M/s. Rolls Royce India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 658/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6745 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 06-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIDHI SHARMA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary
• Section: 271(1)(c); 234B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I-2: NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.658/DEL/2017 ASSESSMENT YEAR: 2012-13 ROLLS ROYCE INDIA PVT. LTD., 2 ND FLOOR, BIRLA TOWER WEST, 25, BARAKHAMBA ROAD, NEW DELHI. PAN: AABCR5277Q VS ACIT, CIRCLE 21(2), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRADEEP DINODIA, ADVOCATE, REVENUE BY : MS NIDHI SHARMA, SR. DR DATE OF HEARING : 22.10.2019 DATE OF PRONOUNCEMENT : 30.10.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 20.12.2016 OF THE ASSESSING OFFICER PASSED U/S 143( 3)/144C/92CA(4) OF THE IT ACT, 1961, RELATING TO ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER:- 1. THAT THE DRP/AO HAS ERRED IN LAW AND ON FACTS I N THE CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ADDITION OF RS.7,26,5 2,018/- ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT U/S 92CA(3) AND NON-TP DISALLOWANCES ON WHOLLY ILLEGAL, ERRONEOUS AND UNTENABLE GROUNDS. 2. THE ORDER OF ASSESSMENT IS BAD IN LAW. ITA NO.658/DEL/2017 2 TRANSFER PRICING ADJUSTMENT 3. THAT THE LD. DP/AO HAS ERRED IN LAW IN CONFIRMI NG THE ADDITION OF RS.5,97,94,267/- U/S 92CA(3). 4. THAT THE LD. DRP HAS ERRED IN LAW IN DISPOSING OFF THE OBJECTION OF THE ASSESSEE IN SUMMARY MANNER WITHOUT ANALYZING AN D APPRECIATING THE FACTS OF THE ASSESSEES CASE. 5. THE LEARNED AOS ORDER BASED ON THE FINDINGS OF THE LEARNED TRANSFER PRICING OFFICER AND THE DIRECTIONS OF THE LEARNED D ISPUTE RESOLUTION PANEL U/S.144C(5) OF THE INCOME- TAX, IS ERRONEOUS, UNTEN ABLE IN LAW AND ON FACTS FOR THE VARIOUS REASONS AND NOT LIMITED TO THE FOLLOWIN G: - 5.1. THE TPO AS WELL AS THE DRP AND CONSEQUENTLY T HE AO HAVE GROSSLY ERRED IN LAW AND ON FACTS AND IN TH E CIRCUMSTANCES OF THE CASE IN ERRONEOUSLY: 5.1.1. REJECTING THE SCIENTIFICALLY RUN SEARCH PROCESS OF THE ASSESSEE WITHOUT COGENT REASON 5.1.2. REJECTING THE SEARCH PROCESS OF THE ASSESSEE WAS BAD IN LAW IN VIEW OF THE FACTS THE FINAL SET O F 7 COMPARABLES OF THE LD. TPO HAD 3 OF THE ORIGINALLY CHOSEN COMPARABLES BY THE ASSESSEE. 5.1.3. CARRYING OUT A NEW SEARCH PROCESS BASED ON ERRONEOUS FILTERS 5.1.4. CHERRY PICKING THE COMPARABLES 5.2. THE TPO AS WELL AS THE DRP AND CONSEQUENTLY T HE AO HAVE GROSSLY ERRED IN LAW AND ON FACTS AND IN THE CIRCUM STANCES OF THE CASE FOR THE CHOICE OF COMPARABLE COMPANIES BY ERRONEOUS LY: 5.2.1. DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE RELATED TO PROJECT MANAGEMENT SERVICES (PMS), MARKETING SUPPORT SERVIC ES (MSS) AND CORPORATE SERVICES THAT ARE SUPPORT SERVI CES IN NATURE BY TREATING AND COMPARING THEM TO HIGH-END T ECHNICAL SERVICES, WHICH IS NOT IN LINE WITH RULE 10B(2)(B), SUCH THAT IT DOES NOT SATISFY THE FUNCTIONS PERFORMED, ASSETS EM PLOYED AND RISK ASSUMED (FAR) TESTS. 5.2.2. IGNORING THE FACT THAT THE AE SERVICE SEGMEN T OF THE ASSESSEE CONSTITUTES OF MORE THAN 90% I.E. SUBS TANTIALLY ITA NO.658/DEL/2017 3 AND PREDOMINANTLY COMPRISING OF SUPPORT SERVICES AN D THEREFORE COMPARABLE COMPANIES WHICH PROVIDED SIMIL AR SUPPORT SERVICES TO THE SUPPORT SERVICE SEGMENT OF THE ASSESSEE SHOULD HAVE BEEN CHOSEN, THUS NOT SATISFYING THE FU NCTIONS TEST. 5.2.3. IN NOT APPRECIATING THE FACT THAT THE NEW COMPARABLES CHOSEN BEAR DIFFERENT RISK IN RENDERING TECHNICAL SERVICES, WHILE THE ASSESSEE IS NON-RISK BEARING EN TITY IN ITS SUPPORT SERVICES SEGMENT. 