M/s. BC Management Services Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6134/DEL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3191 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 23-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T M SHIVAKUMAR
• Assessee Lawyers: DEL CHOPRA; MRS PALLAVI ITA NOS DEL DEL
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Initiation of penalty proceedings; Corroborative evidences; Notional interest
• Section: 143(3); 234B; 37; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ES , I - 2 NEW DELHI BEFORE SHRI J.S. REDDY , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA N O. 6134 / DEL /201 5 A SSESSMENT YEAR: 20 11 - 12 BC MANAGEMENT SERVICES P VT. LTD . , 17, KG MARG , NEW DELHI PAN - AAECB1224A VS. D Y. C OMMISSIONER OF I NCOME T AX, CIRCLE 4(1) NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 5829 /DEL/201 5 ASSESSMENT YEAR: 20 11 - 12 D Y. CIT CIRCLE 4(1), NEW DELHI VS. BC MANAGEMENT SERVICES PVT. LTD., 17, KG MARG, NEW DELHI PAN - AAECB1224A (APPELLANT) (RESPONDENT) ITA NO. 6572 /DEL/201 6 ASSESSMENT YEAR: 201 2 - 1 3 BC MANAGEMENT SERVICES PVT. LTD., KASTURBA GANDHI MARG NEW DELHI PAN - AAECB1224A VS. ACIT CIRCLE - 4(1) NEW D ELHI (APPELLANT) (RESPONDENT) ASSESSEE BY SH. S.P. SINGH, AR, SH. MANONEET DALAL, ADVOCATE, SH. GAURAV BHUTANI , CA, SH. YISHU GOEL, ADVOCATE & MRS. PALLAVI 2 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 CHOPRA, CA REVENUE BY SH. T.M. SHIVAKUMAR, CIT (DR) DATE OF HEARING 23 .0 3 .2017 DATE O F PRONOUNCEMENT 25 . 0 5 .2017 O R D E R PER AMIT SHUKLA , J .M . : THE AFORESAID APPEALS FOR THE ASSESSMENT YEAR 2011 - 12 HAVE BEEN FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST FINAL ASSESSMENT ORDER DATED 29.9.2015 , PASSED UNDER SECTION 143(3) READ WITH SECTION 144 C IN PURSUANCE OF DIRECTION GIVEN BY THE DISPUTE RESOLUTION PANEL - 1 , NEW DELHI (DRP) ; AND THE APPEAL FOR THE ASSESSMENT YEAR 2012 - 13 HAS BEEN FILED BY THE ASSESSEE AGAINST FINAL ASSESSMENT ORDER DATED 28.1 0.2016 , PASSED UNDER SECTION 143(3) READ WITH SECTION 144C IN PURSUANCE OF DIRECTIONS GIVEN BY THE DRP. SINCE THE ISSUE S INVOLVED IN ALL THE APPEALS ARE COMMON ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE, SAME WE RE HEARD TOGETHER AND ARE BEING DISPOSE D OF F BY WAY OF CONSOLIDATED ORDER. 2. WE WILL FIRST TAKE UP THE ASSESSEE S APPEAL FOR THE ASSESSMENT YEAR 2011 - 12 , WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. ASSESSING OFFICER ( AO ) IS BAD IN LAW. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO/ LD. DISPUTE RESOLUTION PANEL ( DRP ) ERRED IN MAKING AN ADJUSTMENT TO THE ARM S LENGTH PRICE ( ALP ) OF THE APPELLANT S INTERNATIONA L TRANSACTIONS, RELATING TO PROVISION OF FINANCE/ IT - BACK OFFICE SUPPORT SERVICES, WITH ASSOCIATED 3 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 ENTERPRISES ( AES ) AMOUNTING TO INR 20,744,853 BY: 2 . 1 . MODIFYING THE COMPARABILITY ANALYSIS CONDUCTED IN THE TRANSFER PRICING DOCUMENTATION OF THE APPELLANT ON INAPPROPRIATE AND INADEQUATE GROUNDS; 2 . 2 . REJECTING THE APPLICABILITY OF FUNCTIONAL FILTER APPLIED IN THE SEARCH PROCESS BY THE APPELLANT; 2 . 3 . REJECTING OMEGA HEALTHCARE MANAGEMENT SERVICES PRIVATE LIMITED WHICH WERE COMPARABLE TO THE APPELLANT, ON GROUND OF FU NCTIONAL DISSIMILARITY; 2 . 4 . SELECTING E - CLERX SERVICES LIMITED, ICRA TECHNO ANALYTICS LIMITED, INFOSYS BPO LIMITED AND TCS E - SERVE LIMITED, WHICH WERE NOT COMPARABLE TO THE APPELLANT ON VARIOUS GROUNDS; 2 . 5 . ERRED I N COMPUTING THE MARGINS OF COMPARABLE COMPANIES SELECTED; 2 . 6 . CONFIRMING THE SELECTION OF CURRENT YEAR (I.E. FINANCIAL YEAR 2010 - 11) DATA FOR COMPARABILITY; AND 2 . 7 . ERRED IN NOT TREATING FOREIGN EXCHANGE GAIN/ LOSS AS OPERATING IN NATURE, WHILE COMPUTING THE OPERATING MARGIN. 3 . THAT ON THE FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW THE LD. AO/ LD. TPO/ LD. DRP ERRED IN THE ASSESSMENT OF THE ALP OF THE APPELLANT S INTERNATIONAL TRANSACTIONS WITH RESPECT TO THE IMPORT OF FIXED ASSETS AS NIL, THEREBY RESULTING IN THE ENHANCEMENT OF TOTAL INCOME BY INR 4,80 5,127. 4 . THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO/ LD. TPO ERRED IN TREATING DELAY IN RECEIPT OF PAYMENT FROM THE AE S, AS UNSECURED LOANS ADVANCED TO THE AE S AND CHARGING INTEREST ON THE SAME. 5 . THAT ON THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW THE LD. AO/ LD. TPO ERRED IN NOT EXAMINING THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE ACT. 6 . THAT ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN CHARGING AND COMPUTING INTER EST UNDER SECTION 2 34B AND 234C OF THE ACT. 3. THE BRIEF FACTS AND BACKGROUND OF THE CASE ARE THAT ASSESSEE COMPANY WAS INCORPORATED ON MAY 12, 2010 AS A SUBSIDIARY OF 4 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 BC HOLDINGS (UK ) LIMITED WITH AN OBJECTIVE TO PROVIDE IT AND FINANCIAL BACK OFFIC E SUPPORT SERVICES TO VARIOUS ENTITIES/ SUBSIDIARIES OF ITS PARENT COMPANY ALL ACROSS THE WORLD . TH E ASSESSEE ALONGWITH BC HOLDINGS (UK LIMITED) IS A PART OF BRITISH COUNCIL WHICH IS AN INTERNATIONAL ORGANIZATION BASED IN UK , ESTABLISHED FOR FOSTERING EDUC ATIONAL OPPORTUNITIES AND CULTURAL RELATIONS. THE ASSESSEE COMPANY COMMENCED IT S OPERATION IN INDIA FROM AUGUST, 2010 AND HENCE THE IMPUGNED ASSESSMENT YEAR IS THE FIRST YEAR OF OPERATIONS. IN THE TRANSFER PRICING STUDY REPORT , THE ASSESSEE HAS CHARACTERIZ ED ITSELF AS A SERVICE PROVIDER AND HAD REPORTED FOLLOWING INTERNATIONAL TRANSACTIONS: NATURE OF TRANSACTIONS VALUE (RS.) 1. PROVISIONS OF FINANCE / IT BACK OFFICE SERVICES 21,61,47,550/ - 2 . PURCHASED OF FIXED ASSETS 2,86,67,478/ - 3 . REIMBURSEMENT OF EXPENSES TO AE 1,64,07322/ - 3. FOR BENCH MARKING IT S INTERNATIONAL TRANS ACTIONS OF PROVISIONS OF FINANCE/ IT BACK OFFICE SUPPORTS S ERVICES, THE ASSESSEE HAD SELECTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE M ETHOD BY ADOPTING THE PLI AS OP / TC. THE MARGIN OF THE ASSESSEE WAS WORKED OUT AT 17.83%. FO R THE PURPOSE OF BENCH MARKING ITS MARGIN, ASSESSEE HAD SELECTED SEVEN COMPARABLE COMPANIES WHOSE AVERAGE PLI MARGIN WAS ARRIVED AT 14.94% AND ACCORDINGLY , IT WAS REPORTED THAT THE ASSESSEE S MARGINS ARE AT ARM S LENGTH PRICE . DURING THE COURSE OF TRANSFER PRICING PROCEEDINGS, THE ASSESSEE SUBMITTED TWO NEW COMPARABLE 5 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 COMPANIES AND OUT OF RESULTANT NINE COMPARABLES, THE TPO HAD REJECTED SEVEN COMPARABLE COMPANIES AN D RETAINED TWO COMPARABLE OF THE ASSESSEE NAMELY ; ( I ) JINDAL INTELLICOM LIMIT ED; AND ( II ) E 4E HEALTH CARE LIMITED. BEFORE ANALYZING THE ARMS LENGTH PRICE, THE LEARNED TPO EXAMINED THE VARIOUS FUNCTION S PERFORMED BY THE ASSESSEE WHICH HAS BEEN HIGHLIGHTED BY HIM FROM PAGES 2 TO 5 OF HIS ORDER , WHICH FOR THE SAKE OF READY REFERENCE ARE REPRODUCED HEREUNDER: THE ASSESSEE S FUNCTIONS AND SERVICES HAVE BEEN CLASSIFIED UNDER TWO MAIN HEADS ACCOUNTS / FINANCIAL SUPPORTS SERVICES AND I.T. SUPPORT SERVICES. UNDER THE FINANCE SUPPORT SERVICES THE SERVICES RENDERED ARE BASICALLY TRANSACTION SERVICES LIKE ACCOUNTS PAYABLE, RECEIVABLE, CASH OPERATIONS, GENERAL ACCOUNTING IN SUPPORT SERVICES AND CENTRE OF EXCELLENCE LIKE FINANCIAL PLANNING AND ANALYSIS , FINANCIAL CONTRO L TREASURY AND BANKING, DATA SYSTEMS ETC. UNDER THE I.T. SUPPORT SERVICES , THE ASSESSEE S KEY FUNCTION HAS BEEN SUMMARIZED IN THE FOLLOWING MANNER. INCIDENT RESOLUTION IS: TO RESOLVE IT INFRASTRUCTURE ISSUES WHICH ARE ASSIGNED TO BCMS WITHIN THE GLOBAL IT SUPPORT MODEL. INCIDENT RESOLUTION SAP: THE RESOLUTION OF SECOND AND THIRD - LINE TECHNICAL SAP ISSUES WHICH CANNOT