Globe Ground India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5711/DEL/2012

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1458 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; Search and seizure; International transaction
• Section: 113; 13; 22; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A NO.5711/DEL/2012 (ASSESSMENT YEAR 2008-09) GLOBE GROUND INDIA PVT. LTD. E-9, CONNAUGHT HOUSE, CONNAUGHT PLACE, NEW DELHI-110 001. PANAAACG 8313K VS. DY. CIT, CIRCLE-12(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. TARANDEEP SINGH, ADV. RESPONDENT BY SH. BHUVNESH KULSHRESTHA, CIT-DR DATE OF HEARING 23.06.2021 DATE OF PRONOUNCEMENT 30.06.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE, AGAINST FI NAL ORDER OF ASSESSMENT DATED 31 ST AUGUST 2021 PASSED UNDER SECTION 143(3)/144C OF THE INCOME TAX ACT, 1961 (HEREINAFTE R CALLED THE ACT). THE SOLE ISSUE IN DISPUTE IS THE TRANSFER PR ICING ADJUSTMENT OF RS 3,53,24,242/- WHICH HAS BEEN PROPOSED BY THE TRAN SFER PRICING 2 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT OFFICER (TPO) AND SUSTAINED BY THE LD DISPUTES RESO LUTION PANEL (DRP). 2.0 BRIEFLY STATED, THE RELEVANT FACTS OF THE CAS E ARE THAT THE ASSESSEE IS AN INDIAN COMPANY IN WHICH 51% EQUIT Y IS HELD BY A GERMAN COMPANY BY THE NAME OF GLOBE GROUND DEUTSCHL AND GMBH AND THE REMAINING 49% EQUITY IS HELD BY AN IND IAN RESIDENT INDIVIDUAL IN THE NAME OF MRS. RADHA BHATIA. THE AS SESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING GROUND AND PAS SENGER HANDLING SERVICES TO AIRLINES. SINCE THE ASSESSEE H AD ENTERED INTO AN INTERNATIONAL TRANSACTION OF RS32,26,71,057/- PE RTAINING TO GROUND HANDLING SERVICES WHICH WERE RENDERED TO ITS A SSOCIATED ENTERPRISE (AE) ALONG WITH OTHER INTERNATIONAL TRANS ACTIONS, CASE OF THE ASSESSEE WAS REFERRED TO THE TPO TO DETERMINE TH E ARM'S-LENGTH PRICE (ALP) OF SUCH INTERNATIONAL TRANSACTION. FROM THE TRANSFER PRICING STUDY FILED BEFORE THE LOWER AUTHORITIES, I T IS APPARENT THAT THE ASSESSEE HAD BENCHMARKED ITS INTERNATIONAL TRAN SACTIONS BY ADOPTING THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM). THE ASSESSEE HAD SELECTED A GROUP OF 13 COMPARABLE COMPANIES HAVING A WEIGHTED AVERAGE PROFI T LEVEL 3 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT INDICATOR (PLI) OF OPERATING PROFIT / OPERATING COS T (OP/OC) OF 10.05%. AS PER THE TRANSFER PRICING STUDY, THE ASSE SSEES PLI AS THE TESTED PARTY IS 13.84%. IT WAS HENCE CLAIMED BEFORE THE LOWER AUTHORITIES THAT THE VALUE OF INTERNATIONAL TRANSAC TIONS EXECUTED WERE AT ALP. THE TPO, HOWEVER, WAS UNSATISFIED. VIDE ORDER DATED 31 ST OCTOBER 2011, THE TPO OBSERVED THAT THE ASSESSEE H AS NOT PROPERLY NARRATED / UNDERSTOOD ITS FUNCTIONAL PROFI LE. IN THIS REGARD, THE TPO NOTED THAT THE WEBSITE OF ASSESSEE DEPICTED VARIOUS ACTIVITIES. THE TPO DOUBTED THE FUNCTIONAL PROFILE OF THE TESTED PARTY BY OBSERVING AS UNDER: THE FIRST GROUND THAT THE ASSESSEE HAS TAKEN IS TH AT THIS OFFICE HAS NOT APPRECIATED THAT THE ACTIVITIES OF THE ASSE SSEE ARE IN THE NATURE OF BUSINESS SUPPORT SERVICES. THE ASSESSEE S TATES THAT IT IS NOT PROVIDING ANY REFUELING SERVICES OR ANY SECU RITY SERVICES SO IT IS NEITHER A SPECIALIZED SERVICE NOR IS IT AF FECTED BY THE SECURITY CONCERNS. I AM AFRAID THAT THE ASSESSEE HA S NOT APPRECIATED ITS OWN FUNCTIONS PROPERLY. HAD IT DONE SO IT WOULD NOT HAVE LIKED TO COMPARE ITSELF WITH COMPANIES THA T ARE ENGAGED IN EVENT MANAGEMENT, FINANCIAL ANALYSIS, TU RNKEY PROJECTS ETC. THE ASSESSEES FUNCTIONS HAVE BEEN LI STED OUT AT PARA 2 OF THE SHOW CAUSE NOTICE. IF THE ASSESSEE HA D LOOKED 4 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT CAREFULLY IT WOULD HAVE FOUND FUELLING SUPERVISION AND AIRCRAFT SECURITY AMONG ITS SERVICES. THEREFORE, THE ASSESS EES CONTENTIONS ARE MADE IN IGNORANCE OF ITS OWN FUNCTI ONS. 2.1 THE TPO, THEREAFTER, CONDUCTED A FRESH SEARCH FOR COMPARABLE COMPANIES AND SELECTED A SET OF 4 COMPAR ABLE COMPANIES WHOSE OP/TC WAS FOUND TO BE 27.99%. THE TPO , THEREAFTER, PROPOSED A TRANSFER PRICING ADJUSTMENT AS UNDER: TOTAL COST 29,24,08,151 ALP@27.99% 37,42,53,192 PRICE RECEIVED 32,26,71,057 ADJUSTMENT U/S 92CA 5,15,82,135 2.2 BEING AGGRIEVED, THE ASSESSEE FILED DETAILED OBJECTIONS BEFORE THE LD DRP. THE LD DRP PARTLY ALL OWED THE OBJECTIONS RAISED BY EXCLUDING M/S COCHIN INTERNATI ONAL AIRPORT LTD AS A COMPARABLE. THE LD DRP HOWEVER UPHELD THE SELE CTION OF OTHER COMPARABLE COMPANIES. IN THIS REGARD IT WAS HELD BY THE LD DRP VIDE ORDER DATED 14 TH JUNE 2012 AS UNDER: GROUND NO.1 WE FIND THAT TPO HAS RELIED ON FUNCTIO NAL SIMILARITY UNDER TNMM FOR IDENTIFYING COMPARABLES. WE HAVE 5 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT ALSO CONSIDERED SUBMISSIONS DATED 12.09.2011 OF THE ASSESSEE IN THIS REGARD. 6.11 FUNCTIONALLY, WE FIND, THE ASSESSEE PROVIDING IS SUPPORT SERVICES WHICH ARE DIFFERENT FROM RUNNING AN AIRPOR T & PROVIDING SUCH SERVICES AS THE OWNER OF THE AIRPORT. IN OUR V IEW THERE IS MORE DISSIMILARITY THEN SIMILARITY AND SO CIAL IS N OT COMPARABLE FUNCTIONALLY WITH THE ASSESSEE AT ENTITY LEVEL. THE ANNUAL REPORT OF CIAL SHOWS INCOME UNDER THE HEAD TRAFFIC REVENUE WHICH INCLUDES LANDING FEE, PARKING AND HOUSING FEE AND T ERMINAL NAVIGATIONAL LANDING CHARGES. WHILE NON TRAFFIC REV ENUE INCLUDES X RAY INSPECTION CHARGES, PUBLIC ADMISSION FEE ROY ALTY, CARGO OPERATIONS, SEAT INTEREST INCOME. THE DIRECTORS REP ORT SHOWS KEY DRIVER OF GROWTH IN REVENUES HAS BEEN DUTY FREE BUS INESS WHICH ACCOUNTED FOR 30& OF THE INCOME WITH TRAFFIC REVENU E BEING 23% ROYALTY AT 15%, CARGO LOWEST AT 6%. 6.1.2 THE EMPLOYEE EXPENSES TO TOTAL INCOME ACCOUNT FOR 10% WHEREIN IN THE CASE OF ASSESSEE IT IS 60%. THUS WE FIND THERE ARE FUNCTIONAL DISSIMILARITIES. ANNUAL REPORT FURTH ER STATES THAT, THE COMPANY IS OPERATING A COMPOSITE AIRPORT WITH FACILITIES FOR CARGO MOVEMENT AND DUTY FREE SHOP. IN THE OPINION O F THE MANAGEMENT, THIS IS THE ONLY PRIMARY REPORTABLE SEG MENTS WITHIN THE MEANING OF ACCOUNTING STANDARD 17 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA. (SCHEDUL E J) 6 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 6.1.3 IF SEGMENTAL DATA WAS AVAILABLE IT MAY PERHAP S HAVE BEEN CONSIDERED FOR COMPARISON PURPOSE BUT IT IS NOT. IN THE CIRCUMSTANCES, CIAL CANNOT BE CONSIDERED AS A COMPA RABLE AT ENTITY LEVEL BASED ON FUNCTIONAL ANALYSIS AND MUST BE EXCLUDED FROM THE LIST OF COMPARABLES. TPO IS DIRECTED TO TH EREFORE EXCLUDE IT AS A COMPARABLE AT ENTITY LEVEL AS SEGMENTAL DAT A IS NOT AVAILABLE. 6.1.4 WE HAVE CONSIDERED THE ANNUAL REPORTS OF THE OTHER COMPARABLES SUBMITTED BEFORE DRP AND HAVE COME TO C ONCLUSION THAT BASED ON FUNCTIONAL TEST THEY ARE COMPARABLE T O ASSESSEE AS MINOR DIFFERENCES AMONG THEM ARE TAKEN CARE OF U NDER TNMM. 2.3 THE AO HAS, THEREAFTER, PASSED THE IMPUGNED F INAL ORDER OF ASSESSMENT DATED 31 ST AUGUST 2012 MAKING AN ADJUSTMENT UNDER CHAPTER X OF INCOME TAX ACT OF RS 3,53,24,242 /-. 2.4 BEING FURTHER AGGRIEVED, THE ASSESSEE IS NOW I N APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. THAT ON FACTS AND IN LAW THE ORDERS PASSED BY THE ASSESSING OFFICER [HEREINAFTER REFERRED AS AO] / DISPUTE RESOLUTION PANEL [HEREINAFTER REFERRED AS DRP]/TR ANSFER PRICING OFFICER [HEREINAFTER REFERRED AS TPO] ARE BAD IN LAW AND VOID AB-INITIO. 