5.2.4. IN NOT APPRECIATING THE RISKS ASSUMED BY TH E ASSESSEE IS NIL VIS-A-VIS THE COMPARABLES WHICH ARE HIGH END SERVICE PROVIDERS SUCH THAT A RISK ADJUSTMENT SHOUL D ALSO BE ALLOWED TO THE ASSESSEE TO FULFILL THE CRITERIA LAI D DOWN IN RULE 10B(2)(B) OF THE IT RULES. 6. THAT THE LD. TPO AND CONSEQUENTLY DRP/AO HAS ER RED IN LAW AND ON FACTS IN NOT SELECTING CYBER MEDIA RESEARCH & SERVI CES LTD IN FINAL LIST OF COMPARABLES WHICH HAS BEEN SELECTED COMPARABLE OF T HE ASSESSEE FOR LAST 2 YEARS. 7. THAT THE LD. TPO AND CONSEQUENTLY DRP/AO HAS ER RED IN LAW AND ON FACTS IN NOT INCLUDING ASSESSEE COMPARABLES NAMELY OFFICE CARE SERVICES LTD AND VATIKA MARKETING LTD IN FINAL LIST OF COMPARABL ES STATING THEM TO BE LOW END AND FUNCTIONALLY DIFFERENT. 8. WITHOUT PREJUDICE TO THE ABOVE, THE AE SERVICE SEGMENT OF THE ASSESSEE IS PRAYED TO BE SEGREGATED INTO 2 SEGMENTS NAMELY, TECHNICAL SEGMENT AND BUSINESS SUPPORT SEGMENT (INCLUDING PRO JECT MANAGEMENT SERVICES, CORPORATE SERVICES & MARKET SUPPORT SERVI CES) AND ALP OF EACH SEGMENT BE DETERMINED SEPARATELY WITH SEPARATE SET OF COMPARABLES AS ALL INFORMATION TO THE EFFECT IN ON RECORDS. 9. THAT THE PROPOSED ADDITION OF RS.5,97,94,267/- IS BAD IN THE LAW AND IS PRAYED TO BE DELETED. 3. GROUND NOS.1 TO 4 BEING GENERAL IN NATURE ARE DI SMISSED. GROUND OF APPEAL NO. 5 TO 7 RELATE TO INCLUSION/EXCLUSION OF CERTAIN COMPARABLES. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A SUBSIDIARY OF ROLLS ROYCE OVERSEAS HOLDING LIMITED AND OPERATES IN INDIA PRIM ARILY IN THE POWER GENERATION ITA NO.658/DEL/2017 4 AND OIL AND GAS MARKETS WITH A RANGE OF RECIPROCATI NG ENGINES COVERING GAS ENGINES, HFO ENGINES AND CRUDE OIL ENGINES. IT ALS O UNDERTAKES SERVICING CONTRACTS WHEREIN IT PURCHASES SPARE PARTS FROM OVERSEAS ROLL S ROYCE ENTITIES FOR SUBSEQUENT SALE. THE COMPANY ALSO UNDERTAKES SERVICES SUCH AS REPAIR AND MAINTENANCE AND OTHER SERVICES INCLUDING TECHNICAL PROJECT MANAGEME NT AND MARKETING SUPPORT. IT FILED ITS RETURN OF INCOME ON 9 TH OCTOBER, 2013 DECLARING TOTAL INCOME OF RS.75,72,74,676/-. THE ASSESSING OFFICER REFERRED THE MATTER TO THE TPO U/S 92CA FOR DETERMINATION OF THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE. THE TPO NOTED THAT THE ASSES SEE DURING THE YEAR UNDER CONSIDERATION HAS ENTERED INTO THE FOLLOWING TRANSA CTIONS:- NO. NATURE OF TRANSACTION METHOD VALUE OF TRANSACTION (IN RS.) 1 . PURCHASE OF SPARES FOR TRADING TNMM (PLI AS OP/OR) 8,18,13,383 2. PROVISION OF TECHNICAL SERVICES TNMM (PLI AS OP/OC) 5,72,53,977 3. PROVISION OF PROJECT MANAGEMENT SERVICES 1,24,70,910 4. PROVISION OF MARKETING SUPPORT SERVICES 40,11,67,754 5. RECHARGE OF PAYROLL EXPENSES NA 1,41,34,741 6. REIMBURSEMENT OF BANK GUARANTEE CHARGES 1,96,053 7. REIMBURSEMENT OF INSURANCE CHARGES 26,19,566 8. RECHARGE OF EXPENSES 13,00,47,169 5. WHILE THE TPO ACCEPTED THE PURCHASE OF SPARES FO R TRADING AND RECHARGE OF EXPENSES, HOWEVER, HE DID NOT ACCEPT THE TP APPROAC H OF THE ASSESSEE FOR THE SERVICE SEGMENT. ACCORDING TO THE TPO, THE SERVICE S RENDERED BY THE ASSESSEE ARE HIGH-END SUPPORT SERVICES. AFTER APPLYING VARIOUS FILTERS, THE TPO PROPOSED THE FOLLOWING COMPARABLES, WHOSE AVERAGE OP/OC IS 30.66 %, THE DETAILS OF WHICH ARE AS UNDER:- ITA NO.658/DEL/2017 5 S.NO COMPANY NAME OP/OC (%) 1 APITCO LTD. 20.46 2 B VG INDIA LTD. 24.46 3 H S C C (INDIA) LTD. 48.83 4 ICR A MANAGEMENT CONSULTING SERVICES LTD. 6.62 5 INFO EDGE (INDIA) LTD. 56.79 6 KITCO LTD. 37.97 7 TATA CONSULTING ENGINEERS LTD. 19.47 AVERAGE 30.66 6. REJECTING THE SUBMISSIONS OF THE ASSESSEE THAT I T WAS PROVIDING SIMPLE BUSINESS SUPPORT SERVICES AND NOT HIGH END MARKETIN G SUPPORT SERVICES AND, THEREFORE, THE COMPARABLES SHOULD BE TAKEN FROM THE SEGMENT BROADLY CLASSIFIED AS BUSINESS SUPPORT SERVICES AND