BE SOLVED AT THE FIRST LINE STAGE BY THE GSD UNDER THE SEAL CONTRACT IS REFERRED TO BCMS OR THE UK. BUSINESS RELATIONSHIP MANAGEMENT: TO SUPPORT THE SOUTH ASIA (SA) , MIDDLE EAST AND NORTH AFRICA (MENA) AND SUB SAHARAN AFRICA (SSA) REGIONS IN DELIVERY OF THEIR STRATEGY, BY ENSURING THAT BUSINESS SOLUTIONS ARE FULLY ALIGNED WITH BUSINESS NEEDS. AS A MEMBER OF THE GLOBAL BUSINESS SOLUTION TEA M, TO ENSURE THAT FUTURE OPTIONS AND SOLUTIONS ARE SCALABLE AND ALIGNED TO CORPORATE STRATEGY. INCIDENT AND SERVICE REQUEST MANAGEMENT. PROBLEM MANAGEMENT . KNOWLEDGE MANAGEMENT . CHANGE MANAGEMENT. CONFIGURATION MANAGEMENT: THE CONFIGURATION AND RELEASE PRO CESS IS ACCOUNTABLE FOR: 6 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 IT SERVICE REPORTING . IT SERVICE MANAGEMENT GOVERNANCE. SERVICE LEVEL MANAGEMENT . EVENT MANAGEMENT. TECHNOLOGY SERVICES SUPPORT ROLE. PROCUREMENT IT OPERATIONS MANAGEMENT 4 . THE LEARNED TPO THEN CARRIED OUT HIS OWN SEARCH PROCESS AND AFTER DISCUSSING THE VARIOUS FILTERS APPLIED BY HIM D URING THE COURSE OF HIS SEARCH , IDENTIFIED SIX NEW COMPARABLE COMPANIES. AFTER INVITING ASSESSEE S OBJECTIONS AND DETAILED ANALYSIS, HE FINALLY SELECTED FOLLOWING EIGHT COMPARABLE WITH AN AVERAGE AR ITHMETIC MEAN OF 29. 53 %. THE DETAILS OF THE COMPARABLES SELECTED BY THE TPO ARE AS UNDER: S. NO. COMPANY NAME OP/OC 1. INFOSYS BPO LTD. 17.86 2. JINDAL INTELLICOM LTD 13.70 3. E4E HEALTHCARE BUSINESS SERVICES PVT. LTD. 9.77 4. ACCENTIA TECHNOLOGY LIMIT ED 29.18 5. ACROPETAL TECH LTD. (SEG.) 14.36 6. ECLERX SERVICE LTD. 56.82 7. ICRA TECHNO ANALYTICS LTD. 25.24 8. TCS E - SERVE LTD. 69.31 AVERAGE 29.53% 7 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 THE LD. TPO HA S ALSO ALTERED THE PLI OF ASSESSEE AT 16.80%, INSTEAD OF 17. 8 3 % ARRIVED AT BY THE ASSESSEE BY HOLDING THAT FOREIGN EXCHANGE GAIN/LOSS CANNOT BE RECKONED AS OPERATING IN NATURE . ACCORDINGLY , AN UPWARD ADJUSTMENTS OF RS. 2,36,21,261/ - WAS SUGGESTED BY HIM O N THE AFORESAID TRANSACTION . 5. SO FAR AS THE TRANSACTION OF P URCHASE OF FIXED ASSETS IS CONCERNED, THE LD. TPO HELD THAT IT IS A SEPARATE CLASS OF TRANSACTION AND THEREFORE , HAS BEARING ON PROFIT. HE OBSERVE THAT, S INCE ASSESSEE COULD NOT PROVIDE PROPE R DOCUMENTATION , THEREFORE, IN ABSENCE OF ANY SUPPORTING EVIDENCE OR THIRD PARTY INVOICE, THE ARMS LENGTH PRICE OF THE PURCHASE OF ASSETS WAS TAKEN BY HIM AS N IL , WHICH RESULTED INTO AN ADJUSTMENT OF RS. 48,05127/ - . 6. THE LEARNED TPO ON FURTHER PERUSAL OF THE TRANSACTIONS, NOTED THAT THERE WAS CERTAIN DELAY IN RECEIPT OF PAYMENT FROM THE AE AND OBSERVED THAT ESTIMATE PERIOD OF 30 DAYS WOULD BE CONSIDERED AS NORMAL PERIOD FOR INTER - COMPANY SALES AND SERVICES AND ANY DELAY BEYOND THE AFORESAID PERIOD SHOU LD BE BENCH MARKED. AFTER TREATING IT AS A PART OF LOAN TRANSACTION, HE CALCULATED THE INTEREST RATE OF 11.69% AFTER TAKING OUTBOUND LOAN ON THE BASIS OF SBI BASE RATE AND ACCORDINGLY , FURTHER ADJUSTMENT OF RS. 5,25,938/ - WAS MADE. 7. FROM STAGE OF THE LE ARNED DRP , FIRST OF ALL THE TPO S ACTION FOR ADJUSTING THE MARGIN AT 16.80% INSTEAD OF 17. 8 3% AS DECLARED BY THE ASSESSEE , HAS BEEN UPHELD. THE LD. DRP REMOVED ONE OF THE COMPARABLE SELECTED BY THE LD. TPO NAMELY , ACCENTIA TECHNOLOGY LIMITED AND RESULTAN TLY SEVEN COMPARABLE COMPANIES 8 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 HAVE BEEN CONFIRMED BY THE DRP RESULTING INTO ARMS LENGTH MARGIN OF 27.98% AND THEREBY ADJUSTMENT WAS REDUCED MARGINALLY. 8. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SO FAR AS THE FIRST ISSUE OF TR ANSFER PRICING ADJUSTMENT OF PROVISION OF F INANCE / IT BACK SUPPORTS SERVICES IS CONCERNED , THE ASSESSEE IS MAINLY CHALLENGING THE EXCLUSION OF THREE COMPARABLE COMPANIES, NAMELY , (I) E - CLERX SERVICE LIMITED ; (II) TCS E - SERVE LIMITED ; AND (III) ICRA TECHNO LOGY ANALYTICS LTD. B ESIDES THIS , THE ASSESSEE IS ALSO CHALLENGING THAT FOREIGN EXCHANGE GAIN / LOSS HAS NOT BEEN TREATED AS OPERATING IN NATURE BY TPO AS WELL AS DRP. 9 . SINCE, THE LEARNED COUNSEL HAS ARGUED ONLY THREE COMPARABLE ; THEREFORE, OUR FINDING WILL BE CONFINED TO THESE COMPARABLE COMPANIES ONLY . HE FURTHER POINTED OUT THAT ONE OF THE DRP MEMBER SO FAR AS TWO COMPARABLE COMPANIES ARE CONCERNED NAMELY , I CRA TECHNO ANALYTICS LIMITED ; AND E - CLERX, HAS GIVEN DISSENTING NOTE IN THE ORDER WHEREBY S HE H A S ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THESE TWO COMPANIES ARE FUNCTIONALLY NOT COMPARABLE. AS FAR AS THE ISSUE OF INCLUSION / EXCLUSION OF THREE COMPARABLE COMPANIES, THE RELEVANT DISCUSSION AND OUR FINDING SHALL BE DISCUSSED HEREIN AFTE R: - I) E - CLERX : - 10. THE LD. TPO S/DRP S REASONING FOR REJECTING THE ASSESSEE S CONTENTION AND INCLUDING THIS COMPANY IN THE COMPARABLE LIST CAN BE SUMMARISED IN THE FOLLOWING MANNER: - 9 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 A . THE SERVICES PROVIDED BY E - CLERX ARE SIMILAR IN NATURE TO THE SEVER AL SERVICES PROVIDED BY THE ASSESSEE ; B . B OTH HIGH AND LOW END COMPARABLES WERE SELECTED BY THE ASSESSEE SINCE ALL THE SERVICES OF THE ASSESSEE ARE N EITHER HIGH END NOR PURELY LOW IN NATURE; C . DATA ANALYTICS AND PROCESS OUTSOURCING SERVICES PROVIDED BY E - CLERX ARE PART OF ITS ITES , HENCE COMPARABLE TO THE ASSESSEE; D . OUTSOURCING OF WORK IS NOT THE CRITERIA TO REJECT A COMPANY AS ARGUED BY THE ASSESSEE ; E . NO SUBSTANTIAL PRESENCE OF INTANGIBLES; F . THE ASSESSEE HAS NOT DEMONSTRATED EFFECT OF THE EXTRA - ORDINARY EVENTS IN CASE OF E - CLERX . 10 . 1 THE DRP HAS UPHELD THE ACTION OF THE TPO AND FURTHER ADDED THAT E - CLERX IS INVOLVED IN DIVERSE NATURE OF SERVICES AND CAN BE CONSIDERED AS KPO , WHEREAS ASSESSEE IS ALSO NOT PRO VIDING LOW - END IT ES SERVICES AS IT INCLUDES FINANCIAL A CCOUNTING, F INANCIAL PLANNING AND ANALYSIS ETC ., WHICH IS NOTHING BUT HIGH - END SERVICES AND THEREFORE , BOTH E - CLERX AND ASSESSEE HAVE SIMILAR FUNCTIONS AND SERVICES. HOWEVER AS NOTED ABOVE , ONE OF THE MEMBER OF THE DRP HAS GIVEN DISSENTING NOTE STATING THA T THE FUNCTIONAL PROFILE DO NOT EXHIBIT SIMILAR NATURE SERVICES BECAUSE , THE ASSESSEE IS ESSENTIALLY PROVIDING BACK OFFICE SUPPORT SERVICES WHILE E - CLERX OPERATES IN DATA ANALYTIC AND PROCESS OUTSOURCING SERVICES SEGMENT. E - CLERX IS ONE OF THE BIGGEST FIRS T KPO COMPANY , WHEREAS THE ASSESSEE OPERATES AS A CAPTIVE SERVICE PROVIDER ON COST PLUS MODEL PROVIDING BACK OFFICE SUPPORT SERVICES ONLY. 10 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 10. 2 BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE MADE ELABORATE SUBMISSIONS WHICH CAN BE SUMMARISED IN FOLLOWI NG WAY : - A . E - CLERX PROVIDES SERVICES THOUGH TWO BUSINESS UNITS ; FIRSTLY, FINANCIAL SERVICES WHICH INCLUDES CONSULTING, BUSINESS ANALYSIS AND SOLUTION TESTING ; AND SECONDLY, SALES & MARKETING SERVICES WHICH ALSO INCLUDES WEB CONTENT MANAGEMENT & MERCHANDISING EXECUTION, WEB ANALYTICS, ETC. HOWEVER, FOR THESE DIVERSE ACTIVITIES SEGMENTAL DATA IS NOT AVAILABLE. THESE ARE VERY HIGH - END SERVICES AND FORMS PART OF KPO SERVICE PORTFOLIO. B . THE LEARNED HAS TPO FAILED TO APPRECIATE THE FACT THAT ITES INDUSTRY IS COMPLET ELY DIFFERENT FROM KPO INDUSTRY. C . E - CLERX MOSTLY OPERATES THROUGH OUTSOURCING MODEL, THAT IS, IT OUTSOURCES ITS MAJOR OPERATION. D . HE FURTHER SUBMITTED THAT IN THE PROCEEDINGS BEFORE HON BLE DRP, ONE OF THE HON BLE MEMBER WAS IN AGREEMENT WITH THE ASSESSEE TH AT E - CLERX IS A KPO COMPANY AND SHOULD NOT BE ACCEPTED AS COMPARABLE TO THE ASSESSEE. FINALLY I N SUPPORT OF HIS CONTENTION , HE STRONGLY RELIED UPON THE FOLLOWING DECISIONS: I . ACTIS GLOBAL SERVICES PVT. LTD. (ITA 417/2016) - (AY 2010 - 11) II . ACTIS GLOBAL SERVICES PRIVATE LIMITED - ITA NO. 6175/DEL/2015 - AY 2011 - 12 . 