7 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 1.1 THAT ON FACTS AND IN LAW, THE ASSUMPTION OF JUR ISDICTION BY THE AO/TPO TO DETERMINE ARMS LENGTH PRICE IS BAD I N LAW AND VOID AB-INITIO. 2. THAT ON FACTS AND IN LAW, THE DRP ERRED IN SUSTA INING AN ADJUSTMENT TO TOTAL INCOME OF RS.3,53,24,242/- UNDE R CHAPTER-X OF THE INCOME TAX ACT, 1961. 3. THAT ON FACTS AND IN LAW, THE DRP ERRED IN HOLDI NG THAT FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANS ACTIONS THE TPO WAS JUSTIFIED IN USING CURRENT YEAR DATA ONLY W HILE COMPUTING THE PROFIT LEVEL INDICATOR OF THE COMPARA BLE COMPANIES. 4. THAT ON FACTS AND IN LAW THE TPO ERRED IN OBSERV ING THAT THE ASSESSEE IS PROVIDING FOLLOWING SERVICES : (A) LOUNGE SERVICES (B) TICKETING (C) CREW BRIEFING (D) FUELING SUPERVISIONS (E) PASSENGER BOARDING BRIDGES HANDLING (F) AIRCRAFT SECURITY (G) EXECUTIVE AVIATION HANDLING (H) FLOOR WALKER SERVICE (I) GOVERNMENT AIRCRAFT HANDLING 8 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 5. THAT ON FACTS AND IN LAW THE DRP ERRED IN UPHOLD ING AND THE TPO ERRED IN PROPOSING A FRESH SET OF COMPARABL E COMPANIES. 5.1 THAT WITHOUT PREJUDICE ON FACTS AND IN LAW THE AO/TPO ERRED AND THE DRP INTER ALIA ERRED IN NOT APPRECIAT ING THAT : (A) THE TPO SHOULD HAVE APPLIED A TURNOVER FILTER OF RS.100 CRORES (B) THE FOUR COMPARABLE COMPANIES SELECTED BY THE TPO WERE NOT ENTIRELY SERVICE ORIENTED (I.E., HAVING A VERY LOW EMPLOYEE COST) AND WERE DERIVING PROFITS FROM OTHER KEY ASSETS. (C) COMPANIES HAVING MORE THAT 25% RELATED PARTY TRANSACTIONS SHOULD NOT HAVE BEEN REJECTED. 5.2 THAT WITHOUT PREJUDICE ON FACTS AND IN LAW THE DRP/TPO ERRED IN IGNORING THE ALTERNATE SET COMPARABLE COMP ANIES PROPOSED VIDE WRITTEN SUBMISSIONS DATED 12 TH SEPTEMBER, 2011. 6. THAT ON FACTS AND IN LAW, THE DRP ERRED IN NOT A DJUDICATING UPON GROUND NO.7 RAISED AS AN OBJECTION BEFORE IT. 6.1 THAT ON FACTS AND IN LAW, WHILE COMPUTING THE O PERATING MARGINS OF THE TESTED PARTY THE TRO/DRP ERRED IN : (I) NOT REDUCING THE FBT COST OF 39,00,000/- FROM THE TOTAL OPERATING COST (II) REDUCING THE TOTAL OPERATING REVENUES BY RS.98,00,361/- 9 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 7. THAT ON FACTS AND IN LAW, THE DRP ERRED IN NOT T AKING INTO CONSIDERATION CONTENTIONS OF ASSESSEE RELATING TO F ACTUAL ERRORS COMMITTED BY THE TPO IN PAST AND RECAPITULATED BY H IM IN THE YEAR UNDER CONSIDERATION. 8. THAT ON FACTS AND IN LAW THE TPO ERRED IN COMPAR ING THE OPERATING MARGINS OF THE ASSESSEE WITH THE MEAN OPE RATING MARGINS OF THE ALLEGED COMPARABLE COMPANIES. 9. THAT WITHOUT PREJUDICE ON FACTS AND IN LAW THE D RP ERRED IN NOT DIRECTING THE AO TO ALLOW THE BENEFIT FOR AD JUSTMENT OF THE ARMS LENGTH PRICE (ALP) BY +- AS PER THE PROVISO TO SECTION 92C(2). 3.0 IT WAS SUBMITTED BY THE LD. AR THAT THE TPO H AS NOT PROPERLY APPRECIATED THE FUNCTIONAL PROFILE OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE IS MERELY RENDERING FEW FACETS OF GROUND HANDLING SERVICES TO ITS AE. IN SUPPORT, THE LD AR RELIED UPON THE ORDER PASSED BY THIS TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR AY 2007-08 REPORTED IN (2019) 103 TAXMAN N.COM 268(DEL). THE LD AR SUBMITTED THAT ONCE THE FUNCTIONAL PROFIL E OF THE ASSESSEE IS CORRECTLY CONSTRUED THEN IT WILL BE CLEAR THAT M/ S CONTAINER CORPORATION OF INDIA LTD. AND M/S SANCO TRANS LTD C ANNOT BE SELECTED AS A COMPARABLE. IN SUPPORT, THE LD AR ALS O RELIED UPON 10 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT THE COORDINATE BENCH DECISIONS IN CASE OF KEEHNE + NAGEL PVT LTD REPORTED IN 49 SOT 592(DEL) AND JAS FORWARDING WORLD WIDE REPORTED IN (2020) 113 TAXMANN.COM 390(DEL). IT WAS SUBMITTED BY THE LD AR THAT ONCE THESE TWO COMPANIES ARE EXCLUDE D, THEN THE OTHER GROUNDS OF APPEAL WOULD BECOME IN FRUCTUOUS . 