIFFERENCE IN WORKING CAPITAL OF THE ASSESSEE VIS-A-VIS COMPARABLES. 14. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER HAS ERRED BOTH ON FACTS A ND IN LAW IN ARBITRARILY REJECTING THE COMPARABLES GIV EN BY THE APPELLANT FOR DETERMINATION OF ARM'S LENGTH PRICE. 15. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE B ENEFIT OF ARMS' LENGTH RANGE OF +/- 5% BE GIVEN IN VIEW OF PROVISO TO SECTION 92C(2) OF THE ACT. 16(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDING THE APPROACH OF THE ASSESSEE, IN ITS TP STU DY OF TAKING MULTIPLE YEARS' DATA, BEING WRONG, DESPIT E HOLDING THE TNMM METHOD USED BY IT AS AN APPROPRIATE METHOD. ITA NO.5293/DEL/2012 6 (II) THAT THE ABOVE HAS BEEN HELD DESPITE THE FACT THAT THE EARLIER YEARS' DATA IN THIS CASE HAS AN IMPACT ON T HE PROFITS IN THE CURRENT FINANCIAL YEAR OF THE ASSESS EE. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN USING THE DATA OF THE COMPARABLES EVEN AFTER THE DA TE OF TP STUDY DONE BY THE ASSESSEE. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN USING THE DATA OF THE COMPARABLES ONLY PERTAINING T O THE CURRENT YEAR. 17. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN MAKING DISALLOWANCE OF AN AMOUNT OF RS.1,07,737/- OUT OF DEPRECIATION ON REPLICATOR AND UPS @ 15% AS AGAINST 60% CLAIMED BY THE ASSESSEE, ALLOWABLE UNDE R THE ACT. 18. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN DISALLOWING AN AMOUNT OF RS.1,04,780/- ON ACCOUNT O F PROFESSIONAL CONSULTANCY FEE INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. 19. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED DRP HAS ERRED BOTH ON FACTS AND IN LAW IN DISALLOWING AN AMOUNT OF RS.1,07,500/- OUT OF DONATION MADE BY ASSESSEE ALLOWABLE UNDER SECTION 80G OF THE ACT. 20. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND O R ALTER ANY OF THE GROUNDS OF APPEAL. 3. THE ASSESSEE OBJECTED THE USE OF CURRENT YEAR DA TA BY THE TPO FOR TRANSFER PRICING ANALYSIS ON THE BASIS THAT SUCH DA TA WAS NOT AVAILABLE IN PUBLIC DOMAIN AT THE TIME OF FINALIZATION OF TRANSF ER PRICING STUDY AND THE USE OF MULTIPLE YEAR DATA WOULD RESULT IN BETTER CA PTURING OF ITA NO.5293/DEL/2012 7 MARKET/BUSINESS CYCLES REFLECTED IN THE INDUSTRY IN COMPARISON TO SINGLE YEAR DATA. THIS PLEA OF THE ASSESSEE WAS NOT ACCEPT ED IN VIEW OF THE PROVISIONS OF RULE 10B(4) OF THE INCOME-TAX ACT, 19 61 WHEREIN IT IS PROVIDED THAT DATA OF THE COMPARABLE TRANSACTIONS S HALL BE FOR THE SAME FINANCIAL YEAR IN WHICH THE ASSESSEE HAS ENTERED IN TO INTERNATIONAL TRANSACTIONS UNLESS DATA RELATED TO EARLIER YEARS ( NOT MORE THAN 2 YEARS) REVEALS CERTAIN FACTS WHICH COULD HAVE AN INFLUENCE ON THE DETERMINATION OF TRANSFER PRICING IN RELATION TO THE TRANSACTIONS BEING COMPARED. SINCE ASSESSEE HAS FAILED TO MAKE OUT ANY CASE RELATING T O THE USE OF EARLIER YEARS DATA, THIS PLEA OF THE ASSESSEE WAS DISMISSED . THIS ISSUE HAS BEEN TAKEN BY THE ASSESSEE UNDER GROUNDS NO.16.1 TO 16.4 . 4. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, WE F IND THAT ASSESSEE HAS FAILED TO ESTABLISH THAT EARLIER TWO YEARS DATA REV EAL CERTAIN FACTS WHICH HAVE INFLUENCE ON THE DETERMINATION OF TRANSFER PRI CING IN RELATION TO TRANSACTIONS BEING COMPARED. THEREFORE, TPO WAS JUS TIFIED IN USING CURRENT YEAR DATAS. SIMILAR VIEW HAS ALSO BEEN AFFI RMED AND SETTLED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. DENSO HARYANA PVT. LTD. 2009-TIOL-696-DEL-IT. IN MANY OTHER CASES, THE COORDINATE BENCHES ALSO TAKEN THE SIMILAR VIEW WHICH CAN BE ENUMERATED AS UNDER :- (I) M/S HAWORTH (INDIA) PVT. LTD. (2011-TII-64-ITA T-DEL-TP) (II) M/S ST MICRO ELECTRONICS (2011-TII-ITAT-DEL-T P) ITA NO.5293/DEL/2012 8 (III) M/S BIRLA SOFT LIMITED (2011-TII-0-ITAT-DEL-TP) (IV) M/S GLOBAL VANTEDGE PVT. LTD. (2010-TIOL-24-ITAT-DE L) THUS, THE ISSUE RAISED IN GROUNDS NO.16(I) TO 16 (I I) STANDS DISMISSED. 5. GROUND NOS.1 TO 3, 14 AND 20 ARE GENERAL IN NATU RE, HENCE DO NOT REQUIRE ADJUDICATION AND THE SAME ARE ACCORDINGLY D ISMISSED. 6. THE OTHER MAJOR ISSUE RAISED IN THE ASSESSEES A PPEAL IN GROUND NOS.4(I) & 4(II) IS REGARDING THE INCLUSION OF SAKE T PROJECTS LIMITED AS COMPARABLES. THE REVENUES CONTENTION IS THAT THE F UNCTIONAL PROFILE OF THE COMPANY IS SAME AS WAS IN THE EARLIER YEAR. THE ASS ESSEE HIMSELF HAS CHOSEN THE SAKET PROJECTS LIMITED BASED ON PREVIOUS THREE YEARS DATA. IN EARLIER YEARS, I.E. 2007-08 ALSO, THIS COMPANY WAS CHOSEN AS COMPARABLE FOR TP ANALYSIS AND ON THAT BASIS, THE REVENUE CLAI MED THAT THIS COMPANY SHOULD BE TAKEN AS COMPARABLE ON THE BASIS OF CURRE NT YEARS MARGINS. THE ASSESSEE HAS CHANGED ITS STAND AFTER SEEING THE CUR RENT YEAR MARGINS AS THERE WERE HIGH MARGINS. 7. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE BU SINESS PROFILE OF THE SAKET PROJECTS LTD. IS COMPLETELY DIFFERENT FOR THE YEAR UNDER CONSIDERATION. IN FACT, THE COMPANY WAS NOT IN THE SERVICE PROVIDER SECTOR. IT WAS ORGANIZING EVENTS ON ITS OWN ACCOUNT AND RAI SING SPONSORSHIP, CONTRIBUTION, DELEGATE FEE ON ITS OWN ACCOUNT. THUS , IT CANNOT BE TAKEN AS SERVICE PROVIDER FOR THE YEAR. THE EVENTS WERE BEIN G ORGANIZED ON ITS OWN ITA NO.5293/DEL/2012 9 ACCOUNT, THUS THE FAR OF THE SAKET PROJECTS LTD. WA S ENTIRELY DIFFERENT THAN THE FAR OF ASSESSEE COMPANY. AS PER THE TP STU DY, PAGE 59 PARA 3.02.1 TO 3.02.3, THE FOLLOWING INTERNATIONAL TRANS ACTIONS WERE UNDERTAKEN BY ASSESSEE WITH AES :- 3.02.1. PROVISION OF ADMINISTRATIVE AND TEC HNICAL SUPPORT SERVICES DURING THE FY 2007-08, PESPL HAS PROVIDED ADMINISTR ATIVE AND TECHNICAL SUPPORT SERVICES TO ITS AES. THE VALUE OF THIS INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE PESPL WITH THE AES I S AS FOLLOWS : ASSOCIATED ENTERPRISE AMOUNT (INR) PREMIER OIL CACHAR BV INDIA PROJECT OFFICE 135,931,806 PREMIER OIL (NORTH EAST INDIA) BV INDIA PROJECT OFFICE 9,265,511 PREMIER OIL & GAS SERVICES LIMITED 94,929,751 TOTAL 240,127,068 3.02.2. CHARGE BACK OF EXPENSES BORNE BY PESPL ON BEHALF OF AES DURING THE FY 2007-08, PESPL HAS CHARGED BACK EXPEN SES BORNE ON BEHALF OF ITS AES. THESE EXPENSES WERE CHARGED FOR LEGAL FEE AND TRAVEL RELATED EXPENDITURE, INCURRED BY PESPL ON BEHALF IT S AES. THE VALUE OF THE CHARGE BACK OF THESE EXPENSES IS AS FOLLOWS : ASSOCIATED ENTERPRISE AMOUNT (INR) PREMIER OIL CACHAR BV INDIA PROJECT OFFICE 11,209,214 PREMIER