11 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 III . DELHI HIGH COURT IN CASE OF RAMPGREEN SOLUTIONS PVT LTD (ITA 102/2015) - (AY 2008 - 09) . 1 0. 3 ON THE OTHER HAND, LEARNED CIT DR AFTER REFERRING TO THE VARIOUS FUNCTIONS PERFORME D BY THE ASSESSEE WHICH HAS BEEN INCORPORATED BY THE TPO IN HIS ORDER AND ALSO AS APPEARING IN THE TRANSFER PRICING STUDY REPORT , POINTED OUT THAT THE ASSESSEE IS PROVIDING VARIOUS KIND OF SUPPORT SERVICES SOME OF WHICH CANNOT BE RECKONED AS LOW - END SERVIC ES AND IS CATERING TO 190 COUNTRIES . THEREFORE, LOOKING TO THE H OST OF SERVICES PROVIDED , IT CANNOT BE HELD THAT ASSESSEE IS PRO VIDING SIMPLY LOW - END IT ES SERVICES. HE ALSO DREW OUR ATTENTION TO ANNUAL REPORT OF E - CLERX AND SUBMITTED THAT BY AND LARGE THEY ARE ALSO PERFORMING SAME KIND OF FUNCTIONS WHICH ASSESSEE HAS BEEN PERFORMING. THUS , E - CLERX HAS RIGHTLY HELD TO BE COMPARABLE COMPANY TO BENCH MARK THE ASSESSEE S MARGIN. 1 1 . W E HAVE HEARD THE RIVAL SUBMISSIONS , PERUSED THE RELEVANT FINDING GIVEN IN T HE IMPUGNED ORDERS AS WELL AS MATERIAL REFERRED TO BEFORE US QUA THIS COMPARABLE. THE ASSESSEE IS MAINLY P ROVIDING BACK OFFICE SUPPORT SERVICES TO ITS AE S REL A T ING TO A CCOUNTS/ F INANCIAL SUPPORT SERVICES ; AND IT SUPPORT SERVICES. INTRA TH E S E HEAD S OF SERVI CES , THE ASSESSEE COMPANY IS PERFORMING HOST OF FUNCTIONS WHICH HAVE BEEN ILLUSTRATED BY THE TPO IN HIS ORDER FROM PAGES 2 TO 5 AND ALSO FINDS MENTION IN ASSESSEE S T.P. STUDY REPORT . THE ASSESSEE HAS CLASSIFIED ITSELF AS THE COMPANY PROVIDING LOW - END ITES SERVICES AND H AS DISTINGUISHED ITSELF FROM HIGH E ND ITES SERVICES OR KPO SERVICE PROVID ER COMPANIES. ONE OF THE MAIN PLANK OF THE ARGUMENT OF THE LEARNED COUNSEL BEFORE US 12 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 TO EXCLUDE E - CLERX IS THAT , IT IS VERY HIGH - E ND SERVICE PROVIDER AND ONE OF THE LEA DING KPO SERVICE COMPANY IN THE COUNTRY AND THIS COMPANY IS IN TO DIVERSE NATURE OF SERVICES. WE FIND THAT ONE OF THE DISSENTING MEMBER OF THE DRP HAS ALSO HIGHLIGHTED THE FUNCTIONAL DIFFERENCES BETWEEN THE ASSESSEE AND E - CLERX AND HAS GIVEN A CATEGORICAL F INDING THAT E - CLERX OPERATE MORE A S A DATA ANALYTIC S AND PROCESS OUTSOURCING SERVICES SEGMENT , W HEREAS THE ASSESSEE IS MER ELY PROVIDING BACK OFFICE SUPPORT SERVICES. 12 . HOWEVER W ITHOUT ENTERING INTO THE SEMANTICS OF ARGUMENTS AS TO WHAT KIND OF FUNCTI ONS CONSTITUTES LOW - END ITES SERVICE PROVIDER OR HIGH - END ITES OR KPO SERVICE PROVIDER , WE WOULD LIKE TO CONFINE OUR FINDING ON FAR ANALYSIS . BECAUSE, AT TIMES WHEN HOST OF SERVICES ARE PERFORMED UNDER ITES, LIKES OF ASSESSEES , THERE BECOMES VERY THIN LIN E DISTINCTION BETWEEN FUNCTIONS PERFORMED BY THE LOW - END ITES SERVICE PROVIDER AND HIGH - END ITES SERVICE PROVIDER AND IT IS QUITE DIFFICULT TO ANALYSE IN SUCH SITUATIONS AS TO HOW MUCH VALUE ADDITIONS ARE THERE IN DELIVERABLES IN RENDERING OF SUCH KIND OF HOST OF SERVICES . A T THE OUTSET , ON A PERUSAL OF THE FINANCIALS AND ANNUAL REPORT OF E - CLERX FOR THE RELEVANT FINANCIAL YEAR AS POINTED OUT TO US DURING THE COURSE OF THE HEARING , WE FIND THAT THE E - CLERX HAS OUTSOURCED MOST OF ITS SERVICES TO OUTSIDER S WH ICH IS EVIDENT FROM THE FACT THAT THE EXPENSES UNDER THE HEAD CONTRACT FOR THE SERVICES IS MORE THAN RS. 43.71 CRORES DURING THE YEAR O UT OF TOTAL EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT O F RS. 91.29 CRORES . THE MAJOR OPERATIONS APPEARS TO BE BASED ON OUTSOURCE MODEL, WHICH IS EVIDENT FROM THE QUANTUM OF EXPENDITURE AND NOT ES TO THE FINANCIAL ACCOUNT ( THE COPY OF WHICH IS APPEARING AT PAGE 840 OF 13 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 THE ASSESSEE S PAPER BOOK ) . IN AN OUTSOURCING MODEL, THE ASSETS DEPLOYED IN THE FORM OF HUMAN RESOURCE S , INF RASTRUCTURE AND OTHER INTANGIBLE S DIFFER FROM AN ENTITY WHICH OPERATES FROM ITS OWN RESOURCES. WHENCE, I N THE CASE OF E - CLERX, SUBSTANTIAL WORK HAS BEEN OUTSOURCED TO VARIOUS PART IES, AS COMPARED TO THE A SSESSEE, WHERE THE ENTIRE BACK OFFICE SUPPORT SERVIC ES HAVE BEEN PROVIDED BY THE ASSESSEE ITSELF , THEN ON THIS GROUND ALONE, IT WOULD BE VERY DIFFICULT TO PUT E - CLERX IN THE COMPARABLE BASKET. ANOTHER IMPORTANT FACT WHICH IS BORNE OUT FROM THE ANNUAL ACCOUNTS IS THAT , E - CLERX IS PERFORMING FINANCIAL SERVICE S AS WELL AS SALES AND MARKETING SERVICES FOR WHICH THERE IS NO SEPARATE SEGMENTAL INFORMATION. IT REFLECTS ONLY ONE PRIMARY SEGMENT WHICH IS DATA ANALYTICS AND PROCESS OUTSOURCING SERVICES. SALES AND MARKETING ACTIVITIES AGAIN IS A DIFFERENT FUNCTION ALTO GETHER WHICH CANNOT BE COMPARED WITH THE ASSESSEE WHICH IS PERFORMING PURELY BACK OFFICE SUPPORT SERVICES . UNDER THESE CIRCUMSTANCES ALSO IT WOULD BE VERY DIFFICULT TO FIND OUT AS TO WHAT IS THE PROFIT MARGIN FROM THE SALES AND MARKETING SERVICES WHICH IS ENTIRELY A DIFFERENT FROM THE FUNCTIONS CARRIED OUT BY THE ASSESSEE. FURTHER BEFORE US , THE LEARNED COUNSEL HAS RELIED UPON CATENA OF DECISIONS OF TH IS T RIBUNAL AND ALSO HIGH COURTS , WHEREIN E - CLERX HAS BEEN HELD TO BE IN COMPARABLE WITH THE COMPANIES PROVI DING PURELY BACK OFFICE SUPPORT SERVICE S. IN VIEW OF AFORESAID CUMULATIVE FACTORS , WE HOLD THAT E - CLERX CANNOT BE HELD TO BE A GOOD COMPARABLE FOR BENCH MARKING THE ASSESSEE S MARGIN TO ARRIVE A T ALP AND ACCORDINGLY, WE DIRECT THE AO/TPO TO REMOVE THIS COM PARABLE. (II) I CRA TECHNO A NALYTICS LIMITED : - 14 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 13. THE LEARNED TPO HAS TAKEN THIS COMPARABLE ON THE GROUND THAT ON STANDALONE BASIS, ICRA IS ENGAGED IN BUSINESS PROCESSING AND ANALYTICS WHICH IS PART OF ITES , WHEREAS THE ASSESSEE HAS USED CONSOLIDATED FUNCTIONAL . FROM THE READING OF THE DRP S, IT IS SEEN THAT THERE IS NO PARTICULAR OBSERVATION MADE BY THE DRP FOR REJECTION OF ICRA , ALBEIT ONE OF THE DRP MEMBER WHO HAS GIVEN HER DISSENTING NOTE HAS GIVEN A VERY CATEGORICAL FINDING THAT , THIS COMPANY DOES NOT EXHIBIT FUNCTIONAL SIMILARITY WITH THE NATURE OF SERVICES BEING PROVIDED BY THE ASSESSEE FOR THE REASON THAT ICRA IS ENGAGED IN SOFTWARE DEVELOPMENT AND CONSULTANCY , ENGINEERING SERVICES WEB DEVELOPMENT AND HOSTING , APART FROM BUSINESS ANALYTICS A ND BUSINESS PROCESS OUTSOURCING. BEFORE US, THE LEARNED DR HAS BEEN UNABLE TO REBUT SUCH AN OBSERVATION OF THE DISSENTING MEMBER OF THE DRP WHICH IS ALSO CORROBORATED FROM MATERIAL ON RECORD. THE LEARNED COUNSEL HAS ALSO POINTED OUT THAT APART FROM THE FAC T THAT IT IS FUNCTIONAL NOT COMPARABLE, EVEN THE SEGMENTAL INFORMATION WITH REGARD TO ITES AND S OFTWARE DEVELOPMENT AND CONSULTANCY ARE NOT AVAILABLE. HENCE, ITS MARGIN CANNOT BE BENCHMARKED WITH THAT OF THE ASSESSEE. 1 4 . AFTER CONSIDERING THE RIVAL SUBMI SSIONS AND ON PERUSAL OF ANNUAL REPORT OF ICRA TECHNO ANALYTICS LIMITED, IT IS SEEN THAT FOLLOWING DISCLOSURES HAVE BEEN MADE: THE COMPANY IS ENGAGED IN THE SOFTWARE DEVELOPMENT & CONSULTANCY , ENGINEERING SERVICES, WEB DEVELOPMENT & HOSTING AND SUBSEQUENT LY DIVERSIFIED ITSELF INTO DOMAIN OF BUSINESS ANALYTICS AND BUSINESS PROCESS OUTSOURCING. FROM THE SAID NOTE, IT IS CLEAR THAT THERE CANNOT BE ANY FUNCTIONAL SIMILARITY BETWEEN A COMPANY WHICH IS PROVIDING PURE BACK OFFICE 15 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 SERVICES AND THE COMPANY WHICH I S ALSO ENGAGED IN SOFTWARE DEVELOPMENT AND CONSULTANCY, ENGINEERING SERVICES, WEB DEVELOPMENT AND PROVIDING BUSINESS ANALYTIC AND BUSINESS PROCESS OUTSOURCING. THUS , ON FUNCTIONAL LEVEL ITSELF THIS CANNOT BE HELD TO BE A COMPARABLE. MOREOVER, AS POINTED OU T BY THE LEARNED COUNSEL, THERE IS NO SEGMENTAL INFORMATION AND BIFURCATION BETWEEN ITES AND S OFTWARE DEVELOPMENT. ACCORDINGLY, WE DIRECT THE AO TO EXCLUDE THIS COMPANY FROM THE COMPARABILITY LIST. (III) TCS E - SERVE LIMITED. 