3.1 THE LD AR ALSO SUBMITTED THAT THE TPO SHOULD HAVE RECOMPUTED THE PLI OF THE ASSESSEE ONCE EXPENDITURE INCURRED ON FRINGE BENEFIT TAX WAS BEING CONSIDERED AS NON-OPERA TING IN CASE OF COMPARABLE COMPANIES. 4.0 PER CONTRA, THE LD CIT (DR) VEHEMENTLY SUPPOR TED THE ADJUSTMENT MADE BY THE TPO WHICH HAS BEEN PARTLY UPHELD BY LD DRP. IT WAS SUBMITTED BY THE LD CIT (DR) THAT THE LOWER AUTHORITIES HAVE JUSTIFIABLY SELECTED M/S CONTAINER CORPORATION OF INDIA LTD. AND M/S SANCO TRANS LTD AS A COMPARABLE. THE LD CIT (DR) INVITED OUR ATTENTION TO THE FOLLOWING OBSERVAT IONS OF THE TPO IN THIS REGARD: CONTAINER CORPORATION OF INDIA LIMITED (CONCOR) AS PER ASSESSEE, THE SERVICES OF THE COMPANY CAN BE CATEGORIZED AS TRANSPORTATION OF CONTAINERS, HANDLI NG OF 11 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT CONTAINERS AND PARKING OF CONTAINERS. THE OBJECTION OF THE ASSESSEE IS ON VERTICALS, THIS HAS BEEN DISCUSSED I N DETAIL ABOVE. ANOTHER OBJECTION OF THE ASSESSEE IS ON TURNOVER. T HIS ISSUE HAS ALSO BEEN DISCUSSED IN DETAIL ABOVE THAT IN A SERVI CE INDUSTRY, TURNOVER DOES NOT PLAY A MAJOR ROLE. THEREFORE, THI S OBJECTION IS ALSO WITHOUT MERIT. THEREFORE, THIS COMPANY WILL BE TAKEN AS A COMPARABLE. . SANCO TRANS LIMITED (SANCO TRANS) THE ASSESSEE HAS OBJECTED TO THIS COMPARABLE ON THE GROUND THAT THE COMPANY HAS EARNED INCOME FROM TRANSPORT A ND HANDLING CHARGES. THE ASSESSEE STATES THAT THIS DOE S NOT IMPLY THAT THIS INCOME IS FROM AIR CARGO HANDLING CHARGES . IT HAS NEVER BEEN THE CASE OF THIS OFFICE THAT THIS COMPANY IS E NGAGED IN AIR CARGO HANDLING ACTIVITIES. THIS COMPANY HAS BEEN CH OSEN BECAUSE IT IS INVOLVED IN TRANSPORT SERVICES AND SU PPORT SYSTEMS. THE ASSESSEE ALSO RUNS THE PASSENGER BUSES , HANDLES LUGGAGE, PROVIDES RAMP SERVICES, LOADING AND UNLOAD ING ETC. ALL THESE ACTIVITIES ARE AKIN TO TRANSPORT SUPPORT SERV ICES. HENCE, THIS COMPANY CAN BE USED AS A COMPARABLE. 5.0 WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE MATERIAL AVAILABLE ON RECORD. THE FIRST ISS UE TO BE DECIDED BY US IS AS TO WHAT IS THE CORRECT FUNCTIONAL PROFIL E OF THE ASSESSEE. 12 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT THE TPO HAS EXAMINED THE WEBSITE OF THE ASSESSEE ON 26 TH AUGUST 2011 AND HAS ALLEGED THAT THE ASSESSEE WAS RENDERING VARIOUS OTHER SERVICES WHICH WERE NOT FORMING PART OF ITS FUNCTION AL PROFILE STATED IN THE TP STUDY. THE LD AR HAS SUBMITTED THAT DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS PROVIDING SERV ICES TO ITS AE AS PART OF AN AGREEMENT WHICH HAS BEEN ANALYSED BY T HE COORDINATE BENCH OF THIS TRIBUNAL IN AY 2007-08. WE HAVE CAREF ULLY PERUSED THE ORDER DATED 18 TH FEBRUARY 2019 PASSED BY THE COORDINATE BENCH FOR AY 2007-08. THE COORDINATE BENCH HAS HELD AS UN DER: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. FIRSTL Y IT IS IMPORTANT TO IDENTIFY THE EXACT NATURE OF THE SERVI CES RENDERED BY THE ASSESSEE TO UNDERSTAND THE FUNCTIONAL PROFIL E OF THE ASSESSEE. SUCH PROFILE HAS BEEN DISPUTED BY THE ASS ESSEE WIDE GROUND NUMBER 2.2 OF THE GROUNDS OF APPEAL. TH E FUNCTIONAL PROFILE STATED IN THE TRANSFER PRICING S TUDY REPORT PREPARED BY THE ASSESSEE IS SKETCHY AND DOES NOT DE SERVE ANY MENTION. THE LEARNED TRANSFER PRICING OFFICER IN PA RA NUMBER 2 IS EXTRACTED THE ACTIVITIES CARRIED OUT BY THE ASSE SSEE FROM THE WEBSITE OF THE ASSESSEE. ON THAT BASIS THE LEARNED TRANSFER PRICING OFFICER AND STATED THAT THE ASSESSEE IS PRO VIDING A VERY SPECIFIC MISSION SERVICES AND HAVING A SPECIALIZED FUNCTIONS 13 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT WHICH REQUIRE CRITICAL KNOWLEDGE OF THE DYNAMICS OF THE INDUSTRY, SPECIALIZED TRAINING OF THE STAFF OF THE ASSESSEE. AND THEREFORE LOOKING AT THE PRESENT ENVIRONMENT OF HIG H SECURITY THE FUNCTIONS AND RESPONSIBILITY OF THE COMPANY AND THE EMPLOYEES OF THE ASSESSEE BECOME ALMOST SIGNIFICANT AND REQUIRE HIGH-QUALITY. THEREFORE THE LEARNED TRANSFE R PRICING OFFICER PROCEEDED TO COMPARE THE FUNCTIONS OF THE A SSESSEE ON THOSE CRITERIA. ASSESSEE HAS OBJECTED BEFORE THE LE ARNED TRANSFER PRICING OFFICER THAT LEARNED TRANSFER PRIC ING OFFICER IS NOT APPRECIATED ACTIVITIES OF THE ASSESSEE WHICH AR E IN THE NATURE OF ONLY BUSINESS SUPPORT SERVICES. IT WAS FU RTHER CONTENDED BY THE ASSESSEE THAT IT IS NOT PROVIDING ANY REFUELING SERVICES OR ANY SECURITY SERVICES AND THE REFORE THE SERVICES PROVIDED BY THE ASSESSEE ARE NOT SPECIALIZ ED SERVICES. SUCH OBJECTION IS RECORDED IN PARA NUMBER 3.1 OF TH E ORDER OF THE LEARNED TRANSFER PRICING OFFICER. THE ASSESSEE HAS SUBMITTED THE COPY OF THE GROUND HANDLING AGREEMENT BETWEEN THE ASSESSEE AND ITS ASSOCIATED ENTERPRISES. IT IS A STANDARD GROUND HANDLING AGREEMENT BETWEEN THE PARTIES EFFEC TIVE FROM 01/02/2002 AND IT IS CLAIMED THAT THE SAME AGREEMEN T CONTINUES. THE SERVICES TO BE PROVIDED BY THE ASSES SEE ARE LISTED IN PARAGRAPH 1 OF THE AGREEMENT. SAME ARE AL SO COMPARED WITH THE STANDARD GROUND HANDLING AGREEMEN T VERSION OF 1998 AND IT IS FOUND THAT ASSESSEE WOULD BE PROVIDING FOLLOWING SERVICES: 14 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT LH SGHA 1ST FEB 2002 TO 31ST DEC 2006 SGHA VERSION L998 SECTION 1 REPRESENTATION AND ACCOMMODATION 1.1. 3 INDICATE THAT THE HANDLING COMPANY IS ACTING AS HANDLING AGENT FOR THE CARRIER. 1.1. 4 INFORM ALL INTERESTED PARTIES CONCERNING MOVEMENTS OF THE CARRIER'S AIRCRAFT. SECTION 2 LOAD CONTROL & COMMUNICATIONS AND DEPARTURE CONTROL SYSTEM 2.1 LOAD CONTROL 2.1. 2 (C) DISTRIBUTE AS APPROPRIATE, DOCUMENTS, INCLUDING BUT NOT LIMITED TO, LOADING INSTRUCTIONS, LOADSHEETS, BALANCE CHARTS, CAPTAIN'S LOAD INFORMATION AND MANIFESTS, IN ACCORDANCE WITH LOCAL OR INTERNATIONAL REGULATIONS OR AS REASONABLY REQUIRED BY THE CARRIER. 2.3 DEPARTURE CONTROL SYSTEM (DCS) 2.3. 1 (B) OPERATE EQUIPMENT AND FACILITIES TO ALLOW THE HANDLING COMPANY ACCESS TO THE CARRIER'S DCS, AS MUTUALLY AGREED. 2.3. 2 ACCESS THE FOLLOWING FACILITIES IN THE CARRIER'S DCS (B) CHECK-IN. 15 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT (C) BOARDING CONTROL (D) BAGGAGE RECONCILIATION. (E) BAGGAGE TRACING SECTION 3 UNIT LOAD DEVICE CONTROL 3.1 HANDLING 3.1. (B) ARRANGE FOR 1 SUITABLE STORAGE SPACE FOR ULD'S, AS MUTUALLY AGREED. 3.1. 2 APPLY CORRECT STORAGE AND HANDLING TECHNIQUES IN ACCORDANCE WITH THE CARRIER'S REQUIREMENTS. 3.1. 3 TAKE APPROPRIATE ACTION TO PREVENT THEFT OR UNAUTHORIZED USE OF, OR DAMAGE TO THE CARRIER'S ULD'S IN THE CUSTODY OF THE HANDLING COMPANY. NOTIFY THE CARRIER IMMEDIATELY OF ANY DAMAGE TO OR LOSS OF SUCH ITEMS. 3.2 ADMINISTRATION 3.2. 3 (A) TAKE PHYSICAL INVENTORY OF ULD STOCK AND MAINTAIN A STOCK RECORD. (B) COMPILE AND DISPATCH ULD CONTROL MESSAGES (UCM), ACCORDING TO UCM PROCEDURE. (C) COMPILE AND DISPATCH STOCK CHECK MESSAGES (SCM), AS MUTUALLY AGREED. SECTION 4 PASSENGERS AND BAGGAGE 16 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 4.1 GENERAL 4.1. 