OBSERVING THAT IN THE PAST ALSO THE SAME APPROACH WAS ADOPTED BY HIM HAS BEEN FOLLOWED, THE TPO FINAL LY ADOPTED THE FOLLOWING COMPARABLES FOR BENCHMARKING THE INTERNATIONAL TRAN SACTION IN SUPPORT SERVICES:- S.NO COMPANY NAME OP/OC 1. - R - S APITCO LTD. 20.46 2. H S C C (INDIA) LTD. 48.83 3. ICRA MANAGEMENT CONSULTING SERVICES LTD. 6.62 4. INFO EDGE (INDIA) LTD. 56.79 5. KITCO LTD. 37.97 6. TATA CONSULTING ENGINEERS LTD. 19.47 7. UB ENGINEERING 6.1 AVERAGE 28.03 7. ACCORDINGLY, HE PROPOSED AN UPWARD ADJUSTMENT OF RS.6,22,45,975/-. THE ASSESSEE APPROACHED THE DRP. THE DRP REJECTED ALL THE CONTENTIONS OF THE ASSESSEE. HOWEVER, THE DRP DIRECTED THE TPO TO REC OMPUTE/BENCHMARK THE MARGIN OF M/S UB ENGINEERING LTD. THE ASSESSING OF FICER, THEREAFTER, CALCULATED ITA NO.658/DEL/2017 6 THE ARMS LENGTH PRICE AND REVISED THE SAME TO RS.5 ,97,94,267/- AS AGAINST RS.6,22,45,975/- MADE EARLIER. 8. AGGRIEVED WITH SUCH ORDER OF THE A.O./TPO/DRP, T HE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS OPERATING IN TRADING AND SERVICE SEGMENT AND THE ONLY AREA OF DI SPUTE IS THE SERVICE SEGMENT COMPRISING PMS, MSS AND TECHNICAL SERVICES. IN AE SERVICE SEGMENT, THE ASSESSEE IS PROVIDING MORE THAN 95% OF THE RISK FREE SERVICE S AND ONLY 10% TECHNICAL SERVICES. REFERRING TO PAGE 209 OF THE PAPER BOOK, HE SUBMITTED THAT THIS WAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER. FURTHER, T HERE IS NO CHANGE IN THE FACTS FROM ASSESSMENT YEAR 2007-08 ONWARDS INCLUDING ASS ESSMENT YEAR 2011-12. HE SUBMITTED THAT THE ASSESSEE HAD SELECTED 11 COMPARA BLES WITH 15.63% MARGIN BASED ON THREE YEAR AVERAGE AS PER TP STUDY COPY OF WHICH IS PLACED AT PAGE 175 OF THE PAPER BOOK. HE SUBMITTED THAT OUT OF SEVEN COM PARABLES PROPOSED BY THE TPO, ONLY THREE COMPARABLES SELECTED BY THE ASSESSEE WER E INCLUDED. SO FAR AS THE VARIOUS COMPARABLES SELECTED BY THE TPO AND UPHELD BY THE DRP ARE CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NON-RISK BEARING IN SUPPORT SERVICES SEGMENT AND HIGH END CHOSEN BY THE TPO AND UPHELD BY THE DRP SHOULD BE EXCLUDED. REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 AND 2011-12, HE SUBMITT ED THAT THE TRIBUNAL HAS GIVEN THE FINDING THAT THE ASSESSEE IS PROVIDING APPROXIM ATELY 90% OF RISK FREE SUPPORT ITA NO.658/DEL/2017 7 SERVICES AND THE COMPARABLES SHOULD BE SELECTED WHI CH ASSUMES LOW OR NO RISK. HE SUBMITTED THAT THERE IS NO CHANGE IN FACTS OF THE C ASE DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THE REVENUE IN SU PPORT SERVICE SEGMENT IS RS.42.62 CRORES WHILE IN TECHNICAL SERVICE IT IS RS .5.27CRORES. THUS, 89% OF TOTAL SERVICE INCOME IS FROM RENDERING SUPPORT SERVICE. SO FAR AS THE ALLEGATION OF THE TPO THAT THE SERVICES PROVIDED BY THE ASSESSEE ARE HIGH END SUPPORT SERVICES, HE SUBMITTED THAT THE TRIBUNAL HAS ALREADY GIVEN A FIN DING IN ASSESSEES OWN CASE THAT THE ASSESSEE IS A NON-RISK BEARING SERVICE PROVIDER . IT IS ALSO EVIDENT FROM THE SUPPORT SERVICE AGREEMENT, COPY OF WHICH IS PLACED AT PAGE 222 TO 243 OF THE PAPER BOOK. NOW, COMING TO THE VARIOUS COMPARABLES SELEC TED BY THE TPO, THE LD. COUNSEL FILED THE FOLLOWING CHART:- S. NO. COMPANY NAME BUSINESS PROFILE RELIANCE PLACED FOR REJECTION 1. APTICO LTD. IMPARTING CONSULTANCY IN ENTIRELY DIFFERENT FIELD AND IS NOT COMPARABLE TO FUNCTIONS PERFORMED BY THE ASSESSEE (PB PG.313) COVERED BY ITAT ORDER FOR A.Y. 2010-11 & A.Y.2011- 12 IN ASSESSEES OWN CASE (PARA 37 PB PG.338 & PARA 15 PB PG.323 RESPECTIVELY) 2. KITCO LTD. FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE BECAUSE OF NATURE OF SERVICES RENDERED (PB PG.314) COVERED BY ITAT ORDER FOR A.Y. 2010-11 & A.Y. 2011- 12 IN ASSESSEES OWN CASE (PARA 38-39 PB PG.338 & PARA 15 PB PG.323 RESPECTIVELY) 3. INFO