15. THE LEARNED TPO HAS INCLUDED THIS COMPANY ON THE GROUND THAT SERVICES PROVIDED BY THE TCS E - SERVE IS MORE IN THE NATURE OF BPO WHICH IS AKIN TO ASSESSEE S FUNCTION AND SO FAR AS ASSESSEE S OBJECTION THAT IT HAS A VERY HIGH TURNOVER IS ALSO NOT TENABLE, BECAUSE HIGH TURNOVER DOES NOT NECESSARILY HAS ANY CO - RELATION WITH HIGH PROFITS EARNED. FURTHER , THE EXTRAORDINARY EVENT OF ACQUISITION OF CITI BPO AS POINTED OUT BY THE ASSESSEE, DOES NOT AFFECT FAR ANALYSIS OF TCS E - SERVE . THE LEARNED DRP TOO HAS MERELY CONFIRMED THE ACTION OF THE TPO. 16. BEFORE US, THE LD. COUNSEL S CONTENTION HAS BEEN THAT : A . FUNCTIONALLY DIFFERENT: TCS E - SERVE OPERATIONS BROADLY COMPRISE OF TRANSACTION PROCESSING AND TECHNICAL SERVICES PRIMARILY TO CITIGROUP ENTITIES GLOBALLY, WHICH CANNOT BE COMPARED TO THE FUNCTIONS PERFORMED BY THE ASSESSEE . B . TECHNICAL SERVICES INVOLVE SOFTWARE TESTING, VERIFICATION AND VALIDATION OF SOFTWARE AT THE TIME OF IMPLEMENTATION AND DATA CENTRE MANAGEMENT ACTIVITIES WHICH ARE CLEARLY NOT COMPARABLE TO THE ITES. HOWEVER, SEGME NTAL BIFURCATION 16 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 BETWEEN TRANSACTION PROCESSING AND TECHNICAL SERVICES IS NOT AVAILABLE IN THE PUBLIC DOMAIN . C . TCS E - SERVE, BEING EARLIER ENTRANTS IN THE INDUSTRY, HAS DEVELOPED DOMAIN EXPERTISE, PROCESS EXCELLENCE; ABILITY TO LEVERAGE TECHNOLOGY ETC. , WH EREAS, THIS IS THE FIRST YEAR OF OPERATION, OF THE ASSESSEE , HENCE CANNOT BE COMPARED TO THE TCS E - SERVE. D . PRESENCE OF BRAND - TCS E - SERVE BEING A SUBSIDIARY OF TATA CONSULTANCY SERVICES LIMITED AND IS A PART OF THE EMINENT TATA GROUP , WHICH INHERENTLY HAS A N ELEMENT OF HUGE BRAND VALUE ASSOCIATED WITH IT, WHICH TEND S TO INFLUENCE THE PRICING POLICY AND THEREBY DIRECTLY IMPACTING THE MARGINS EARNED BY THE COMPANY. HUGE PAYMENT HAS BEEN MADE BY TCS E - SERVE TO TATA CONSULTANCY FOR USE OF BRAND NAME, TATA. E . TCS E - SERVE PROVIDES SERVICES PRE - DOMINANTLY TO CITI GROUP. F . ABNORMAL PROFIT - THE LD. TPO STATED SUPER NORMAL PROFIT MAKING COMPANIES CANNOT BE REJECTED UNLESS PECULIAR ECONOMIC CIRCUMSTANCES OF SUCH COMPANIES ARE POINTED OUT. THE ASSESSEE CLEARLY DEMONSTRATE D THE ABNORMAL CIRCUMSTANCES, WHICH LED TO SUPER NORMAL PROFITS EARNED BY TCS E - SERVE. THE COMPANY EARNED SUPERNORMAL PROFITS DURING THE YEAR I.E. 69.31% ON COST. THIS FACT IS ALSO SUBSTANTIATED IN THE TABLE PROVIDED BELOW: G . ABNORMAL FLUCTUATIONS IN PROFIT S: TCS E - SERVE S WIDELY FLUCTUATING GROWTH IN OPERATING REVENUE, OPERATING COSTS AND MARGINS . 17 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 H . SIZE OF THE COMPANY: THE EMPLOYEE COST BASE IS MORE THAN 64 TIMES THAT OF THE ASSESSEE . FURTHER, ITS TURNOVER IS MORE THAN 67 TIMES TO THAT OF THE APPELLANT (I. E. 1,442.42 CRORES) . I . IN THE RECENT CASE LAW OF BAXTER INDIA PVT. LTD. (ITA NO. 345/DEL/2016) AY 2011 - 12, THE HON BLE DELHI TRIBUNAL HAS EXCLUDED THIS COMPARABLE ON THE GROUND OF FUNCTIONAL DIFFERENCES AND NON - AVAILABILITY OF SEGMENTAL . J . IN THE CASE OF EQUANT SOLUTIONS INDIA PVT. LTD (ITA NO. 1202/DEL/2015), THE HON BLE DELHI TRIBUNAL HAS EXCLUDED TCS E - SERVE AS A COMPARABLE TO ITES PROVIDER FOR AY 2010 - 11 ON THE GROUND THAT IT CARRIES ON BUSINESS OF SOFTWARE TESTING, VERIFICATION AND VALIDATION FOR WH ICH NO SEGMENTAL BIFURCATION IS AVAI LA BLE. FURTHER, IT OWNS HUGE INTANGIBLES AND ALSO USES TATA BRAND . THOUGH THE ABOVE DECISION IS FOR AY 2010 - 11, THE FACTS ARE EQUALLY APPLICABLE. 17. THE LEARNED COUNSEL ALSO SUBMITTED THAT THE ISSUE OF COMPARABILIT Y OF TCS E - SERVE VIS - A - VI S ., THE COMPANY PROVIDING ITES SERVICES HAD COME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN THE CASE OF AMRI PRICE INDIA PRIVATE LIMITED VS. DCIT , ITA NO. 2010/DEL/2014 AND ITA NO. 7014 /DEL/2014 WHEREIN THIS COMPANY HAS BEEN HELD NOT COMPARABLE WITH THE ITES COMPANIES. THIS JUDGMENT OF THE TRIBUNAL HAS ALSO BEEN UPHELD BY THE HON BLE HIGH COURT. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT FINDING GIVING IN THE IMPUGNED ORDERS AS WELL AS THE MATERIAL PLACED ON R ECORD. ONE OF THE MAIN POINTS OF DISTINCTION WHICH IS 18 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 QUITE OSTENSIBLE IS THAT THE TCS E - SERVE IS A SUBSIDIARY OF TATA CONSULTANCY SERVICES LIMITED , WHICH IS ONE OF THE LEADING AND GIANT COMPANY IN THE WORLD AND H AS AN INHERENT ELEMENT OF VERY HIGH BRA ND VALUE ASSOCIATED WITH IT . SUCH A HIGH BRAND VALUE DEFINITELY H AS AN IMPACT ON THE PRICING POLICY , NICHE MARKET , CONTRACTUAL TERMS, ETC. AND THEREBY A FFECTING THE PROFIT MARGINS . ANNUAL REPORT OF THIS COMPANY REFLECTS THAT H UGE PAYMENTS HAVE BEEN MADE BY TCS E - SERVE TO TCS LIMITED FOR THE USE OF THE BRAND AS A ROYALTY . THIS FACT ITSELF SHOWS THE EFFECT OF BRAND VALUE IN THE PRICING MECHANISM. ON A FURTHER ANALYSIS IT IS SEEN THAT THE EMPLOYEE COST BASE IS MORE THAN 64 TIMES THAN THE ASSESSEE AND EVEN THE TURNOVER IS ALSO MORE THAN 67 TIMES AS COMPARED TO THE ASSESSEE . THIS ONLY GOES TO SUGGEST THAT ASSETS EMPLOYED BY TCS E - SERVE ALONGWITH HUGE INTANGIBLES IN THE FORM OF BRAND VALUE DEFINITELY HAS A HUGE EFFECT IN PLI AND VITIATES THE COMPARABILITY UN DER FAR ANALYSIS WITH A COMPANY LIKE ASSESSEE WHICH IS A CAPTIVE SERVICE PROVIDER WITHOUT MUCH INTANGIBLES AND RISKS . ANOTHER IMPORTANT THING WHICH HAS BEEN POINTED OUT BY LEARNED COUNSEL IS THAT , THE OPERATION OF TCS E - SERVE BROADLY COMPRISE OF TRANSACT ION PROCESSING AND TECHNICAL SERVICES INCLUDING SOFTWARE TESTING, VERIFICATION AND VALIDATION FOR WHICH NO SEGMENTAL BIFURCATION IS AVAILABLE. IN ABSENCE OF SUCH VITAL INFORMATION OF THE MARGIN S OF SUCH VARIED SEGMENTS IT BECOMES QUITE DIFFICULT TO PUT SUC H COMPANY IN THE COMPARABILITY BASKET SO AS TO BENCH MARK THE CORRECT PROFIT MARGIN. ALL THE AFORESAID FACTORS HAVE BEEN HELD SO IN VARIOUS DECISIONS OF THIS T RIBUNAL IN SEVERAL CASES AS RELIED UPON BY THE LD. COUNSEL , INCLUDING THE DECISION OF AMRI PRICE INDIA PRIVATE LIMITED (SUPRA) . THUS , IN OUR OPINION TCS E - SERVE CANNOT BE HELD TO BE A GOOD COMPARABLE FOR 19 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 THE PURPOSE OF BENCH MARKING THE ASSESSEE S PLI AND ACCORDINGLY, WE DIRECT THE LD . AO/ TPO TO EXCLUDE TCS E - SERVE FROM THE COMPARABILITY LIST. 19 . IN VIEW OF OUR FAVOURABLE FINDING GIVEN WITH REGARD TO THE ABOVE THREE COMPARABLE , THEN AS SUBMITTED BY THE LD. COUNSEL , THE ADJUDICATION ON THE OTHER COMPARABLE WILL BECOME PURELY ACADEMIC , BECAUSE THE ASSESSEE S MARGIN WILL FALL WITHIN THE TOLERANCE RANGE OF + / - 5%. HENCE WE ARE NOT ADJUDICATING THE OTHER COMPARABLES. 20. THE NEXT ISSUE RELATES TO , WHETHER FOREIGN EXCHANGE GAIN / LOSS IS OPERATING INCOME OR NOT WHILE COMPUTING THE OPERAT ING MARGIN. THE ASSESSEE HAS COMPUTED ITS PLI AFTER TAK ING INTO ACCOUNT FOREIGN EXCHANGE GAIN/ LOSS AS OPERATING IN NATURE , WHEREAS THE TPO HAS CONSIDERED AS NON - OPERATING AND THEREFORE , HE HAS TINKERED WITH THE COMPUTATION OF PLI OF THE ASSESSEE . THE LEARNED DRP TOO HAS CONFIRMED THE SAID ACTION OF THE TPO . 