OIL (NORTH EAST INDIA) BV INDIA PROJECT OFFICE 1,499,295 PREMIER OIL & GAS SERVICES LIMITED 2,229,168 TOTAL 14,937,677 3.02.3. CHARGE BACK OF EXPENSES BORNE BY AES O N BEHALF OF PESPL DURING THE FY 2007-08, THE AES HAVE CHARGED BACK CE RTAIN EXPENSES BORNE BY THEM ON BEHALF OF PESPL. THE VALUE OF THE CHARGED BACK EXPENSES IS AS FOLLOWS : ASSOCIATED ENTERPRISE AMOUNT (INR) PREMIER OIL & GAS SERVICES LIMITED 74,023,785 ITA NO.5293/DEL/2012 10 THE LD. AR EMPHASIZED ON PARA 2 OF TPOS ORDER FOR ANALYSIS OF THE ASSESSEES T.P. APPROACH (PLACED AT PAGE 267 OF THE PAPER BOOK). THE ASSESSEE ITSELF SELECTED SAKET PROJECTS LTD. AS COM PARABLE. THE RELEVANT REMARKS OF TPO IN THIS REGARD ARE AS UNDER :- IN YOUR SUBMISSION OF 09.03.2011 YOU HAVE MENTIONE D THAT CURRENT YEAR DATA IS NOT AVAILABLE. THE ANNUAL REPO RT OF THE COMPANY IS AVAILABLE. NORMALLY THE EVENTS MANAGEME NT SEGMENT IS CONSIDERED COMPARABLE. IN THE RELEVANT F INANCIAL YEAR, DATA OF THIS SEGMENT IS VERY MUCH AVAILABLE A ND THE EXPENSES ARE CLEARLY IDENTIFIED IN SCH.14 OF THE PR OFIT AND LOSS ACCOUNT. ACCORDINGLY, THIS SEGMENT SHALL BE TA KEN AS COMPARABLE. THE LD. AR ALSO DREW OUR ATTENTION TO THE FINANCIAL ACCOUNTS OF SAKET PROJECTS LTD. PLACED AT PAGES 554 TO 584 OF THE PAP ER BOOK. LD. AR PLEADED THAT SAKET PROJECTS LTD. WAS ENGAGED IN EVE NT MANAGEMENT AND REVENUE SHOWN FROM THIS SEGMENT WERE OF RS.1,67,94, 237/- AND EXPENDITURE SHOWN WERE ONLY RS.38,89,482/-. FOR THI S FACT, HE DREW OUR ATTENTION TO PAGE 573 OF THE PAPER BOOK. LD. AR ALS O DRAWS OUT ATTENTION TO PAGE 579 OF THE PAPER BOOK WHICH GIVES DETAILS O F EXPENSES ON EVENT MANAGEMENT AND PLEADED THAT SAKET PROJECTS LIMITED WAS ORGANIZING CONFERENCES OR SEMINARS. HE PLEADED THAT THE EXPENS ES ARE NOT ALLOCATED IN PROPER WAY. HE ALSO DRAWS OUR ATTENTION TO SEGMENTA L INFORMATION DONE BY SAKET PROJECTS LTD. AT PAGE 583 OF PAPER BOOK WH ERE IT IS CLEAR THAT TOTAL OPERATING PROFIT OF SAKET PROJECTS LTD. WAS R S.103.63 LACS AND IN THE ITA NO.5293/DEL/2012 11 EVENT MANAGEMENT IT WAS RS.104.42 LACS. THIS, ITSEL F SHOWS THAT THERE WAS NO ACCURACY IN ALLOTMENT OF EXPENSES TO VARIOUS SEG MENTS. LD. AR ALSO PLEADED THAT THE WEBSITE DETAILS OF SAKET PROJECTS LTD. PLACED AT PAGE 622 OF PAPER BOOK SHOWS THAT THE EVENTS ORGANIZED BY SA KET PROJECTS LTD. WERE SPONSORED BY INDUSTRIES AND THERE WERE VARIOUS TYPE OF SPONSORS LIKE PRIME SPONSOR, DIAMOND SPONSOR, PLATINUM SPONSOR, G OLD SPONSOR, SILVER SPONSOR, ETC. LD. AR ALSO DRAWS OUR ATTENTIO N TO OBJECTIONS FILED BEFORE DRP WHERE FUNCTIONAL ANALYSIS CARRIED OUT BY DRP WAS CLAIMED TO BE DEFECTIVE. THE EVENT MANAGEMENT WAS QUITE DIFFER ENT THEN OIL AND EXPLORATION CONSULTANCY THEN FUNCTIONS CANNOT BE CO MPARED TO ASSESSEE COMPANY. FINANCIAL RESULTS OF SAKET PROJECTS LTD. W ERE ALSO NOT RELIABLE. THE LD. AR ALSO DREW OUR ATTENTION TO THE OBJECTION S FILED BEFORE THE DRP IN THE WRITTEN SUBMISSIONS PLACED AT PAGES 714 72 8 OF THE PAPER BOOK. HE HAS ALSO DRAWN OUR ATTENTION OF REMAND REPORT AT PAGES 746 -747 OF THE PAPER BOOK AND REJOINDER AT PAGES 756 TO 760. 8. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT INI TIALLY ASSESSEE TOOK IT COMPARABLE AND THE ASSESSEE HAS OBJECTED TO INCL USION OF THE COMPANY AS HAVING ABNORMAL MARGINS IN THE SET OF COMPARABLE S TAKEN BY THE TPO AFTER USING CURRENT YEAR DATA. THE SAKET PROJECTS L IMITED HAS SHOWN HIGHER MARGINS OF PROFIT FOR THE YEAR. THE ASSESSEE HAS HIMSELF CHOSEN AS ITS COMPARABLE FOR THE EARLIER YEAR AND ALSO IN THE YEAR UNDER CONSIDERATION ON THE BASIS OF EARLIER YEARS DATA. W HEN THE ASSESSEE HAS ITA NO.5293/DEL/2012 12 TAKEN FUNCTIONAL COMPARABLE COMPANY THEN LOW OR HIG H MARGINS OF PROFIT WILL NOT AFFECT THE EXCLUSION AND INCLUSION OF THE COMPARABLE. THERE SHOULD BE FUNCTIONAL COMPARABILITY AND THE DIFFEREN CE IN THE MARGINS IS TAKEN OUT BY TAKING THE ARITHMETIC MEANS OF VARIOUS COMPARABLE COMPANIES. VARIATIONS IN MARGINS ARE IRON OUT IN WO RKING OUT THE ARITHMETIC MEAN. THEREFORE, ANY COMPANY CANNOT BE R EJECTED SIMPLY ON THE BASIS THAT IT IS MAKING HIGH PROFIT FOR THE YEA R. FOR THIS PROPOSITION, THE LD. DR RELIED ON THE OECD REVISED GUIDELINES OF 201 0 WHICH HAS BEEN REPRODUCED IN TPOS ORDER AT PAGES 5 6. THE LD. D R ALSO RELIED ON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF EXXON MOBIL COMPANY INDIA PVT. LTD. 2011-TII-68-ITAT-MUM-TP WHEREIN I TAT HAS HELD AS UNDER :- NOW, COMING TO THE ALTERNATIVE ARGUMENTS OF THE AS SESSEE THAT ABNORMAL PROFIT MAKING UNIT IS ALSO TO BE ELIM INATED ON THE SAME ANALOGY ON WHICH LOSS MAKING UNITS ARE EXC LUDED, WE, IN PRINCIPLE, DO NOT DISPUTE THIS PROPOSITION. THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE LAY DOWN THAT A COMPARABLE CANNOT BE ELIMINATED JUST BECAUSE IT IS A LOSS MAKING UNIT. SIMILARLY, A HIGHER PROFIT MAKING UNIT CANNOT ALSO BE AUTOMATICALLY ELIMINATED JUST BECAUSE THE COMPARABLE COMPANY EARNED HIGHER PROFITS THAN THE A VERAGE. THE REASON FOR REJECTING THE TWO LOSS MAKING UNITS IS NOT JUST BECAUSE THEY WERE LOSS MAKING UNITS BUT FOR THE REA SONS WHICH ARE ALREADY STATED IN THE PRECEDING PARAGRAPH S. IF SIMILAR REASONS EXISTED IN THE HIGHER PROFIT MAKING UNIT, THEN IT IS FOR THE ASSESSEE TO BRING OUT THOSE REASONS A ND SEEK EXCLUSION OF THE SAME. A GENERAL ARGUMENT THAT, YOU HAVE TO EXCLUDE UNITS WHICH HAVE HIGH PROFIT RANGE IN CASE YOU EXCLUDE UNITS WHICH HAVE MADE LOSS IS A GENERAL SUB MISSION WHICH CANNOT BE ACCEPTED. IN OTHER WORDS AS A GENER AL PRINCIPLE, BOTH LOSS MAKING UNIT AND HIGH PROFIT MA KING UNIT ITA NO.5293/DEL/2012 13 CANNOT BE ELIMINATED FROM THE COMPARABLES UNLESS, T HERE ARE SPECIFIC REASONS FOR ELIMINATING THE SAME WHICH IS OTHER THAN THE GENERAL REASON THAT A COMPARABLE HAS INCURRED L OSS OR HAS MADE ABNORMAL PROFITS. THUS, THIS GROUND IS DISMISS ED. FINALLY, HE PLEADED TO DISMISS THIS GROUND OF APPEA L. 9. WE HAVE HEARD BOTH SIDES ON THIS GROUND. TPO HAD CONSIDERED THE EVENT MANAGEMENT DIVISION OF SAKET PROJECTS LTD. AS COMPARABLE TO ASSESSEES FUNCTIONS. ALTHOUGH ASSESSEE HAD TAKEN T HIS COMPANY AS COMPARABLE ON THE BASIS OF PAST YEARS DATA BUT IN O UR CONSIDERED VIEW, THE SAKET PROJECTS LTD. WAS NOT COMPARABLE TO ASSESSEE BECAUSE THE EVENT MANAGEMENT WAS DONE BY SPONSORSHIPS WHICH IS EVIDEN T FORM VARIOUS DOCUMENTS PLACED IN PAPER BOOK. FURTHER THE