3 WHEN REQUESTED BY THE CARRIER (A) PROVIDE OR (B) ARRANGE FOR SPECIAL EQUIPMENT, FACILITIES AND SPECIALLY TRAINED PERSONNEL, AS AVAILABLE, FOR ASSISTANCE TO (1) UNACCOMPANIED MINORS. (2) DISABLED PASSENGERS. (3) VIP'S. (4) TRANSIT WITHOUT VISA PASSENGERS (TWOV'S). (5) DEPORTEES. (6) OTHERS, AS SPECIFIED. ADDITIONAL COSTS MAY BE RECHARGED TO THE CARRIER. ACCORDING TO THE ABOVE EXTRACTION THE ASSESSEE DOES NOT PROVIDE ANY LOUNGE SERVICE, TICKETING SERVICES, CRE W BRIEFING, FUELLING SUPERVISIONS, AIRCRAFT SECURITY SERVICES, OTHER THAN LISTED ABOVE. THEREFORE IT IS APPARENT THAT THE LEA RNED TRANSFER PRICING OFFICER HAS WRONGLY INTERPRETED THE FUNCTIO NS PROVIDED BY THE ASSESSEE. THE ASSESSEE IS PROVIDING MAINLY T HE PASSENGERS AND BAGGAGE IS HANDLING SERVICES AS LIST ED IN SECTION 4 OF THE ABOVE VERSION. THE OTHER SERVICES PROVIDED ARE THE INFORMATIVE SERVICES SUCH AS INFORMING THE AIRP ORT ACTIVITIES 17 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT CONCERNING THE SPECIFIC CARRIERS' AIRCRAFT TO THE C ONCERNED PERSONS/ AGENCIES/ OTHER OPERATORS AND TO OPERATE C ERTAIN FACILITIES AVAILABLE AT THE AIRPORT FOR THESE PASSE NGER AND BAGGAGE SERVICES. THEREFORE ACCORDING TO THE ABOVE FINDING THE FUNCTIONAL PROFILE OF THE ASSESSEE IS NOW UNDISPUTE D. IN THE REVENUE PROFILE OF THE ASSESSEE IT DERIVES INCOME F ROM PROVIDING GROUND SERVICES INCLUSIVE OF ALL TYPE OF CARGO AND PASSENGER HANDLING SERVICES TO THE AIRLINES AT INDIAN AIRPORT S. IN ITS ASSET BASE IT DOES NOT HAVE ANY IMMOVABLE PROPERTY BUT TH E TOTAL ASSET BASE IS INR 25,76,70,389/- . 5.1 THE LD CIT (DR) HAS NOT BEEN ABLE TO HIGHLIGH T ANY DISTINGUISHABLE FACT. THEREFORE, RESPECTFULLY FOLLO WING THE FINDINGS OF COORDINATE BENCH FOR AY 2007-08, IT HELD THAT THE T PO, IN THE YEAR UNDER CONSIDERATION ALSO, HAS NOT PROPERLY APPRECIA TED THE FUNCTIONAL PROFILE OF THE ASSESSEE. FROM THE FACTS ON RECORD, IT IS DISCERNIBLE THAT THE ASSESSEE IS MAINLY PROVIDING P ASSENGERS AND BAGGAGE HANDLING SERVICES TO ITS AE AND IS NOT PROV IDING OTHER SPECIALIZED AIRPORT SERVICES AS ALLEGED BY THE TPO. FOR RENDERING SUCH SERVICES, THE ASSESSEE HAS A NET GROSS ASSET B ASE OF RS 31,22,65,835/- WHICH COMPRISES OF KNOW HOW/ ROYALTY, TEMPORARY STRUCTURES, OFFICE EQUIPMENT, SAFETY EQUIPMENTS, A IR-CONDITIONERS, 18 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT DATA PROCESSING EQUIPMENT, ELECTRICAL EQUIPMENT, FU RNITURE AND FITTINGS, MOTOR CAR, AND PLANT AND MACHINERY. IN TH E YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED TOTAL EXPE NDITURE OF RS 34,73,49,275/- OUT OF WHICH PERSONNEL EXPENDITURE IN CURRED IS RS 20,16,09,112/- WHICH IS 60% OF THE TOTAL EXPENSE. T HEREFORE, CLEARLY THE ASSESSEE IS A SERVICE ORIENTED COMPANY DERIVING ITS SOLE STREAM OF INCOME FROM PROVIDING PASSENGERS AND BAGGAGE HAN DLING SERVICES AT THE AIRPORT. 5.2 ONCE THE FUNCTIONAL PROFILE OF THE ASSESSEE I S CLEAR, WE PROCEED TO EXAMINE WHETHER LTHE OWER AUTHORITIES W ERE CORRECT IN SELECTING M/S CONTAINER CORPORATION OF INDIA LTD. A ND M/S SANCO TRANS LTD AS A COMPARABLE. BEFORE SPECIFICALLY ANAL YSING THE FAR OF THESE COMPARABLE COMPANIES, WE WOULD LIKE TO REITERA TE THE RATIO PROPOUNDED BY THE COORDINATE BENCH IN CASE OF JAS F ORWARDING WORLDWIDE (SUPRA) AS UNDER: BIC LOGISTICS LIMITED 29. THIS COMPANY IS ALSO ENGAGED IN ROAD TRANSPORTA TION. AS MENTIONED ELSEWHERE, THE APPELLANT IS ENGAGED AS NO N VESSEL OWNING FREIGHT FORWARDING COMPANY PROVIDING LOGISTI CS SERVICES 19 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT WHICH IS VERY DIFFERENT FROM THE TRANSPORTATION BUS INESS. THE CO- ORDINATE BENCH IN THE CASE OF KUEHNE + NAGEL (P.) L TD. V. ASSTT, CIT [2012] 17 TAXMANN.COM 97/49 SOT 592 (DELHI) HAS HELD THAT COMPANIES OWNING TRUCKS/AIRPLANES AND OTHER AS SETS USEFUL FOR TRANSPORTATION CANNOT BE COMPARED TO FRE IGHT FORWARDING COMPANIES WHICH DO NOT OWN SUCH ASSETS. 