EDGE (INDIA) PVT. LTD. INFO EDGE (INDIA) LIMITED (INFO EDGE) IS INDIAS PREMIER ONLINE CLASSIFIEDS COMPANY IN RECRUITMENT, MATRIMONY, REAL ESTATE, EDUCATION AND RELATED SERVICES (PB PG.315- 316) COVERED BY ITAT ORDER FOR A.Y. 2011-12 IN ASSESSEES OWN CASE. (PARA 21 PB PG. 325) 4. TCE CONSULTING ENGINEERS TATA CONSULTING ENGINEERS LIMITED (TCE) IS AN INDIAN ENGINEERING CONSULTING FIRM. THE COMPANY IS A COVERED BY ITAT ORDER FOR A.Y. 2011-12 IN ASSESSEES OWN CASE. (PARA ITA NO.658/DEL/2017 8 LTD. WHOLLY OWNED SUBSIDIARY OF TATA SONS LTD. THE COMPANY PROVIDES ENGINEERING SERVICES & SOLUTIONS FOR POWER, NUCLEAR, INFRASTRUCTURE, INDUSTRIAL, MINING & MINERALS, STEELS AND METALS, TRANSPORTATION, WATER BUILDING, MANUFACTURING, SPATIAL PLANNING, AND THE ENVIRONMENT. LATELY AN ADVANCED TECHNOLOGY BUSINESS UNIT HAS ALSO BEEN STARTED. HENCE HIGHLY TECHNICAL. SEE PROFILE ON PB PG.311-312) MOREOVER ALL TATA GROUP COMPANIES OWN IPR WHICH MAKES IT FUNCTIONALLY DIFFERENT FROM ASSESSEE WHICH DOES NOT OWN ANY IPR 17 PB PG.324) M/S VERIZON (INDIA) PVT. LTD. VS JCIT [ITA NO. 4187/DEL/2010], EIL RITES, WAPCOS AND TCE OPERATE IN ENGINEERING CONSULTANCY INDUSTRY, THE RISKS AND RETURNS VARY SIGNIFICANTLY FROM THOSE OF THE MARKETING SUPPORT SERVICES COMPANY OPERATING ON A COST PLUS MODEL .' DELHI ITAT IN FLUOR DANIEL INDIA PVT. LTD., NEW VS ACIT, ITA 973/DEI/2006 THEREFORE, IN OUR VIEW IT IS APPARENT THAT THIS COMPANY IS ENGAGED IN PROVIDING HIGH END ENGINEERING CONSULTING SERVICES WHICH IS NOT COMPARABLE WITH LIMITED FUNCTIONS PERFORMED BY ASSESSEE. THEREFORE WE DIRECT TO EXCLUDE THIS COMPARABLE. 5. HSCC (INDIA) LTD. HSCC INDIA LTD. IS A GOVERNMENT OF INDIA ENTERPRISE SET UP IN 1983 WITH AN AUTHORIZED CAPITAL OF RS.20 MILLION. HSCC IS ONE OF THE FEW ORGANIZATION IN SOUTH EAST ASIA, RENDERING COMPREHENSIVE RANGE OF PROFESSIONAL CONSULTANCY SERVICES IN HEALTH-CARE AND OTHER SOCIAL SECTORS, IN INDIA AND ABROAD. THE SERVICES OF HSCCS BEING GOVERNMENT OF INDIA ENTERPRISE, HAVE BEEN UTILIZED BY VARIOUS ORGANIZATION, BOTH IN PUBLIC AND PRIVATE SECTORS, CENTRAL THE COMPANY IS A GOVT. OF INDIA UNDERTAKING PROVIDING HIGH QUALITY PROFESSIONAL SERVICES. CONSIDERING THESE FACTS, ITAT IN CASE OF SHELL INDIA MARKETS PVT. LTD. [TS- 430-ITAT-2014 (MUM)- TP] HELD THAT THE COMPANY WAS NOT FUNCTIONALLY COMPARABLE AND DIRECTED ITS EXCLUSION. RELIANCE IS PLACED ON INTERNATIONAL SOS SERVICES INDIA P LTD. [TS- ITA NO.658/DEL/2017 9 GOVERNMENT DEPARTMENT, STATE GOVERNMENTS AS ALSO INTERNATIONAL AGENCIES LIKE THE WORLD BANK, WHO, AMONG OTHERS FOR THEIR PROJECTS IN INDIA AND ABROAD. IT UNDERTAKES VARIOUS IT PROJECTS AND PROCUREMENT PROJECTS AS EVIDENT FROM THE WEBSITE OF THE COMPANY. HENCE HIGHLY TECHNICAL. SEE PROFILE ON PB PG. 307-310. COPY OF RELEVANT EXTRACT OF FINANCIALS ENCLOSED AS ANNEXRE-1 493-SC-2018-TP] IN WHICH JUDGEMENT OF DELHI HC IN SAME CASE HAS BEEN UPHELD AND IT HAS BEEN HELD THAT GOVERNMENT OF INDIA UNDERTAKING CANNOT BE INCLUDED AS A COMPARABLE. RELIANCE IS ALSO PLACED ON ITAT RULINGS IN CHEMTEX GLOBAL ENGINEERS PVT. LTD. [TS-161-ITAT-2013 (MUM)-TP] AND YUM RESTAURANTS (INDIA) PVT. LTD. [TS-166-ITAT-2014 (DEL)- TP] IN WHICH IT WAS HELD THAT ENGINEERING, CONSULTANCY, CHEMICAL TESTING SERVICES NOT COMPARABLE TO ASSESSEES MARKETING SUPPORT SERVICES. DELHI BENCH OF THE TRIBUNAL IN THE CASE OF BACHTEL INDIA PVT. LTD. VS. DCIT IN ITA NO.882/DEL/2014. THUS THIS COMPARABLE IS PRAYED TO EXCLUDED DUE TO FUNCTIONALLY DIFFERENT AND BEING GOVERNMENT COMPANY. 10. REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR ASSESSMENT YEAR 2010-11AND 2011-12, COPY OF WHICH I S PLACED AT PAGE 317 TO 341 OF THE PAPER BOOK, HE SUBMITTED THAT THE TRIBUNAL H AS HELD THAT SUCH COMPARABLES SHOULD BE SELECTED WHICH ARE PROVIDING NON-RISK BEA RING BUSINESS SUPPORT SERVICES. IF ABOVE MENTIONED HIGH END TECHNICAL SERVICES COMP ARABLES ARE EXCLUDED FROM THE FINAL LIST OF COMPARABLES, THEN, AVERAGE PLI OF THE REMAINING COMPARABLES SHALL BE 6.36%. ITA NO.658/DEL/2017 10 11. SO FAR AS THE INCLUSION OF CYBER MEDIA RESEARCH & SERVICES IN THE FINAL LIST OF COMPARABLES IS CONCERNED, HE SUBMITTED THAT THE TPO DID NOT INCLUDE THE ABOVE COMPARABLE IN THE FINAL LIST OF COMPARABLES ALTHOUG H IT PASSES ALL THE FILTERS OF TPOS SEARCH PROCESS. HE SUBMITTED THAT SINCE THIS COMPARABLE IS FUNCTIONALLY SIMILAR TO THAT OF THE ASSESSEE AND WAS TAKEN AS TH E ASSESSEES COMPARABLE IN THE PRECEDING TWO YEARS, THEREFORE, THIS COMPARABLE SHO ULD BE INCLUDED IN THE FINAL LIST OF COMPARABLES. REFERRING TO THE DECISION OF THE M UMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SIEMENS TECHNOLOGY SERVICES PVT. LTD. [ TS-220-ITAT-2016 (MUM)- TP], HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DEC ISION HAS HELD THAT IF A COMPANY WAS A GOOD COMPARABLE IN EARLIER YEARS BECAUSE OF F UNCTIONAL SIMILARITY, IT SHOULD HAVE BEEN INCLUDED FOR ARRIVING AT THE AVERAGE PLI OF COMPARABLES. SO FAR AS INCLUSION OF CYBER MEDIA RESEARCH & SERVICES IS CON CERNED, HE SUBMITTED THAT THE ASSESSEE HAD FILED OBJECTIONS BEFORE THE TPO FOR NO T INCLUDING THE ABOVE COMPARABLE. HOWEVER, THE TPO HAD EXCLUDED THIS COM PARABLE MERELY BECAUSE ITS TURNOVER DECREASED FROM THE PREVIOUS YEAR FROM RS.1 2.70 CRORE TO RS.3.33 CRORE IN THE YEAR UNDER CONSIDERATION AND ALLEGED ABNORMAL R EDUCTION IN REVENUE. HE SUBMITTED THAT THIS OBSERVATION OF THE TPO IS WITHO UT ANY BASIS SINCE IN SUBSEQUENT YEAR IT AGAIN INCREASED TO 5.61 CRORE. HE SUBMITTE D THAT THE TPO HAD APPLIED TURNOVER CRITERIA FOR OBTAINING COMPARABLES OF ABOV E RS.1 CRORE AS PER PAGE 12 OF THE TPOS ORDER. THEREFORE, THE TPO CANNOT ARTIFIC IALLY REJECT THIS CRITERIA AND APPLY ANY TURNOVER TEST FOR REJECTING THIS COMPANY. HE SUBMITTED THAT THE DRP IN PARA 10 OF THE ORDER HAS UPHELD THE EXCLUSION OF TH IS COMPARABLE FOR BEING ITA NO.658/DEL/2017 11 FUNCTIONALLY DIFFERENT. SINCE THERE IS NO ABNORMAL BUSINESS CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION SO AS TO WARRANT EXCLUSION OF CYBER MEDIA RESEARCH & SERVICES FROM THE FINAL LIST OF COMPARABLES WHEN IT WAS A GOOD COMPARABLE IN THE LAST TWO YEARS, THEREFORE, HE SUBMITTED THAT THIS C OMPANY SHOULD BE INCLUDED IN THE FINAL LIST OF COMPARABLES. REFERRING TO THE DECISI ON OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TREND MICRO INDIA PVT. LTD. [TS-556-ITAT-2015 (DEL)- TP], HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DEC ISION HAS HELD THAT THE REVENUE CANNOT CHALLENGE OWN COMPARABLES ABSENT CIT(A)/DRP DIRECTIONS. 12. SO FAR AS THE EXCLUSION OF ASSESSEES COMPARABL ES, NAMELY OFFICE CARE AND VATIKA MARKETING FROM THE FINAL LIST OF COMPARABLES ARE CONCERNED, HE SUBMITTED THAT BOTH THE COMPANIES ARE FUNCTIONALLY SIMILAR T O THE ASSESSEES SUPPORT SERVICES SEGMENT. SO FAR AS OFFICE CARE SERVICES LTD. IS CO NCERNED, HE SUBMITTED THAT THE COMPANY IS ENGAGED IN PROVIDING HOUSEKEEPING SUPPOR T SERVICES FOR OFFICES AND HOMES, ELECTRICAL MAINTENANCE WORK, CIVIL MANAGEMEN T, MANPOWER OF SUPPORT SERVICES AND OTHER ALLIED SERVICES. SINCE THIS COM PANY PERFORMS THE SAME KIND OF SUPPORT FUNCTIONS AS THE FUNCTIONS PERFORMED BY THE ASSESSEE, THEREFORE, THIS COMPANY SHOULD BE INCLUDED IN THE FINAL LIST OF COM PARABLES. FURTHER, THE COMPANY DOES NOT FAIL 75% SERVICE INCOME FILTER AS ALLEGED BY THE TPO AT PAGE 9 OF HIS ORDER. REFERRING TO THE PROFITS & LOSS ACCOUNT OF THE ABOVE COMPANY, HE SUBMITTED THAT THERE IS REVENUE OF RS.7.16 CRORE AN D NO REVENUE FROM TRADING OR FINISHED GOODS SALE AS