SEGMENT ALLOCATION OF EXPENSES ALSO APPEARS TO BE NOT RELIABLE. WE AGREE WITH THE VIEW OF REVENUE THAT NO COMPARABLE CAN BE REJECTED MERELY O N THE BASIS OF HIGH MARGINS IF THE COMPARABLE IS FUNCTIONALLY COMPARABL E TO THE ASSESSEE AND ALSO THAT THERE IS MINER VARIATION IN FUNCTIONAL SI MILARITY. HOWEVER, IN THE CASE OF SAKET PROJECTS LTD. THERE IS FUNCTIONAL DIS SIMILARITY. THE COMPANY IS ORGANIZING EVENTS WITH VARIOUS KINDS OF SPONSORS HIPS. THE FACTS ALSO SUGGEST THAT SEGMENTAL ALLOCATION OF EXPENSES WERE NOT RELIABLE. WE ALSO HOLD THAT WHEN DIRECT COMPARABLES ARE AVAILABLE THE N SEGMENTAL RESULTS OF COMPANIES ENGAGED IN OTHER BUSINESS SHOULD NOT BE T AKEN AS COMPARABLE. ON THE BASIS OF THESE FACTS, WE HOLD THAT SAKET PRO JECTS LTD. WAS NOT ITA NO.5293/DEL/2012 14 COMPARABLE TO THE EXTENT WHEREIN THE VARIOUS VARIAT IONS COULD BE RULED OUT OR IRON OUT BY PROVISIONS OF LAW AND RULES. 10. IN GROUND NO.5, THE ISSUE IS REGARDING ICRA MAN AGEMENT CONSULTANT SERVICES LIMITED WHEREIN THE ASSESSEE CL AIMS THAT IN THE TNMM (OP/TC) SHOULD BE 2.15% INSTEAD OF 4.18% AS TA KEN BY THE TPO BY NOT EXCLUDING NON-OPERATING INCOME OF RS.0.34 MI LLION. 11. WHILE PLEADING ON BEHALF OF THE ASSESSEE, LD. A R SUBMITTED THAT THE TPO HAS COMPUTED TNMM OF COMPARABLE M/S. ICRA MANAG EMENT CONSULTANT SERVICES LTD. AT 4.18% BY ADDING MISCELL ANEOUS INCOME OF RS.33,86,000/-. THE OPERATING INCOME & CONSULTANCY FEE OF M/S. ICRA MANAGEMENT CONSULTANT SERVICES LTD. WAS RS.18,05,32 ,000/- AS EVIDENT FORM PAGE 680F OF PAPER BOOK. TPO HAS WRONGLY INCL UDED MISC. INCOME OF RS.33,86,000/- (PAGE 686 OF THE PAPER BOOK). THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2008 (PAGE 680 OF PAPER BOOK) OF M/S. ICRA MANAGEMENT CONSULTANT SERVICES LTD. SHOWS THAT CONSULTANT FEE INCOME OF M/S. ICRA MANAGEMENT CONSULTANT SERVICES LTD. WAS ONLY OF RS.18,05,32,000/-. THE DETAILS OF THE OTHER INCOME OF RS.71,80,000/- IS PROVIDED IN ANNEXURE 10 WHICH IS PLACED AT PAGE 866 OF THE PAPER BOOK WHEREIN RS.33,86,000/- WAS SHOWN AS MISC. INCOME AN D THE SAME HAS BEEN ADDED BY THE TPO FOR WORKING OUT THE OP/TC AT 4.18%. PAGE 680 OF PAPER BOOK WHICH IS PROFIT AND LOSS ACCOUNT OF M/S. ICRA MANAGEMENT CONSULTANT SERVICES LTD. CLEARLY MENTIONS THAT THE OPERATING INCOME FROM ITA NO.5293/DEL/2012 15 CONSULTANT FEES WAS ONLY AT RS.18,05,32,000/-. THER EFORE, THE TPO WAS NOT JUSTIFIED. THE DRP HAS IGNORED THIS ASPECT EVEN WHEN THE EXPLICIT DOCUMENTS WERE PROVIDED FOR IT AND CONFIRMED THE CO NTENTION OF THE TPO. 12. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER O F THE AUTHORITIES BELOW AND ALSO SUBMITTED THAT THE NATURE OF THE MIS C. INCOME HAS NOT BEEN PROVIDED BY THE ASSESSEE AS IT HAS BEEN SHOWN AS MI SC. INCOME (PAGE 686 OF PAPER BOOK). THEREFORE, THE ASSESSEES CONTENTIO N SHOULD NOT BE ACCEPTED. 13. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE F IND THAT AS PER PROFIT & LOSS ACCOUNT OF ICRA MANAGEMENT CONSULTANT SERVICES LTD., THE OPERATING INCOME AND CONSULTING FEE SHOWN IS OF RS. 18,05,32,000/-, HOWEVER WHILE GIVING THE DETAILS OF OTHER INCOMES ( AS PER SCHEDULE X WHICH IS PLACED AT PAGE 868 OF THE PAPER BOOK), RS. 33,86,000/- HAS BEEN SHOWN AS MISC. INCOME. THUS, DETAILS OF REAL NATURE OF THIS MISC. INCOME HAVE NOT BEEN PROVIDED IN THE ACCOUNTS, THEREFORE, IN ABSENCE OF ANY DETAILS WITH REGARD TO THE NATURE OF SUCH INCOME, N O CLEAR FINDING CAN BE GIVEN IN THIS REGARD. KEEPING THESE FACTS IN VIEW, WE SET ASIDE THE ISSUE TO TPO AND IF THE MISC. INCOME IS NOT OPERATIONAL INCO ME THEN DIRECT TO EXCLUDE THE SAME. 14. IN THE GROUND NO.6, THE ISSUE INVOLVED IS REGAR DING THE COMPARABLE EDUCATIONAL CONSULTANTS (P) LTD. WHERE THE ASSESSEE PRAYED THAT THE PROFIT HAS BEEN OVERSTATED BY RS.2.72 CRORES WHICH IS EVID ENT FROM THE AUDITORS ITA NO.5293/DEL/2012 16 REPORT OF EDUCATIONAL CONSULTANTS (P) LTD. PLACED A T PAGES 689 TO 692 OF THE PAPER BOOK. 15. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE L D. AR SUBMITTED THAT AUDITORS IN THEIR REPORT WHICH IS PLACED AT PAGES 6 89 TO 692 OF THE PAPER BOOK IN ITS PARA 4.VII HAS CLEARLY MENTIONED THAT T HE PROFIT HAS BEEN OVERSTATED BY RS.2.72 CRORES AND THIS PROFIT SHOULD BE DEDUCTED WHILE WORKING OUT THE OP/TC. THE REVENUES RELIANCE THAT THE OBSERVATION OF THE AUDITORS HAS BEEN REBUTTED BY THE COMPANY IN IT S ANNUAL REPORT SHOULD NOT BE MADE A BASIS FOR REJECTING THE CONTENTION OF THE ASSESSEE. 16. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE F IND THAT THE AUDITORS HAVE IN THEIR REPORT AT PARA 4.VII HAS REP ORTED AS UNDER :- SUBJECT TO OUR COMMENTS IN PARAGRAPH 4(VI)(A), NON CONFIRMATION AND NON RECONCILIATION OF SUNDRY DEBTO RS, SUNDRY CREDITORS, LOAN & ADVANCES AND OTHER LIABILI TIES, THE IMPACT OF WHICH IS INDETERMINABLE, PARAGRAPH 4( VI)(B), AD-HOC PROVISION OF RS.10.30 LAKHS IN RESPECT OF 50 % MERGER OF DEARNESS ALLOWANCE WITH BASIC PAY FINANCI AL IMPACT NOT DETERMINABLE PRESENTLY, PARAGRAPH 4(VI)( C), THE NON PROVISION OF AMOUNT DUE FROM KREIS TO THE TUNE OF RS.1.10 CRORES AND PARAGRAPH 4(VI)(D), NON PROVISIO N OF UNSECURED AND UNCONFIRMED BALANCES OF MORE THAN 3 Y EARS FROM SUNDRY DEBTORS & LOANS AND ADVANCES TO THE TUN E OF RS.1.62 CRORES HAS RESULTED IN OVERSTATEMENT OF PRO FIT BY RS.2.72 CRORES AND OVERSTATEMENT OF SUNDRY DEBTORS BY RS.2.45 CRORES AND OVERSTATEMENT OF LOAN & ADVANCES BY RS.0.27 CRORES, IN OUR OPINION AND TO THE BEST OF O UR INFORMATION & ACCORDING TO THE EXPLANATIONS GIVEN T O US, THE SAID ACCOUNTS READ WITH THE NOTES TO ACCOUNTS IN SC HEDULE 3 GIVE THE INFORMATION REQUIRED BY THE COMPANIES ACT, 1956, IN THE MANNER SO REQUIRED AND GIVE A TRUE AND FAIR VIEW IN CONFORMITY WITH THE ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDIA. ITA NO.5293/DEL/2012 17 IN VIEW OF THESE FACTS NOTED IN AUDITORS REPORT, W E HOLD THAT THERE WAS AN ABNORMALITY IN THE ACCOUNTS OF COMPARABLE EDUCATION CONSULTANT (P) LTD. BY OVERSTATING THE PROFIT TO THE TUNE OF RS.2.72 CR ORES AND WHICH NEEDS TO BE ADJUSTED WHILE WORKING OUT THE OP/TC IN THIS ACC OUNT OF COMPARABLES. FOR THE SAME, WE RESTORE THE ISSUE TO THE FILE OF T PO. 17. THE ISSUES RAISED IN GROUND NOS.7 TO 10 HAVE BE EN HEARD AND WE FIND THAT THERE IS NO SPECIFIC ISSUE RAISED IN THES E GROUNDS AND ALL THE LEGAL ISSUES RAISED IN THESE ARE SETTLED AGAINST THE ASSE SSEE, THEREFORE, ALL THESE FOUR GROUNDS ARE DISMISSED. 