30. SIMILAR VIEW WAS TAKEN BY THE CO-ORDINATE BENCH IN THE CASE OF CEVA FREIGHT INDIA (P.) LTD. V. DY. CIT [2018] 9 0 TAXMANN.COM 120 (DELHI -TRIB.) WHEREIN THE TRIBUNAL HAS HELD THAT ROAD TRANSPORTATION COMPANY IS FUNCTIONALLY DI SSIMILAR TO FREIGHT FORWARDING COMPANIES. IT WOULD NOT BE OUT O F PLACE TO MENTION HERE THAT THE DRP ITSELF EXCLUDED AGARWAL I NDUSTRIAL CORPORATION ON THIS COUNT. CONSIDERING THE FUNCTION AL PROFILE OF THIS COMPANY WITH THAT OF THE APPELLANT, IN THE LIG HT OF THE DECISION OF THE CO-ORDINATE BENCH [SUPRA], WE DIREC T FOR EXCLUSION OF THIS COMPANY FROM THE FINAL LIST OF COMPARABLES. 5.3.0 KEEPING THE ABOVE DISTINCTION INTO CONSIDER ATION HIGHLIGHTED BY US ABOVE, OUR OBSERVATIONS IN THIS R EGARD ARE AS UNDER: 5.3.1.0 M/S CONTAINER CORPN. OF INDIA LTD: WITH ASSISTANCE FROM BOTH THE SIDES, WE HAVE PERUSAL THE ANNUAL ACCOUNTS OF THIS COMPANY. IT IS APPARENT THAT THIS IS A GOVERNMENT 20 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT COMPANY. CONTAINER CORPORATION OF INDIAS INCOME FR OM OPERATION IS FROM FREIGHT, HANDLING, TERMINAL SERVICE CHARGES , DEMURRAGE AND OTHERS OF RS. 3,347 CRORES. THERE ARE NO SEGMEN TAL ACCOUNTS PREPARED. IT IS NOW TRITE LAW THAT IN ABSENCE OF SEGM ENTAL DATA, A COMPANY SHOULD BE REJECTED AS A COMPARABLE. IN THIS REGARD WE DRAW SUPPORT FROM WISDOM OF THE HONBLE JURISDICTIONA L HIGH COURT IN CASE OF M/S SAXO INDIA LIMITED REPORTED IN 397 I TR 160(DEL) AND M/S SEZ GURGAON REPORTED IN 416 ITR 51(DEL). MOREOV ER, WE FIND THAT CONTAINER CORPORATION OF INDIA IS ALSO NOT A S ERVICE-ORIENTED COMPANY AS THE RATIO OF EMPLOYEE COST IS MERELY 1.6 5% (I.E. 55CR/ 3347CR). THIS IS AN IMPORTANT FACT WHICH MERITS CONS IDERATION. THE LD DRP HAS ITSELF MADE THIS AS A GROUND WHILE EXCLUD ING M/S COCHIN INTERNATIONAL AIRPORT (CIAL) AS A COMPARABLE WHICH WAS ORIGINALLY PROPOSED BY THE TPO. FROM PERUSAL OF THE ANNUAL ACCOUNTS OF THIS COMPANY, WE ALSO FIND THAT CONTAIN ER CORPORATION OF INDIA IS A GIANT COMPANY WITH TURNOVER OF MORE TH AN RS. 3,300/- CRORES, FIXED ASSET BASE OF AROUND RS.2,244/- CRORE S, CONTAINER FLEET OF 13,517 UNITS, SPEED WAGONS OF 6,722 AND OWNING TE RMINALS. THE ASSESSEE, ON THE OTHER HAND, IS A SERVICE-ORIENTED COMPANY WITH 21 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT TURNOVER OF RS 33.24 CR AND FIXED ASSET BASE (GROSS ) OF ONLY RS 31.22 CRORES. CONTAINER CORPORATION OF INDIA IS ALSO OPER ATING IN VIRTUAL MONOPOLY CONDITIONS. FROM THE ABOVE CUMULATIVE REAS ONS, WE FIND THAT FAR OF CONTAINER CORPORATION OF INDIA IS NOT A KIN TO THAT OF THE ASSESSEE. IT SHOULD, THEREFORE, BE REJECTED AS A CO MPARABLE. WE DIRECT ACCORDINGLY. 5.3.2.0 M/S SANCO TRANS LTD: M/S SANCO TRANS IS A COMPANY, WHICH PER AUDITED ACCO UNTS, IS PRINCIPALLY ENGAGED IN A SINGLE BUSINESS SEGMENT VI Z. CUSTOMS CLEARING & FORWARDING, CONTAINER FREIGHT STATION AND RELATED ACTIVITIES. DIRECTORS REPORT ACKNOWLEDGES THAT THE MAIN GROWTH AREA FOR THE COMPANY WAS BUSINESS OF CONTAINER FREIGHT ST ATION (CFS) AND THEREFORE, THE FUTURE STRATEGIES ARE AS UNDER: STRATEGIES AND FUTURE PLANS THE OPERATIONS IN CFS IS EXPECTED TO SHOW FAVOURABL E RESULTS IN THE CURRENT YEAR AS WELL. YOUR COMPANY IS THEREFORE , TAKING NECESSARY STEPS TO AUGMENT THE OPERATING FLEET FURT HER BY THE ACQUISITION OF REACH STOCKERS OF A COST OF NEARLY R S.300 LAKHS AND TRAILERS AND FORKLIFTS AT A COST OF RS.200 LAKH S WHICH WILL MAKE THE CFS ONE OF THE MOST MODERNIZED AND STATE O F THE ART 22 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT FACILITATES OF WORLD CLASS IN THIS PART OF THE COUN TRY. APART FROM THE ABOVE, YOUR COMPANY IS PLANNING TO REPLACE CERT AIN OPERATING EQUIPMENTS WHICH WILL GO A LONG WAY TO IM PROVE ITS OPERATING EFFICIENCY AND ALSO RESULT IN REDUCTION I N OPERATION COST. THESE AFFIRMATIVE