THERE IS NO OR NEGLIGIBLE CO ST OF GOODS AND NIL INVENTORY. ITA NO.658/DEL/2017 12 12.1 SO FAR AS VATIKA MARKETING LTD. IS CONCERNED, HE SUBMITTED THAT THE COMPANY WAS SET UP BY ASHIANA HOUSING GROUP AND IS ENGAGED IN PROVIDING BUILDING REPAIR AND MAINTENANCE SERVICES AND PERFOR MS THE SIMILAR KIND OF SUPPORT FUNCTIONS AS THE FUNCTIONS PERFORMED BY THE ASSESSE E. THIS COMPANY DOES NOT FAIL 75% SERVICE INCOME FILTER AS ALLEGED BY THE TPO AT PAGE 10 OF HIS ORDER. HE SUBMITTED THAT OUT OF TOTAL REVENUE OF RS.11.13 CRO RE, AN AMOUNT OF RS.9.85 CRORE IS FROM SERVICE INCOME AND THERE IS NO REVENUE FROM TR ADING OR FINISHED GOODS SALE AS THERE IS NO OR NEGLIGIBLE COST OF GOODS AND NIL INV ENTORY. ACCORDINGLY, HE SUBMITTED THAT THIS COMPANY SHOULD BE INCLUDED IN T HE FINAL LIST OF COMPARABLES. HE SUBMITTED THAT THE LD. DRP UPHELD THE EXCLUSION OF THE ABOVE TWO COMPARABLES IN AN AD HOC MANNER BY JUST REFERRING TO THE REASONING GIVEN BY THE TPO AND WITHOUT GIVING ANY COGENT REASON FOR NOT APPRECIATI NG THE SUBMISSIONS OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT BOTH THE C OMPANIES BE INCLUDED IN THE FINAL LIST OF COMPARABLES. 13. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORT ED THE ORDER OF THE A.O./TPO/DRP. SO FAR AS THE VARIOUS COMPARABLES WH ICH HAVE BEEN TESTED BY THE TRIBUNAL IN ASSESSEES CASE IN THE PRECEDING YEARS ARE CONCERNED, SHE RELIED ON THE ORDER OF THE A.O./TPO/DRP. SO FAR AS THE NEW COMPA RABLES ARE CONCERNED, SHE SUBMITTED THAT THE FAR ANALYSIS HAS NOT BEEN CONSID ERED BY THE A.O./TPO/DRP AND, THEREFORE, MERELY ON THE BASIS OF THE SUBMISSI ONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE, THESE COMPANIES CANNOT BE INCLUDED/EX CLUDED. SHE SUBMITTED THAT SHE ITA NO.658/DEL/2017 13 HAS NO OBJECTION IF THESE COMPARABLES ARE RESTORED TO THE FILE OF TPO/A.O. FOR VERIFICATION OF THE FUNCTIONALITY TEST AND THE FAR ANALYSIS. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. SO FAR AS THE COMPANIES APTICO LTD. AND KITCO LTD. ARE CONCER NED, WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE, VIDE ITA NO.6336/DEL/2015, ORD ER DATED 22 ND APRIL, 2016 FOR ASSESSMENT YEAR 2011-12, HAS DIRECTED THE TPO FOR E XCLUSION OF THE COMPANIES HOLDING THAT THEY ARE FUNCTIONALLY DIFFERENT AND TH EY ARE NOT COMPARABLE WITH THAT OF THE ASSESSEE. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL AT PARA 15-16 OF THE ORDER READS AS UNDER:- 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS. COMPARABLE NO.1 APITCO LTD. AND NO 2. KITCO LTD. ARE SUBMITTED TO F UNCTIONALLY NOT COMPARABLE AND FURTHER IT IS SUBMITTED THAT THEY HAVE BEEN CON SIDERED BY THE COORDINATE BENCH IN THE ORDER OF THE ASSESSEE FOR A.Y. 2010-11 IN ASSESSEE'S OWN CASE AS UNDER:- '36. THE SECOND COMPARABLE, INCLUSION OF WHICH IS D ISPUTED BY THE ASSESSEE, IS APITCO LTD. IN THE SYNOPSIS FILED BY T HE ASSESSEE IT IS MENTIONED THAT THE SERVICES PROVIDED INCLUDE BUT NO T LIMITED TO THE DOMAINS OF PROJECT REPORT PREPARATION, TECHNO ECONO MIC STUDIES, FEASIBILITY STUDIES, MICRO ENTERPRISE DEVELOPMENT, SKILL DEVELOPMENT, PROJECT MANAGEMENT CONSULTING, INDUSTR IAL CLUSTER DEVELOPMENT, ENVIRONMENTAL MANAGEMENT CONSULTING, E NERGY MANAGEMENT CONSULTING, MARKET & SOCIAL RESEARCH AND ASSET RECONSTRUCTION MANAGEMENT SERVICES. THIS COMPANY WA S PROMOTED JOINTLY BY ALL INDIA FINANCIAL INSTITUTIONS (IDBI, IFCI, ICICI), STATE INDUSTRY DEVELOPMENT CORPORATIONS (APIDC, APSFC) AN D COMMERCIAL BANKS (ANDHRA BANK, INDIAN BANK, STATE B ANK OF INDIA, SYNDICATE BANK), 37. FROM A BARE PERUSAL OF THE SERVICES RENDERED BY APITCO LTD. IT IS CLEAR THAT IT IS IMPARTING CONSULTANCY IN ENTIRELY DIFFERENT FIELD AND IS NOT COMPARABLE TO THE FUNCTIONS PERFORMED BY DIF FERENT SERVICE SEGMENTS OF ASSESSEE. WE, THEREFORE, DIRECTION FOR EXCLUSION OF THIS COMPARABLE FROM THE LIST OF COMPARABLES. ITA NO.658/DEL/2017 14 KITCOLTD. 