18. IN THE GROUND NOS.11 & 12, THE ASSESSEE HAS PRA YED THAT THE FOREIGN EXCHANGE DIFFERENCE INCOME OF RS.29,86,259/ - HAS BEEN EXCLUDED FROM THE OPERATING INCOME OF THE ASSESSEE WHILE COM PARING ARMS LENGTH PRICE. 19. THE ASSESSEE HAS MADE THE OBJECTION IN THIS REG ARD BEFORE THE DRP WHICH IS EVIDENT FORM PAGE NOS.7 TO 9 OF THE PAPER BOOK WHEREIN THE ASSESSEE HAS PRAYED THAT THE GAIN ON ACCOUNT OF FOR EIGN EXCHANGE FLUCTUATION IS PART OF OPERATING PROFITS FOR COMPUT ING THE PLI AND THE ISSUE WAS NO MORE RES INTEGRA. ITAT, BANGALORE BENCH IN T HE CASE OF SAP LABS INDIA (P) LTD. VS. ACIT (2011) 44 SOT 156 (BANGALOR E) HAS HELD THAT THE FOREIGN EXCHANGE GAIN IS NOTHING BUT AN INTEGRAL PA RT OF THE SALE PROCEEDS OF AN ASSESSEE CARRYING ON AN EXPORT BUSINESS. LD. AR ALSO SUBMITTED THAT ITA NO.5293/DEL/2012 18 THIS PROPOSITION HAS BEEN CONSIDERED TIME AND AGAIN WHILE DECIDING THE ISSUE RELATING TO 80HHC WHEREIN THE COURTS HAVE HEL D THAT FOREIGN EXCHANGE FLUCTUATION GAIN FORMS PART OF THE SALE PR OCEEDS OF THE EXPORTER AND HE PRAYED THAT THIS INCOME SHOULD NOT BE EXCLUD ED FROM THE COMPUTATION OF THE OPERATING MARGIN OF THE ASSESSEE COMPANY. LD. AR ALSO SUBMITTED THAT THIS HAS BEEN FOLLOWED IN THE C ASE OF TILOGY E BUSINESS SOFTWARE INDIA (P.) LTD. VS. DCIT 12 TAX MANN.COM 464 (BANG.). IT WAS ALSO PRAYED THAT IF ASSESSEES CONT ENTION IS NOT ACCEPTED THEN THE FOREIGN EXCHANGE FLUCTUATION INCOME OF THE COMPARABLES NEEDS TO BE EXCLUDED FROM THE OPERATING INCOME OF THE COMPAR ABLES. 20. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND WE AGREE WITH THE LD. AR THAT THIS ISSUE IS NO MORE RES INTEGRA. VARI OUS BENCHES OF THE ITAT HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY TAKING THE FOREIGN EXCHANGE FLUCTUATION INCOME IN CASE OF EXPORTERS AS A PART OF THE OPERATING INCOME AND WE DIRECT THE TPO TO INCLUDE T HE FOREIGN EXCHANGE INCOME AS OPERATING INCOME WHILE WORKING OUT THE PL I. 21. IN THE GROUND NO.13, IT IS PRAYED THAT THE DRP AHS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CALCULATION OF TH E ASSESSEE FOR MAKING APPROPRIATE ADJUSTMENT TO ACCOUNT FOR VARYING RISK PROFILES AND DIFFERENCE IN WORKING CAPITAL OF THE ASSESSEE VIS--VIS COMPAR ABLES. 22. WE HAVE HEARD BOTH THE SIDE SON THIS ISSUE AND AFTER HEARING, WE FIND THAT THERE IS NO MERIT IN THE PLEA OF THE ASSE SSEE. NO RISK ADJUSTMENT ITA NO.5293/DEL/2012 19 CAN BE ALLOWED WHEN THE SAME HAS NOT BEEN QUANTIFIE D. THE ASSESSEE HAS FAILED TO BRING ANY EVIDENCE ON RECORD TO SHOW THAT THERE WAS ANY DIFFERENCE IN RISK PROFILE OF COMPARABLE COMPANIES. RISK ADJUSTMENT CANNOT BE ALLOWED AS A THUMB RULE. UNLESS OR UNTIL IT IS SHOWN AND ESTABLISHED THAT DIFFERENCE IN THE RISK RESULTS INT O DEFLATION AND INFLATION OF THE FINANCIAL RESULTS OF COMPARABLES NO ADJUSTMENT CAN BE MADE ON THIS GROUND. THE ASSESSEE HAS ALSO FAILED TO ESTABLISH A NY WORKING CAPITAL DIFFERENCE, THEREFORE, THIS GROUND HAS ALSO NO LEGS AND ACCORDINGLY BOTH THE PLEA RAISED IN THIS GROUND ARE DISMISSED. 23. IN THE GROUND NO.15, THE ASSESSEE HAS ASKED FOR +/- 5% IN VIEW OF THE PROVISO TO SECTION 92C(2) OF THE INCOME-TAX ACT , 1961. 24. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THI S ISSUE HAS BEEN SETTLED BY THE AMENDMENT MADE BY THE FINANCE ACT, 2 012 RETROSPECTIVELY THEREBY IT HAS BEEN MADE CLEAR THAT BENEFIT OF +/- 5% UNDER THE PROVISO TO SECTION 92C(2) OF THE ACT SHALL NOT BE ALLOWED FOR THE PURPOSE OF COMPUTATION OF ARMS LENGTH PRICE. THEREFORE, WE FI ND NO MERITS IN THIS GROUND OF ASSESSEES APPEAL AND DISMISS THE SAME. 25. IN THE GROUND NO.17, THE ISSUE RAISED IS DEPREC IATION ON COMPUTER PERIPHERALS WHEREIN THE ASSESSEE HAS CLAIMED 60% AN D THE DRP HAS ALLOWED 25% ONLY. 26. THE LD. AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF VARIOUS HIGH COURTS IN CLUDING THE HON'BLE ITA NO.5293/DEL/2012 20 JURISDICTIONAL HIGH COURT IN THE CASES OF COMMISSIO NER OF INCOME TAX VS. BSES YAMUNA POWERS LTD. (IN ITA NO.1267 DECIDED ON 31.08.2010) AND CIT VS. ORIENTAL CERAMICS & INDS. LIMITED IN ITA NO .66/2011. 27. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND A LSO PERUSED THE RECORDS. AS FAR AS THE RATE OF DEPRECIATION ON UPS IS CONCERNED, IT IS COVERED BY THE AFORESAID DECISIONS OF HON'BLE JURIS DICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ORIENTAL CERAMICS & INDS. LIMITED IN ITA NO.66/2011, CITED SUPRA HAD HELD AS UNDER:- 13. THE THIRD ISSUE PERTAINING TO DEPRECIATION ON UPS ARISES ONLY IN THE ASSESSMENT YEAR 2005-06. THE AS SESSEE HAD CLAIMED DEPRECIATION ON UPS @ 60% WHEREAS THE A .O HAD ALLOWED IT @ 25% AND ON THIS BASIS, DISALLOWANC E OF 1,470 WAS MADE. THE ISSUE NOW STANDS COVERED BY T HE JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BSES YAMUNA POWERS LTD. (IN ITA NO.1267 DECIDED ON 31.08.2010) WHEREIN IT WAS HELD THAT THE DEPRECIATION @ 60% ON SUCH ITEMS SHALL BE ALLOW ED. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENTS OF H ON'BLE JURISDICTIONAL HIGH COURT, WE ALLOW THIS GROUND OF ASSESSEES APPE AL. 28. IN THE GROUND NO18, THE ISSUE IS AGAINST THE DI SALLOWANCE OF RS.1,04,780/- ON ACCOUNT OF PROFESSIONAL CONSULTANC Y FEE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 29. WHILE PLEADING ON BEHALF OF THE ASSESSEE LD. AR SUBMITTED THAT THE DRP HAS NOT ALLOWED THE ASSESSEES PLEA IN TOTO. IN FACT, THE TDS HAS BEEN ITA NO.5293/DEL/2012 21 DEDUCTED WHICH IS EVIDENT FROM PAGES 343A, 343B, 34 3C AND 343D OF THE PAPER BOOK. THE DRP BEING SATISFIED WITH THE EXPLAN ATION OF THE ASSESSEE ASKED THE ASSESSING OFFICER TO VERIFY THE SAME AND ALLOW DEDUCTION. THIS DISALLOWANCE WAS FACTUALLY INCORRECT. 31. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. SIN CE THE DRP HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND ALLOW DEDUCTION IF THE TDS HAS BEEN DEDUCTED, WE UP HOLD THE DIRECTION OF THE DRP AND DISMISS THIS GROUND OF ASSESSEES APPEA L. 32. GROUND NO.19 WAS NOT PRESSED, HENCE DISMISSED A S NOT PRESSED. 33. GROUND NO.20 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION, HENCE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF NOVEMBER, 2013. SD/- SD/- (DIVA SINGH) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 22 ND DAY OF NOVEMBER, 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR/ITAT NEW DELHI