2 1 . BEFORE US, THE LD. C OUNSEL SUBMITTED THAT , SINCE ASSESSEE IS PROVIDING BACK OFFICE SUPPORT SERVICES TO ITS AE IN UK AND ALL ITS INVOICES ARE RAISED IN GBP (GREAT BRITAIN POUND) , THEREFORE , IT ALONE UNDERTAKES SUCH FOREIGN CURRENCY RISK . IF THE INDI AN ENTITY MAKES PAYMENT TO ITS AE AT THE PREVAILING EXCHANGE RATE THEN IT ALONE BEARS THE EXCHANGE RISK RELATED TO CREDIT PERIOD , I.E. , DURING THE PERIOD BETWEEN INVOICING AND RECOVERY. IN SUPPORT, H E STRONGLY RELIED UPON THE DECISION OF DELHI HIGH COURT I N THE CASE OF AMRI PRICE I NDIA PRIVATE LIMITED, ITA NO. 206/2016 , WHEREIN THE HON BLE DELHI HIGH COURT HAS HELD THAT FOREIGN FLUCTUATION RESULTING INTO GAIN OR LOSS IS PART OF OPERATING INCOME. 20 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 2 2 . ON THE OTHER HAND, LEARNED DR STRONGLY RELIED UPON THE OR DER OF THE TPO AS WELL AS THE DRP . AS AN ALTERNATIVE HE SUBMITTED THAT IN CASE IF IT IS TO BE TREATED AS OPERATIONAL INCOME , THEN SIMILAR TREATMENT SHOULD BE GIVEN TO THE COMPARABLES. 2 3 . WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS. IT IS AN UNDISPUTED FACT THAT INVOICES ARE RAISED IN GBP AND THE ENTIRE FOREIGN CURRENCY RISK IS UNDER TAKEN BY THE ASSESSEE AND CONSEQUENTLY THE EXCHANGE RISK RELATING TO THE CREDIT PERIOD ALSO PERTAINS TO THE ASSESSEE . IF TNMM IS APPLIED TO A TRANSACTION IN WHICH THE FOREIGN EXCHANGE RISK IS BORN E BY THE TESTED PARTY THE N FOREIGN EXCHANGE GAINS OR LOSSES SHOULD BE CONSISTENTLY ACCOUNTED FOR AND IT HAS TO BE RECKONED AS PART OF OPERATING INCOME OR LOSS . NOW WHEN THIS IS SUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF AMRI PRICE INDIA PRIVATE LIMITED (SUPRA) , THEREFORE WITHOUT GOING INTO FURTHER ANALYSIS, WE RESPECTIVELY FOLLOWING THE RATIO , HOLD THAT THE FOREIGN EXCH ANGE GAIN HAS TO BE TREATED AS PART OF OPERATING INCOME AND THEREFORE , THE PLI HAS TO BE COMPUTED ACCORDINGLY. THUS THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE. HOW EVER, AS SUGGESTED BY THE LEARNED DR, WE DIRECT THE TPO TO SEE , WHETHER SIMILAR TREA TMENT OF FOREIGN EXCHANGE GAIN SHOULD BE GIVEN IN THE CASE OF COMPARABLE COMPANIES IF THESE COMPANIES ARE ALSO UNDE RTAKING SIMILAR FOREIGN EXCHANGE RISK. 2 4 . THE NEXT ISSUE RELATES TO , WHETHER THE TPO OR LD. DRP WAS JUSTIFIED IN LAW AND ON FACTS BY TREAT ING THE TRANSACTION OF IMPORT OF FIXED ASSETS AS N IL AND THEREBY RESULTING IN TO ENHANCEMENT OF 21 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 INCOME OF RS. 48,05,127/ - . THE ASSESSEE HAS IMPORTED CERTAIN FIXED ASSETS FROM ITS AE WHICH ARE MAINLY OFFICE EQUIPMENT S , FIXTURE S AND FURN ITURE, COMPUTERS AND PERIPHERAL AND LEASE HOLDS IMP LEMENTS . B ESIDES THIS , CERTAIN SOFTWARE WERE ALSO IMPORTED. THE ASSESSEE S CASE BEFORE THE AUTHORITIES BELOW HAD BEEN THAT THESE ASSETS WERE IMPORTED BY THE ASSESSEE SO AS TO ENABLE IT TO CARRY ON ITS BUSINESS OPERATIONS IN I NDIA. THE ASSESSEE S CONTENTION HAD BEEN THAT, ONCE FOR THE BENCH MARKING OF THE INTERNATIONAL TRANSACTION THE ASSESSEE HAS APPLIED TNMM AS MOST APPROPRIATE METHOD BY TAKING OP / TC AS PLI , TH E N DEPRECIATION O N SUCH AN ASSET ALREADY STANDS CONSIDERED AS OP ERATING COST FOR RENDERING BACK OFFICE SUPPORT SERVICES. THE TPO AS WELL AS THE LD. DRP HAVE PROCEEDED TO DETERMINE THE ALP AT N IL ON THE GROUND THAT THE PURCHASE ARE NOT SUPPORTED BY THIRD PARTY INVOICES AND ACCORDINGLY , THE ADJUSTMENTS HAVE BEEN MADE. 2 5 . BEFORE US, THE LEARNED COUNSEL, FIRST OF ALL REBUTTED THE SAID FINDING OF TPO AND DRP BY POINTING OUT THAT THE ASSESSEE HAS SUBMITTED ALL THE NECESSARY EVIDENCES BEFORE THE TPO AS WELL AS THE DRP IN THE FORM OF COPY OF INVOICES TO CORROBORATE THE ARM S LENGTH CHARACTER OF IMPORTED EQUIPMENT. IN SUPPORT , THE ASSESSEE HA D ALSO FILED CERTIFICATE FROM THE MANAGEMENT OF BRITISH COUNCIL CERTIFYING THAT THE FIXED COST WERE IMPORTED ON A COST TO COST BASIS . LD. COUNSEL FURTHER TO CONTROVERT THE FINDING AN D OBSERVATIONS OF THE TPO & DRP, DREW OUR ATTENTION TO VARIOUS DETAILS FURNISHED BEFORE THE TPO APPEARING IN THE PAPER BOOK FROM PAGES 386 TO 449. IN ANY CASE, HE SUBMITTED THAT THIS TRANSACTION IS TAX NEUTRAL BECAUSE , IF THE AMOUNT OF DEPRECIATION IS TO B E TAKEN AT N IL , THE N THE AMOUNT OF INCOME TO THAT EXTENT SHOULD ALSO BE TAKEN AT NIL . 22 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 THE REASON BEING THE MARK UP CAN BE APPLIED ONLY TO FIX ED DEPRECIATION COST TO THE ASSESSEE. IN OTHER WORDS, THE TRANSACTION OF DEPRECIATION AS A COST ON ONE HAND AND T HE RESULTANT R EVENUE ON THE OTHER GO HAND IN HAND. IN SUPPORT, HE STRONGLY RELIED UPON THE DECISIONS OF ITAT DELHI BENCH IN THE CASE OF CIENA INDIA PRIVATE LIMITED, ITA NO. 143/DEL/2014 . 2 6 . ON THE OTHER HAND, THE LEARNED DR HAS STRONGLY RELIED UPON THE O RDER OF THE TPO AS WELL AS THE DRP. 2 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL REFERRED TO BEFORE US. AT THE OUTSET, WE ARE OF THE OPINION THAT ONCE THE TPO HIMSELF SAYS THAT IT IS A SEPARATE INTERNATIONAL TRANSACTIO N, THEN IT WA S INCUMBENT UPON HIM TO DETERMINE THE ARMS LENGTH PRICE AFTER CARRYING OUT COMPARABILITY ANALYSIS FROM THE UN CONTROLLED COMPARABLE TRANSACTIONS BY ADOPTING ANY OF THE PRESCRIBED METHOD. IF THE ASSESSEE HAS CLAIMED THAT IT HAS PURCHASED THE ASS ETS ON COST TO COST BASIS AND THERE IS N O MARK UP , THEN IT WA S ALL THE MORE INCUMBENT UPON THE TPO TO EXAMINE THE TRANSACTION , AS TO WHETHER UNDER A THIRD PARTY SITUATION WHAT WOULD BE HE ALP OF SUCH TRANSACTION. THE ALP CANNOT BE DETERMINED NIL UNLESS I T IS BROUGHT ON RECORD BY THE TPO THAT IN THE THIRD PARTY SITUATION, THE COST TO SUCH AN ASSET WOULD ALSO BE NIL. HENCE IN OUR OPINION, THE VALUE OF ALP DETERMINED FOR THE TRANSACTION OF PURCHASE OF CAPITAL ASSET CANNOT BE TAKEN AT N IL AND THEREFORE , AT THE THRESHOLD , SUCH AN ACTION OF THE TPO AS WELL AS DRP CANNOT BE UPHELD AT ALL. MOREOVER, THE PLEA OF THE ASSESSEE BEFORE US IS THAT , IT IS A TAX NEUTRAL TRANSACTION, WHICH PROPOSITION FINDS SUPPORT FROM THE DECISION OF 23 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 THE COORDINATE BENCH IN THE CASE OF CIENA INDIA PRIVATE LIMITED (SUPRA) WHEREIN THE HON BLE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 15.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE PURCHASED CERTAIN FIXED ASSETS FROM IT S AE WITH THE DECLARED VALUE OF RS.33.50 CRORE. IN OUR CONSIDERED OPINION THE ASSESSEE RIGHTLY REPORTED PURCHASE OF FIXED ASSETS WITH THE TRANSACTED VALUE AS AN INTERNATIONAL TRANSACTION, SINCE THE SAME IS COVERED WITHIN THE DEFINITION GIVEN IN SUB - SECTIO N (1) OF SECTION 92B, WHICH PROVIDES THAT 'INTERNATIONAL TRANSACTION' MEANS A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF WHOM ARE NON - RESIDENTS, IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY, OR .............. . SECTION 92(1) STIPULATES THAT: `ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE . THE MANNER OF COMPUTATION OF ARM'S LENGTH PRICE IS SET OUT IN SECTION 92C. SUB - SECTION (1) PROVIDES THAT THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE METHODS GIVEN IN THE PROVISION, BEING THE MOST APPROPRIATE METHOD, HAVING REGARD TO THE NATURE OF TRANSACTION OR CLASS OF TRANSACTION ETC. AM ONGST OTHERS, THERE IS COMPARABLE UNCONTROLLED PRICE (CUP) METHOD AND TNMM. THE PRIMARY ONUS OF PROVING THAT THE INTERNATIONAL TRANSACTION IS AT ALP, IS ALWAYS ON THE ASSESSEE. 