ACTIONS, IT IS HOPED WILL H AVE A FAVOURABLE IMPACT ON PRODUCTIVITY AND PROFITABILITY OF THE CFS OPERATIONS. APART FROM THE ABOVE, YOUR COMPANY IS PLANNING TO D EVELOP THE EXISTING WAREHOUSING FACILITIES BY ACQUIRING SIMILA R FACILITIES ON OUTRIGHT / LEASE BASIS AND ALSO CREATING ENHANCED V OLUMES IN THE EXISTING FACILITY, WHICH, IT IS HOPED, WILL IMP ROVE ITS CAPABILITY TO MEET THE ANTICIPATED INCREASE IN THE VOLUME OF BUSINESS IN THE SOLD OPERATIONS AND ALSO RESULT IN REDUCED OPERATING COST. WITH THESE ACTIONS, PLANNED AND ANT ICIPATED, YOUR DIRECTORS ARE CONFIDENT, BARRING UNFORESEEN CI RCUMSTANCES OF REPORTING BETTER WORKING RESULTS IN THE CURRENT YEAR. 5.3.2.1 THIS CLEARLY HIGHLIGHTS THE NATURE OF BUS INESS OF THIS COMPANY IS PRIMARILY IN FROM EARNING PASSIV E INCOME. REVENUE SHOWN IN PROFIT &LOSS ACCOUNT IS AS UNDER: OPERATING EARNINGS (RS LAKHS) 2008 2007 HANDLING CHARGES EARNED 1760.18 1387.48 EQUIPMENT AND FLEET HIRE CHARGES EARNED 822.90 803.88 AGENCY AND OTHER CHARGES EARNED 136.23 130.22 WAREHOUSING CHARGES EARNED 1577.05 947.56 23 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 4296.36 3269.14 5.3.2.2 HANDLING CHARGES EARNED IS 40.96% OF THE TOTAL REVENUE AND BALANCE IS PASSIVE INCOME I.E., HIRE CH ARGES EARNED AND WAREHOUSE CHARGES EARNED WHICH IS 59.03%. THERE ARE N O SEGMENTAL ACCOUNTS PREPARED. M/S SANCO TRANS HAS EA RNED TOTAL OPERATING REVENUE OF RS.4296.36 LAKH AND TOTAL EMPL OYEE COST INCURRED IS 511.96 LAKHS WHICH IN RATIO TERMS IS 11. 91%. THIS SHOWS THAT THIS IS ALSO NOT A SERVICE-ORIENTED COMPA NY. FOR REASONS AKIN TO THAT STATED ABOVE WE, THEREFORE, HOLD THAT M/S SANCO TRANS CANNOT BE SELECTED AS A COMPARABLE. WE DIRECT ACCOR DINGLY. 5.4.0 BEFORE US, THE LD AR HAS ALSO SUBMITTED TH AT THE TPO HAD COMPUTED THE PLI OF COMPANIES SELECTED BY HIM BY PRESUMING THAT FBT EXPENSE IS A NON-OPERATING ITEM. IN THIS REGARD WE NOTE THAT AT PAGE 28 HIS ORDER IT IS HELD BY THE TPO AS UNDER: THE COMPUTATIONS MADE BY THE ASSESSEE HAVE BEEN CONSIDERED. IT IS SEEN THAT THE ASSESSEE HAS CONSID ERED FRINGE BENEFIT TAX AS OF OPERATING NATURE, WHICH IS INCORR ECT. THE FIGURES OF OPERATING INCOME AND OPERATING EXPENSES ARE BEIN G ADOPTED AS SUBMITTED BY THE ASSESSEE BUT AFTER EXCLUDING FB T. 24 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 5.4.1 IT IS SUBMITTED BY THE LD AR THAT WHILE TH E PLI OF COMPARABLE COMPANIES HAS BEEN COMPUTED BY THE TP O ADOPTING FBT EXPENSE AS NON-OPERATING, IN THE CASE OF ASSESS EE IN ITS TP STUDY IT HAS COMPUTED A PLI OF 13.84% BY TAKING FB T EXPENSE AS AN OPERATING ITEM. IN THIS REGARD, THE LD AR HAS IN VITED OUR ATTENTION TO PAGE 202 OF THE PAPER BOOK BEFORE US. IT WAS ALSO SUBMITTED THAT BEFORE THE LD. DRP, THE ASSESSEE HAD RAISED A SPECIFIC OBJECTION VIDE GROUND NO 7 IN THIS REGARD AND HAD ALSO MADE DETAILED SUBMISSIONS FOR WHICH LD AR INVITED OU R ATTENTION TO PAGES 87 AND 88 OF THE PAPER BOOK. WE HAVE PERUSED THE MATERIAL ON RECORD AND IT IS SEEN THAT THERE IS NO ADJUDICAT ION BY THE LD DRP ON THIS ISSUE. WE, THEREFORE, DIRECT THE TPO TO ADO PT A UNIFORM POLICY. ONCE FBT EXPENSE IS TAKEN AS NON-OPERATING WHILE COMPUTING THE PLI OF COMPARABLE COMPANIES, A SIMILA R EFFECT SHOULD ALSO BE GIVEN WHILE COMPUTING PLI OF THE TESTED PART Y. WE, THEREFORE, DIRECT THE TPO TO RE-COMPUTE THE PLI OF ASSESSEE EX CLUDING FBT EXPENSE. 25 ITA NO.5711/DEL/2011 GLOBE GROUND INDIA PVT . LTD. VS . DCIT 6.0 IN THE FINAL RESULT, THE APPEAL IS ALLOWED WI TH DIRECTIONS AS ABOVE. ORDER PRONOUNCED ON 30.06.2 021. SD/- SD/- (R.K.PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/06/2021 *DRAGON* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT DEHRADUN