15.3. REVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSE E APPLIED TNMM AS THE MOST APPROPRIATE METHOD FOR SHOWING THAT THIS INTERNATIONAL TRANSACTION WAS AT ALP. THE TPO HELD THAT THE CORRECT METHOD TO BE APPLIED WAS CUP AND AS SUCH THE ASSESSEE WAS CALLED UPON TO GIVE UNCONTROLLED COMPARABLE INSTANCES OF THE PURCHASE OF SIMILAR ASSETS, WHICH THE ASSESSEE FAILED TO DO. THIS LED THE TPO TO TREAT THE ALP OF THIS INTERNATIONAL TRANSACTION AT NIL. NORMALLY, IF THE ASSESSEE FAILS TO GIVE ANY COMPARABLE INSTANCE, THEN IT BECOMES THE DUTY OF THE TPO TO SEARCH SOME CO MPARABLE UNCONTROLLED INSTANCES AT HIS OWN AND ACCORDINGLY DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTION. IN OUR VIEW, BOTH THE ASSESSEE AS WELL THE TPO 24 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 WENT WRONG BY NOT DOING WHAT WAS REQUIRED TO BE DONE BY THEM. 15.4. ONCE THE ALP OF AN INTERN ATIONAL TRANSACTION OF PURCHASE OF FIXED ASSETS IS DETERMINED, THEN THE DIFFERENCE BETWEEN THE TRANSACTED VALUE AND THE ALP DOES NOT DIRECTLY LEAD TO THE TRANSFER PRICING ADJUSTMENT. AT THIS JUNCTURE, IT IS PERTINENT TO NOTE THE LANGUAGE OF SECTION 92(1) W HICH PROVIDES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE. IT DOES NOT SAY THAT THE TOTAL INCOME IS TO BE COMPUTED IN ACCORDANCE WITH THE ALP. IT IS RIGHTLY SO BECAUSE THE INTERNATIONA L TRANSACTIONS WHICH HAVE NO DIRECT BEARING ON THE TOTAL INCOME, CANNOT GIVE RISE TO ADDITION ON ACCOUNT OF DIFFERENCE BETWEEN THEIR TRANSACTED VALUE AND ALP. SINCE THE TRANSACTION OF PURCHASE OF FIXED ASSETS IS A CAPITAL TRANSACTION, THIS, IN ITSELF, DO ES NOT AFFECT THE TOTAL INCOME OF THE ASSESSEE. IT IS ONLY THE OFF - SHOOT OF SUCH TRANSACTION IN THE CAPITAL FIELD, BEING DEPRECIATION ALLOWANCE ON SUCH ALP OF THE TRANSACTION, WHICH AFFECTS THE TOTAL INCOME. TO ILLUSTRATE, IF A FIXED ASSET IS PURCHASED BY AN ENTERPRISE FROM ITS AE FOR A SUM OF RS.100 AND RATE OF DEPRECIATION ON SUCH ASSET IS 10%, THEN THE ENTERPRISE WILL CHARGE DEPRECIATION AMOUNTING TO RS.10 IN ITS PROFIT AND LOSS ACCOUNT. IF THE ALP OF SUCH TRANSACTION IS DETERMINED AT RS. 80, THEN THE D IFFERENCE OF RS.20 CANNOT BE CONSIDERED AS INCOME. RATHER, THE AMOUNT OF DEPRECIATION WILL BE RESTRICTED TO RS.8 INSTEAD OF RS.10, THEREBY INCREASING THE TOTAL INCOME BY RS. 2. WHEN WE ADVERT TO THE FACTS OF THE EXTANT CASE, IT IS FOUND THAT THE TPO HAS RI GHTLY HELD TO THE EFFECT THAT IT IS THE AMOUNT OF DEPRECIATION ON THE PURCHASE OF SUCH FIXED ASSETS, WHICH WILL BE CONSIDERED FOR MAKING ADDITION AND NOT THE DIFFERENCE BETWEEN THE TRANSACTED VALUE AND THE ALP DETERMINED AT NIL. 15.5. ORDINARILY AN INT ERNATIONAL TRANSACTION OF PURCHASE OF FIXED ASSETS BY AN ASSESSEE ENGAGED IN A MANUFACTURING OR TRADING BUSINESS IS REQUIRED TO BE DETERMINED ON CUP METHOD, WHICH IS USUALLY THE MOST APPROPRIATE METHOD IN SUCH CIRCUMSTANCES. THE TNMM ON ENTITY LEVEL CANNOT BE APPLIED, BECAUSE THE TRANSACTION OF PURCHASE OF FIXED ASSETS CAN HAVE NO RELATION WITH THE TRANSACTION OF PURCHASE OF RAW MATERIAL FROM AE OR SALES OF GOODS TO AES. RULE 10A OF THE IT RULES, DEFINES `TRANSACTION AS INCLUDING `A NUMBER OF CLOSELY LINKE D 25 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 TRANSACTIONS . THE HON BLE DELHI HIGH COURT IN ITS JUDGMENT OF MARCH, 2015 IN SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. HAS HELD THAT THE RELATED TRANSACTIONS SHOULD BE CONSIDERED JOINTLY FOR DETERMINING THEIR ALP. HOWEVER, IN ORDER TO CONSIDE R MORE THAN ONE INTERNATIONAL TRANSACTION AS ONE, IT IS SINE QUA NON THAT SUCH TRANSACTIONS MUST BE CLOSELY AND NOT REMOTELY LINKED. EVERY TRANSACTION DONE BY AN ENTERPRISE IS SOMEHOW OR THE OTHER LINKED WITH THE CARRYING ON OF THE BUSINESS. BUT IN ORDER T O BE ELIGIBLE FOR PROCESSING TWO OR MORE TRANSACTIONS JOINTLY FOR DETERMINING THEIR ALP, IT IS ESSENTIAL THAT THEY SHOULD BE CLOSELY LINKED. IF TWO TRANSACTIONS ARE NOT CLOSELY LINKED, THEN THEY CANNOT BE CONSIDERED JOINTLY. CONSIDERING THE ABOVE CASE OF A MANUFACTURER OR A TRADER, IT CANNOT BE HELD THAT THE TRANSACTION OF PURCHASE OF FIXED ASSETS IS CLOSELY LINKED WITH THE PURCHASE OF RAW MATERIAL OR SALE OF FINISHED GOODS ETC. IN SUCH A SCENARIO, IT BECOMES IMPORTANT TO EXAMINE THE TRANSACTION OF PURCHASE OF FIXED ASSETS INDEPENDENT OF OTHER TRANSACTIONS. 15.6. HOWEVER, THE ABOVE RULE OF SCRUTINIZING INTERNATIONAL TRANSACTION OF PURCHASE OF FIXED ASSET AS INDEPENDENT OF ALL OTHER TRANSACTIONS IS NOT UNIVERSAL. IT HAS ITS OWN EXCEPTIONS AS WELL. THE INST ANT CASE IS A GLARING EXAMPLE OF EXCEPTION TO THE ABOVE RULE. IT IS SO FOR THE REASON THAT THE ASSESSEE IS GETTING REMUNERATION FROM ITS AE AT COSTS INCURRED PLUS A PARTICULAR MARK - UP. THE COST BASE INCLUDES NOT ONLY DIRECT BUT ALL THE INDIRECT COSTS. TH E AMOUNT OF DEPRECIATION ALLOWANCE ON FIXED ASSETS, INCLUDING THOSE PURCHASED FROM AE, IS ALSO COMPENSATED WITH THE SAME MARK - UP. THUS WE CAN SAY THAT DEPRECIATION ALLOWANCE AND REMUNERATION TO THE ASSESSEE ON SUCH DEPRECIATION ARE INSEPARABLE TRANSACTION S. THE INCOME IN THE SHAPE OF REMUNERATION TO THIS EXTENT DIRECTLY DEPENDS UPON THE AMOUNT OF DEPRECATION ALLOWANCE. WHEN THE ASSESSEE IS GETTING MARK - UP OF 13%, THE AMOUNT OF DEPRECATION AT RS.10 IN OUR ABOVE HYPOTHETICAL EXAMPLE WILL FETCH REMUNERATION OF RS.11.30. IF THE AMOUNT OF DEPRECIATION IS REDUCED TO NIL, THE AMOUNT OF INCOME TO THAT EXTENT WILL ALSO BE NIL, BECAUSE THE MARK - UP CAN BE APPLIED ONLY IF THERE IS DEPRECIATION COST TO THE ASSESSEE. IN OTHER WORDS, THE TRANSACTIONS OF DEPRECIATION ON ONE HAND AND THE RESULTANT REVENUE ON THE OTHER, GO HAND IN HAND. IN SUCH A CASE, WHERE THE INCOME IS DIRECTLY BASED ON THE COSTS INCURRED INCLUDING 26 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 DEPRECIATION, THEN THESE TWO TRANSACTIONS BECOME CLOSELY LINKED TRANSACTIONS, ELIGIBLE FOR PROCESSING UN DER THE TP PROVISIONS ON A COMBINED BASIS. IT IS ILLOGICAL TO COMPUTE THE ALP OF THE TRANSACTION OF PURCHASE OF FIXED ASSETS AND CONSEQUENTLY REDUCE OR NULLIFY THE AMOUNT OF DEPRECIATION ALLOWANCE DE HORS THE CONSIDERATION OF INTERNATIONAL TRANSACTION OF T HE REVENUE FROM AE, WHICH IS EQUAL TO DEPRECIATION AS CLAIMED WITH MARK - UP. BOTH THE TRANSACTIONS OF CLAIM OF DEPRECIATION ALLOWANCE AND REVENUE OF DEPRECIATION WITH MARK - UP HAVE TO BE SEEN JOINTLY. THE TPO IN THE PRESENT CASE HAS SIMPLY REDUCED THE AMOUN T OF DEPRECATION ALLOWANCE TO NIL WITHOUT SIMULTANEOUSLY CONSIDERING THE REVENUE SIDE OF THIS TRANSACTION. IF WE CONSIDER THESE CLOSELY LINKED TRANSACTIONS OF DEDUCTION FOR DEPRECIATION ALLOWANCE AND REVENUE DUE TO DEPRECIATION IN UNISON, THE POSITION WHIC H FOLLOWS IS THAT NO FURTHER ADDITION CAN BE MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT DUE TO ONE - SIDED CONSIDERATION OF DEPRECIATION ALLOWANCE AT NIL. RATHER, THE DETERMINATION OF ALP OF THE INTERNATIONAL TRANSACTION OF PURCHASE OF FIXED ASSETS, IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, IS TAX NEUTRAL. AS SUCH, WE ORDER FOR THE DELETION OF ADDITION MADE BY DISALLOWING OR REDUCING THE AMOUNT OF DEPRECIATION ON THE ASSETS PURCHASED FROM AE. THIS GROUND IS ALLOWED. THOUGH WE HAVE ALREADY HELD THAT THE ALP CANNOT BE DETERMINED AT N IL , HOWEVER FOLLOWING THE PRINCIPLE AND OBSERVATION AS DISCUSSED IN THE AFORESAID DECISION, WE ALSO HOLD THAT BEING TAX NEUTRAL TRANSACTION, NO ADJUSTMENT CAN BE MADE BY TAKING THE VALUE AT N IL . THUS , THIS ISSUE T OO IS DECIDED IN FAVOUR OF THE ASSESSEE. 28 . THE LAST RELATES TO TREATING THE DELAY IN RECEIPTS OF PAYMENTS FROM AE TO BE IN THE NATURE OF UNSECURED LOAN ADVANCED TO THE AE AND THEREBY CHARGING INTEREST BY TAKING SBI BASE RATE AND ADOPTING THE INTERES T RATE OF 11.69 % . BEFORE US , ONE OF THE MAIN CONTENTION OF THE LEARNED COUNSEL HAD BEEN THAT IF THE CUP IS CONSIDERED TO BE THE MAM, THEN ON THE FACTS OF THE ASSESSEE S OWN 27 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 CASE , IT CAN BE SEEN THAT THE CREDIT PERIOD TO THE THIRD PART IES IS MUCH LONGER AND EXTENDS UPTO 181 DAYS WHICH IS EVIDENT FROM THE DETAILS GIVEN AT PAGES 703 AND 706 OF THE PAPER BOOK. SINCE NO INTEREST HAS BEEN CHARGED ON THE DELAYED PAYMENT MADE BY THE THIRD PARTIES , THEREFORE , NO INTEREST SHOULD BE IMPUTED IN RESPECT OF RECEIVABLES O UTSTANDING FROM THE AE ALSO . APART FROM THAT THE LEARNED COUNSEL ALSO SUBMITTED THAT THE ASSESSEE IS COMPLETELY A DEBT FREE COMPANY AND THEREFORE , IT CANNOT BE HELD THAT IT S INTEREST BEARING FUNDS HAVE BEEN LOCKED UP WITH THE AE FOR A LONG PERIOD. THE LEA RNED COUNSEL IN SUPPORT HAD DRAWN OUR ATTENTION TO PAGE S 145 AND 146 OF THE PAPER BOOK , WHICH IS A COPY OF PROFIT AND LOSS ACCOUNT AND STATEMENT OF INTEREST IN FINANCIAL CHARGES. FURTHER , H E STRONGLY RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF BECHTEL INDIA PRIVATE LIMITED, ITA NO. 1478 / DEL / 2015 AND ALSO POINTED OUT THAT, THIS DECISION HAS NOW BEEN AFFIRMED BY THE HON BLE DELHI COURT. ON THE OTHER HAND LEARNED DR RELIED UPON THE ORDERS OR THE TPO AS WELL AS DR P . 2 9 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RELEVANT MATERIAL PLACED ON RECORD, WE FIND THAT FIRST OF ALL , THE ASSESSEE IS A DEBT FREE COMPANY AS IT HAS NEITHER RECEIVED ANY INTEREST FROM ANY CREDITORS NOR PAID INTEREST TO ANY DEBTOR. A PERUSAL OF PROFIT AND LOSS ACCOUNT SHOW THAT INTEREST AND FINANCE CHARGES ARE ONLY RS. 73/ - ; AND INTEREST ON CORPORATE TAX IS RS. 1,27,798/ - . APART FROM THAT THERE IS NO DEBT OR LOAN WITH THE ASSESSEE ON WHICH IT HAS TO PAY ANY INTEREST . ONCE IT IS AN ACCEPTED FACT THAT ASSESSE E DOES NOT HAVE ANY INTEREST BEARING BORROWED FUNDS FOR EXTENDING ANY KIND OF LOAN TO ITS AE , THEN IT CANNOT BE THE RECKONED THAT ASSESSEE HAS GIVEN ANY BENEFIT TO THE 28 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 AE BY BLOCKING ITS INTEREST BEARING FUNDS TO THE AE BY EXTENDING THE CREDIT PERIOD. THIS HAS BEEN HELD SO BY THIS TRIBUNAL IN THE CASE OF BECHTEL INDIA PRIVATE LIMITED (SUPRA) . MOREOVER AS POINTED OUT BY THE LEARNED COUNSEL , THE ASSESSEE HAS ALSO GIVEN SIMILAR CREDIT PERIOD TO THE THIRD PARTIES WHICH ARE EXTENDING UP TO 181 DAYS . I F A SIMILAR CREDIT PERIOD IS GIVEN TO THE AE AS GIVEN TO THIRD PARTIES , THEN UNDER THE ARMS LENGTH SCENARIO AND LOOKING INTO THE SIMILAR CONDITIONS PREVAILING BETWEEN CONTROLLED TRANSACTION AND COMPARABLE UNCONTROLLED TRANSACTION, THEN THERE CANNOT BE ANY ADJUSTMENT , BECAUSE IN A SITUATION LIKE THIS , THERE IS A DIRECT CUP TO ANALYSE SUCH TRANSACTION. ACCORDINGLY , THE TRANSFER PRICING ADJUSTMENT AS MADE BY THE TPO BY THE IMPUTING INTEREST ON DELAY IN RECEIPT OF PAYMENT IS UNCALLED FOR ON THE FACTS OF THE PRESENT CASE A ND SAME IS DIRECTED TO BE DELETED. 30 . NOW WE WILL TAKE UP REVENUE S APPEAL , WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED ARE AS UNDER: 1. THE LD. DRP HAS ERRED IN LAW AND ON FACTS AND IN CIRCUMSTANCES OF THE CASE IN DIRECTING THE TPO TO REDUCE THE AMOUNT TO RS. 2,59,64,962/ - IN PLACE OF RS. 2,89,52,326/ - WHICH WAS ADDED ON ACCOUNT OF ARM S LENGTH PRICE TO THE TAXABLE INCOME OF THE ASSESSEE COMPANY. 2. T HE LD. DRP HAS ERRED IN LAW AND ON FACTS AND IN CIRCUMSTANCES OF THE CASE IN DIRECTING THE TPO TO EXCLU DE M/S ACCENTIA TECHNOLOGIES PVT. LTD. WHILE IGNORING THE FACTS BROUGHT OUT BY THE TPO FOR INCLUDING IT AS COMPARABLE BEING FUNCTIONALLY SIMILAR TO TAXPAYER COMPANY. 3. THE LD. DRP HAS ERRED IN LAW AND ON FACTS AND IN CIRCUMSTANCES OF THE CASE IN REJECTIN G THE BENCHMARKING OF INTEREST RATE ON THE BASIS OF SBI BASE RATE FOR RECEIVABLES OUTSTANDING BY IGNORING THE CBDT NOTIFICATION ON SAFE HARBOUR RULES WHICH DEFINES THE BENCHMARKING OF INTEREST ON THE BASIS OF SBI RATE AND IGNORING THAT THE DELHI HIGH 29 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 COURT JUDGMENT IN THE CASE OF M/S COTTON NATURAL (I) PVT. LTD. DEALT WITH THE ISSUE OF INTEREST ON OUTBOUND LOAN GIVEN TO THE FOREIGN AE'S. 31. SO FAR AS GROUND NO. 1 IS CONCERNED , THE SAME IS GENERAL A ND THEREFORE, NO SEPARATE EDUCATION IS REQUIRED. 32. AS REGARD GROUND NO. 3 IS CONCERNED , THE SAME HAS ALSO BECOME PURELY ACADEMIC FOR THE REASONS THAT, WE HAVE ALREADY DIRECTED THE TPO/AO TO DELETE THE INTEREST AS PER OUR FINDING GIVEN IN THE ASSESSEE S APPEAL , HEREIN ABOVE . THUS , GROUND NO. 3 IS TREATED AS DISMISSED. 33. THE ONLY ISSUE WHICH REMAINS FOR OUR ADJUDICATION IN THE DEPARTMENTAL APPEAL IS THE DRP S DIRECTION TO EXCLUDE , ONE COMPARABLE COMPANY, M/S ACCENTIA TECHNOLOGIES PRIVATE LIMITED. THE TPO HAS INCLUDED THIS COMPANY ON THE GROUND THAT IT IS FUNCTIONALLY SIMILAR AND PASSES ALL THE FILTERS ADOPTED BY HIM. ON THE OTHER HAND, THE DRP HAS EXCLUDED THE SAID COMPARABLE ON THE GROUND THAT THERE WERE EXCEPTIONAL CIRCUMSTANCES EFFECTING THE PROFIT DURING THE YEAR. 34. THE LEARNED DR O N FUNCTIONA L C OMPARABILITY SUBMITTED THAT , THE TPO HAS GIVEN HIS ELABORATE FINDING HOW IT IS FUNCTIONAL LY COMPARABLE TO THE ASSESSEE AND ALSO DREW OUR ATTENTION TO VARIOUS OBSERVATION OF LD. TPO . ON THE OTHER HAND, LEARNED COUNSEL MADE FOLLOWING SUBMISSIONS QUA THIS COMPARABLE: - A . FUNCTIONALLY DIFFERENT: ACCENTIA RENDERS KPO SERVICES IN THE HEALTHCARE SECTOR, BY WAY OF SOFTWARE AS A SERVICE SAAS 30 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 MODEL. THE SOFTWARE HELPS IN MANAGING ALL THE HEALTHCARE DOCUMENTATION NEEDS, RECEIVABLES MANAGEMENT NEEDS, PERFORMANCE TRAC KING AND REPORTING. IT IS ALSO ENGAGED IN DEVELOPING AND DESIGNING A CLOUD BASED HOSTED APPLICATION, HARDWARE AND BANDWIDTH INFRASTRUCTURE, WHICH ARE IN THE NATURE OF SOFTWARE AND SOFTWARE SUPPORT SERVICES. ACCENTIA IS ENGAGED IN DEVELOPMENT AND SALE OF PR ODUCTS AND PROVISION OF SERVICES. HOWEVER, SEGMENTAL BREAK - UP BETWEEN SOFTWARE PRODUCT DIVISION AND MEDICAL TRANSCRIPTION DIVISION ARE NOT AVAILABLE. B . PRESENCE OF IPR - ACCENTIA POSSESSES GOODWILL / BRAND/ IPRS AMOUNTING TO 49.27% OF THE NET FIXED ASSETS, WHICH TEND S TO INFLUENCE THE PRICING POLICY AND THEREBY DIRECTLY IMPACTING THE MARGINS EARNED BY ACCENTIA . C . DURING FY 2010 - 11, ACCEN TIA ACQUIRED STRATEGIC TANGENT C ORPORATION WHICH WAS A SOFTWARE DEVELOPMENT COMPANY HAVING EXPERTISE IN DEVELOPMENT OF SOFTWA RE RELATED TO EMR AND SAAS. D . ABNORMAL CIRCUMSTANCES: BECAUSE OF ACQUISITIONS BETWEEN FY S 2007 AND 2011, THE REVENUES OF ACCENTIA HAVE INCREASED SIGNIFICANTLY. THE LD. TPO DID NOT TAKE THIS ARGUMENT OF THE ASSESSEE INTO CONSIDERATION. E . MARGIN AT OVERALL ENT ITY LEVEL - THE LD. TPO HAS CONSIDERED THE PROFITABILITY OF ACCENTIA AT AN OVERALL ENTITY LEVEL WHICH INCLUDES INCOME FROM SOFTWARE DEVELOPMENT AND THEREFORE, SUCH AN APPROACH IS INCORRECT WHEN NO SEGMENTAL INFORMATION IS AVAILABLE. THUS, ON THE BASIS OF SU CH INCOMPLETE INFORMATION A COMPANY CANNOT BE CONSIDERED TO 31 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 BE A COMPARABLE COMPANY. 35 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER . I T IS AN UNDISPUTED FACT THAT DURING THE FINANCIAL YEAR 2010 - 11 , A CCENTIA ACQUIRED STRATEGIC T ANGENT C ORPORATION WHICH WAS A SOFTWARE DEVELOPMENT COMPANY HAVING EXPERTISE IN DEVELOPMENT OF SOFTWARE RELATING TO EMR SAAS . DUE TO THIS ACQUISITION , THE R EVENUE OF A CCENTIA HAS BEEN INCREASED SIGNIFICANTLY AND THIS FACT UM AS HELD BY THE LEARNED DRP DEFINITELY IS A VERY VITAL FACTOR A FFECTING THE PRIC ING AND CONSEQUENTLY THE COMPARABILITY AS WELL AS THE PROFIT MARGIN. APART FROM THAT, A CCENTIA IS ALSO ENGAGED IN DEVELOPMENT AND SALE OF PRODUCTS FOR THE U.S. MARKET AND THE RE ARE NO SEPARATE SEGMENTS OF THE FINANCIALS PRO VIDING DETAILS OF REVENUE / PROFIT FROM SOFTWARE PRODUCT DIVISION AND MEDICAL TRANS CRIPT DIVISION. O N THESE CIRCUMSTANCES ALSO IT WOULD BE VERY DIFFICULT TO INCLUDE A CCENTIA FOR COMPARABILITY ANALYSIS . A CCORD INGLY , ON THESE GROUNDS WE UPHOLD HOLD THE ORDER OF THE DRP EXCLUDING THE SAID COMPANY. IN THE RESULT, GROUND NO. 2 AS RAISED BY THE DEPARTMENT IS DISMISSED . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 36. NOW WE WILL TAKE UP THE ASSESSEE S APPEAL F OR THE ASSESSMENT YEAR 2012 - 13 . IN THE GROUNDS OF APPEAL, T HE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED UNDER SECTION 143 (3) R.W.S. 144C OF THE ACT BY THE LEARNED ASSESSING O FFICER ('TD. AO') IS ERRONEOUS AND BAD IN LAW AS WELL AS IN FACTS. 2 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO/ LD. DISPUTE RESOLUTION PANEL ('DRP ) 32 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 ERRED IN MAKING AN ADJUSTMENT TO THE ARM'S LENGTH PRICE ( ALP ) OF THE APPELLANT'S INTERNATIONAL TRANSACTIONS, RELATING TO PROVISION OF FINANCE/ IT - BACK OFFICE SUPPORT SERVICES, WITH ASSOCIATED ENTERPRISES ( AES ) AMOUNTING TO INR 25,972,178. 3 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO/ LD. DRP ERRED IN APPLICATION OF TRANSACTIONAL NET MARGIN METHOD ('TNMM') BY: 3 . 1 . REJECTING / MODIFYING THE ECONOMIC ANALYSIS CONDUCTED IN THE TRANSFER PRICING DOCUMENTATION BY THE APPELLANT, INCLUDING THE COMPARABLE COMPANIES SELECTED FOR ARM S L ENGTH PRICE DETERMINATION, DURING THE COURSE OF ASSESSMENT PROCEEDINGS; 3 . 2 . APPLYING INAPPROPRIATE QUANTITATIVE FILTERS AND INSTEAD APPLYING NEW FILTERS, WHICH RESULTED IN ARRIVING AT A CHERRY - PICKED RESULT; 3 . 3 . ACCEPTING COMPANIES THAT WERE FUNCTIONALLY NOT COM PARABLE TO THE APPELLANT IN TERMS OF FUNCTIONS, ASSETS AND RISK PROFILE; 3 . 4 . COMPUTING ERRONEOUS MARGINS OF THE COMPANIES SELECTED FOR ARM'S LENGTH PRICE DETERMINATION; 3 . 5 . CONFIRMING THE SELECTION OF CURRENT YEAR (I.E. FINANCIAL YEAR 2011 - 12) DATA FOR ARM'S LEN GTH PRICE DETERMINATION; AND 3 . 6 . NOT TREATING FOREIGN EXCHANGE GAIN/ LOSS AS OPERATING IN NATURE, WHILE COMPUTING THE OPERATING MARGIN; 4 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. AO/ LD. TPO/ LD. DRP ERRED IN MAKING A NOTIONA L ADJUSTMENT OF INTEREST AMOUNTING TO INR 649,897 ON OUTSTANDING RECEIVABLES BY TREATING IT AS INTERNATIONAL TRANSACTION. THE LD. AO/ LD. TPO/ LD. DRP ERRED BY: 4 . 1 . TREATING DELAY IN RECEIPT OF PAYMENT FROM THE AES, AS UNSECURED LOANS ADVANCED TO THE AES AND CHARGING INTEREST ON THE SAME; 4 . 2 . APPLYING AN ADHOC METHODOLOGY FOR BENCHMARKING THE BALANCES OUTSTANDING FROM RELATED PARTIES AND IN IGNORING THE FACT THAT THE BALANCES HAD ALREADY BEEN BENCHMARKED BY THE APPELLANT AS PART OF THE TNMM ANALYSIS PERFORMED BY IT; 33 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 4 . 3 . IGNORING THE FACT THAT THE APPELLANT HAD EARNED HIGHER OPERATING PROFIT MARGIN THAN WORKING CAPITAL ADJUSTED MARGIN OF THE COMPARABLE COMPANIES ON ITS INTERNATIONAL TRANSACTIONS AND HENCE ANY NOTIONAL INTEREST ON THE EXTENDED CREDIT PERIOD PROVIDED TO AES WAS FACTORED IN THE PRICING OF THESE TRANSACTIONS . 4 . 4 . IGNORING THE FACT THAT A HIGHER PERIOD OF CREDIT WAS RECEIVED BY THE APPELLANT FROM THIRD PARTIES. 5 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO/LD. TPO ERRED IN NOT EXAMINING THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS U/S 217(1)(C) OF THE ACT. 6 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN CHARGING AND COMPUTING INTEREST UNDER SECTION 234B AND 234C OF THE ACT. 37 . SO FAR AS THE ISSUE RELATING TO TRANSFER PRICING ADJUSTMENT ON PROVISION OF F INANCE / IT BACK OFFICE SUPPORT SERVICES AMOUNTING TO RS. 2,59,72, 178/ - , THE LEARNED COUNSEL SUBMITTED THAT IN THIS YEAR ALSO THE ASSESSEE IS MAINLY CHALLENGING THE EXCLUSION OF TWO C OMPARABLE COMPANIES, E - CLERX AND TCS E - SERVE LIMITED. IF THESE TWO COMPARABLES ARE REMOVED , THEN OTHER COMPARABLES WHICH HAS BEEN INCLUDED BY THE TPO AND ALSO UPHELD BY THE DRP WILL BECOME PURELY ACADEMIC. SO FAR AS THESE TWO COMPARABLES ARE CONCERNED, HE SUBMITTED THAT THE FACTS ARE IDENTICAL AND THERE IS NO MATERIAL CHANGE IN THE COMPARABILITY ANALYSIS OF COMPANIES VIS - - VIS THE ASSESSEE , THEREFORE , ANY FINDING GIVEN IN THE ASSESSMENT YEAR 2011 - 12 WOULD BE SQUARELY APPLICABLE IN THIS YEAR ALSO. THIS FACT HAS ALSO NOT BEEN CONTROVERTED BY THE LEARNED CIT DR THAT FACTS AND MATERIAL FOR CARRYING OUT COMPARABILITY ANALYSIS ARE THE SAME . 34 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 3 9. AFTER CONSIDERING THE AFORESAID SUBMISSIONS AND ON PERUSAL OF THE IMPUGNED ORDERS, WE FIND THAT THE COMPARABLE COMPANI ES WHICH HAVE BEEN FINALIZED FROM THE STAGE OF THE DRP ARE AS UNDER: 1. ACCENTIA TECHNOLOGY LTD. 2. ACROPETAL TECHNOLOGIES LTD. 3. CALIBER POINT BUSINESS SOLUTIONS LIMITED. 4. ECLERX SERVICES LTD. 5. EXCEL INFOWAYS LTD. 6. INFORMED TECHNOLOGIES INDIA LIMITED . 7. INFOSYS BPO LTD. 8. JINDAL INTELLICOM LTD . 9. TCS E - SERVE LTD. OUT OF THESES COMPARABLE BEFORE US , THE ASSESSEE IS ONLY CHALLENGING , E - CLERX AND TCS E - SERVE LIMITED. SINCE BOTH THE PARTIES ARE NOT DISPUTING THAT THE FACT ORS RELATING T O COMPARABILITY ANALYSIS IN CASE OF E - CLERX AND TCS E - SERVE VIS - A - VI S THE ASSESSEE ARE NOT DIFFERENT FROM THE EARLIER YEAR , THEREFORE , OUR FINDING GIVEN REGARDING THESE TWO COMPARABLE AS GIVEN IN FOREGOING PARAS OF EARLIER YEAR APPEAL WILL APPLY MUTATIS MU TANDIS . THUS, IN VIEW OF FINDING GIVEN THEREIN, WE DIRECT THE TPO TO EXCLUDE THESE TWO COMPARABLES FROM THE COMPARABILITY ANALYSIS AND ACCORDINGLY WORK OUT THE ARM S LENGTH PRICE. OTHER COMPARABLE COMPANIES AS CHALLENGED IN GROUNDS OF APPEAL ARE THEREFORE, NOT ADJUDICATED. 40 . THE NEXT ISSUE RELATES TO TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF IMPUTING THE INTEREST ON OUTSTANDING RECEIVABLES. HERE IN THIS YEAR ALSO, THE FACT REMAINS THE SAME THAT ASSESSEE IS A DEBT FREE AND IT HAS NEITHER RECEIVED ANY INT EREST FROM ANY CREDITORS NOR PAID INTEREST TO DEBTORS AND NO BORROWED FUNDS HAVE BEEN UTILIZED FOR EXTENDING THE TIME PERIOD OF THE RECEIVABLES. APART FROM THIS, IT IS ALSO A FACT THAT CREDIT PERIOD EXTENDED TO THIRD PARTIES IS ALSO SAME AS PROVIDE TO THE AE, HENCE NO ADJUSTMENT IS REQUIRED TO BE 35 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 MADE BY TREATING IT TO BE LOAN TRANSACTION AND IMPUTING INTEREST ON THE DELAYED PERIOD RECEIVABLES. SINCE SIMILAR FACTS AND FINDING OF REVENUE AUTHORITIES ARE PERMEATING IN THIS YEAR ALSO THEREFORE , OUR FINDING GIV EN IN THE APPEAL FOR THE AY 2011 - 12 WOULD BE SQUARELY APPLICABLE AND ACCORDINGLY , THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 41. LASTLY , ON THE ISSUE OF WHETHER THE FOREIGN EXCHANGE GAIN OR LOSS IS OPERATING IN NATURE, WE HAVE ALREADY HELD THAT I T IS PART OF THE OPERATING INCOME AND THEREFORE , IT CANNOT BE REMOVED FROM THE COMPUTATION/ WORKING OF THE PLI. ACCORDINGLY , IN VIEW OF THE FINDING GIVEN IN THE APPEAL IN THE ASSESSMENT YEAR 2012 - 13 , THIS ISSUE TOO HIS DECIDED IN FAVOUR OF THE ASSESSEE. 42 . SINCE OTHER GROUNDS HAVE NOT BEEN ARGUED BEFORE US, THEREFORE , SAME ARE DISMISSED AS NOT PRESSED. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 43. IN THE RESULT APPEALS OF THE ASSESSEE FOR THE AYS 2011 - 12 AND 2012 - 13 ARE PARTLY ALLOWED , WHEREAS, REVENUE S APPEAL FOR THE AY 2011 - 12 IS DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON THIS DAY OF MAY 2017 . SD/ - SD/ - ( J.S. REDDY ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 . 5. 201 7 36 ITA NOS. 6134/DEL/2015, 5829/DEL/2015 & 6572/DEL/2016 SH COPY OF ORDER TO : - 1 ) THE APPELLANT; 2 ) THE RESPONDENT; 3 ) THE CIT ; 4 ) THE CIT(A) - , NEW DELHI ; 5 ) THE DR, I.T.A.T., NEW DELHI ; BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT , NEW DELHI S.NO. DETAILS DATE INITIALS DES IGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KE PT FOR PRONOUNCEMENT ON SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R. 10 DATE OF DISPATCH OF ORDER