38. THE FUNCTIONAL PROFILE OF THIS COMPANY, AS GIVE N IN THE SYNOPSIS FILED BY THE ASSESSEE, IS AS UNDER: '1. KITCO, THE FIRST TECHNICAL CONSULTANCY ORGANIZA TION(TCO) IN INDIA, WAS ESTABLISHED IN 1972 BY INDUSTRIAL DEVELO PMENT BANK OF INDIA, OTHER NATIONAL AND STATE LEVEL FINANCIAL INS TITUTIONS, GOVT. OF KERALA AND 7 PUBLIC SECTOR BANKS FOR RENDERING SERV ICES TO ENTREPRENEURS, GOVT. DEPARTMENTAL PSUS, LOCAL BODIE S, ETC. PRESENTLY, SMALL INDUSTRIES DEVELOPMENT BANK OF IND IA (SIDBI) IS THE PRIME SHAREHOLDER WITH 49% SHARES OF THE COMPAN Y. 2. THE AIM OF SETTING UP OF TCO, WHICH HAD THE BLES SING OF GOVT. OF INDIA AND THE RESERVE BANK OF INDIA, WAS TO PROVIDE PROFESSIONAL TECHNICAL CONSULTANCY ASSISTANCE TO BANKS BY APPRAI SAL OF PROJECTS FOR PRIORITY SECTOR LENDING AND TO ENTREPRENEURS IN THE 5MB SECTOR BY WAY OF PREPARATION OF PROJECT REPORTS & MARKET S TUDIES AND CONDUCTING TRAINING PROGRAMMES FOR ENTREPRENEURSHIP DEVELOPMENT. SUBSEQUENTLY SIMILAR TCOS WERE SET UP IN ALMOST ALL THE STATES WITH ONE OF THE NATIONAL FINANCIAL INSTITUTIONS (IDBI, I FCI OR ICICI) AS THE PRIME SHAREHOLDER. 3. KITCO HAS SUCCESSFULLY IMPLEMENTED PROJECTS LIKE COCHIN INTERNATIONAL AIRPORT LTD., TITANIUM SPONGE PROJECT , INTERNATIONAL MARINA, COCHIN SPECIAL ECONOMIC ZONE, ETC AND PRESE NTLY IMPLEMENTING A MULTIMODAL MOBILITY HUB AT COCHIN, A LL OF WHICH ARE FIRST OF ITS KIND IN THE COUNTRY IN THEIR OWN R ESPECT. KITCO HAS SUCCESSFULLY COMPLETED THE PHASE-1 OF CIAL GOLF COU RSE & COUNTRY CLUB AND GHALLAH WENTWORTH GOLF COURSE AT M USCAT, SULTANATE OF OMAN, THEREBY ESTABLISHING ITSELF IN A N AREA, WHICH WAS CONSIDERED TO BE THE FORTE OF EUROPEAN CONSULTANTS. THE PRESTIGIOUS OVERSEAS ASSIGNMENTS KITCO SO FAR HAS COMPLETED INC LUDE THE TECHNICAL EVALUATION OF ELECTRICAL POWER DISTRIBUTI ON NETWORK AT KING ABDUL AZIZ INTERNATIONAL AIRPORT, JEDDAH. 4. ALL ITS CLIENTS ARE EITHER CENTRAL GOVERNMENT, S TATE GOVERNMENT, PSU ETC. SNAPSHOT ENCLOSED. 5. IT IS WORKING IN DIVISIONS LIKE INFRASTRUCTURE, TOURISM, AVIATION, IT SERVICES, HRD, FINANCIAL SERVICES ETC. WHICH ARE DI SSIMILAR TO THE FUNCTIONAL PROFILE OF THE ASSESSEE COMPANY. SNAPSHO T ENCLOSED. 39. FROM THE ABOVE SUBMISSIONS IT IS EVIDENT THAT T HIS COMPARABLE IS NOT FUNCTIONALLY COMPARABLE WITH THE ASSESSEE BECAU SE IT IS THE NATURE OF SERVICES RENDERED AND NOT PER SE RENDERIN G OF SERVICES IS RELEVANT IN ACCEPTING OR REJECTING A COMPANY AS COM PARABLE. ITA NO.658/DEL/2017 15 THEREFORE, WE DIRECT EXCLUSION OF THIS COMPARABLE F ROM THE LIST OF COMPARABLES.' 16. IN VIEW OF ABOVE FINDING OF COORDINATE BENCH FO R EXCLUSION OF APTICO AND KITCO LTD. HOLDING THAT THEY ARE FUNCTIONALLY DIFFE RENT ROLLS ROYCE INDIA PRIVATE LIMITED V DCIT ITA NO 6636 DEL 2015 A.Y. 20 11-12 AND ARE NOT COMPARABLE WITH THE ASSESSEE. THEREFORE RESPECTFULL Y FOLLOWING THE DECISION OF COORDINATE BENCH WE DIRECT TO EXCLUDE BOTH THESE CO MPARABLES ACCORDINGLY. 15. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE DIRECT THE A.O./TPO EXCLUDE THE ABOVE TWO COMPANIES FROM THE L IST OF COMPARABLES. 15.1 SO FAR AS INFO EDGE (INDIA) PVT. LTD. IS CONCE RNED, WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING AS SESSMENT YEAR AT PARA 21 OF THE ORDER HAS DISCUSSED THE ISSUE AND HAS DIRECTED THE TPO FOR EXCLUSION OF THIS COMPARABLE. THE RELEVANT OBSERVATION OF THE TRIBUN AL AT PARA 21 READS AS UNDER:- 21. REGARDING INFOEDGE INDIA PVT. LTD WE ARE OF TH E VIEW THAT THIS COMPANY HAS BEEN INCLUDED BY THE TPO HOLDING THAT IT IS FUN CTIONALLY COMPARABLE. ASSESSEE CONTENDED BEFORE THE LD. TPO AS WELL AS DR P THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE IN VIEW OF IT ENGAGED I N MANAGEMENT OF ONLINE PORTALS AND ALSO HAS MAJOR SOURCES OF REVENUE AS AD VERTISEMENT INCOME. BOTH THE LOWER AUTHORITIES REJECTED THE CONTENTION OF TH E ASSESSEE. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. IT IS APPARENT TH AT THE COMPARABLE SELECTED BY TPO IS ENGAGED IN ONLINE PORTAL ACTIVITIES SUCH AS EMPLOYMENT WEBSITE, MATRIMONIAL WEBSITE AND ITS MAJOR REVENUE IS ADVERT ISEMENT AND SUBSCRIPTIONS. IT HAS DIVERSIFIED SERVICES SUCH AS RECRUITMENT REL ATED, REAL ESTATE RELATED, MATRIMONIAL RELATED SERVICES AND OWNS SIGNIFICANT R OLLS ROYCE INDIA PRIVATE LIMITED V DCIT ITA NO 6636 DEL 2015 A.Y. 2011-12 IN TANGIBLES/WEBSITES SUCH AS NAUKRI.COM, 99 ACRE.COM ETC.THEREFORE THIS COMPANY IS FUNCTIONALLY DIFFERENT AS IT IS PROVIDING AN ADVERTISEMENT SPACE AS WELL AS ONLINE PORTAL BASED ON SUBSCRIPTION BY THE BUYER AND SELLER OF TH E SERVICES COMPARED TO SERVICES PROVIDED BY THE ASSESSEE OF MARKETING SUPP ORT SERVICES . IN VIEW OF THIS WE DIRECT LD. TPO FOR EXCLUSION OF THIS COMPAR ABLE. ITA NO.658/DEL/2017 16 16. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE AND IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE DIRECT THE TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPAR ABLES. 17. SO FAR AS TCE CONSULTING ENGINEERS LTD., IS CON CERNED, WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AT PARA 17 OF THE ORDER HAS DISCUSSED THE ISSUE AND HA S DIRECTED THE A.O./TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF COMPARABLES. THE RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER:- 17. REGARDING TCE CONSULTING ENGINEERS LTD. IT IS SUBMITTED THAT IT IS ALSO ENGAGED IN PROVIDING HIGHLY TECHNICAL SERVICES. THE PROFILE SUBMITTED BY THE ASSESSEE SHOWS THAT IT HAS SUCCESSFULLY MANAGED COM PLEX ENGINEERING PROJECTS ACROSS THE INFRASTRUCTURE SPECTRUM AND ALSO ASSOCIA TED WITH PRESTIGIOUS URBAN INFRASTRUCTURE FACILITIES SUCH AS AIRPORTS, RAILWAY AND AEROTROPOLIS ENGINEERING CONSULTING PROJECTS. THEREFORE IT IS AP PARENT THAT THIS COMPANY IS ENGAGED IN PROVIDING HIGH END ENGINEERING CONSULTIN G SERVICES WHICH IS NOT COMPARABLE WITH THE FUNCTIONAL ANALYSIS OF THE ASSE SSEE. THEREFORE WE DIRECT TO EXCLUDE THIS COMPARABLE. 18. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE DIRECT THE A.O./TPO TO EXCLUDE THIS COMPANY FROM THE LIST OF C OMPARABLES. 19. SO FAR AS HSCC (INDIA) LTD. IS CONCERNED, WE FI ND THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING A SSESSMENT YEAR AT PARA 24 OF THE ORDER HAS DISCUSSED THE ISSUE AND RESTORED THE ISSUE TO THE FILE OF THE TPO WITH CERTAIN DIRECTIONS BY OBSERVING AS UNDER:- ITA NO.658/DEL/2017 17 24. THE NEXT COMPARABLE IS HSCC INDIA LTD. WHICH H AS BEEN INCLUDED BY LD. TPO BASED ON PAGE NO.7 OF THE ANNUAL REPORT OF THAT COMPANY. HOWEVER, ON READING OF THE ORDER OF TPO WE DO NOT FIND ANY ARGU MENT OF THE ASSESSEE REGARDING EXCLUSION OF THIS COMPARABLE. ON READING OF THE ORDER OF THE DRP ALSO THIS COMPARABLE WAS NOT OBJECTED TO ITS INCLUS ION BY TPO. ONLY OBJECTION WAS RAISED REGARDING CORRECTION OF THE MARGINS ANDT HIS GRIEVANCE OF THE ASSESSEE IS RESOLVED BY LD. DRP. IN VIEW OF THIS RE SPECTFULLY FOLLOWING THE DECISION OF HONOURABLE SPECIAL BENCH IN DEPUTY COMM ISSIONER OF INCOME-TAX V QUARK SYSTEMS (P.) LTD. 2010] 38 SOT 307 (CHD.) ( SB) WE REMIT THIS COMPARABLE BACK TO THE FILE OF THE LD. TPO FOR EXCL USION OR RETENTION OF THIS COMPARABLE AS PLEA FOR ITS EXCLUSION HAS BEEN RAISE D BEFORE US FOR THE FIRST TIME. 19.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TR IBUNAL IN ASSESSEES OWN CASE, WE RESTORE THIS ISSUE TO THE FILE OF THE TPO/ A.O. FOR FRESH ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE DIRECTION OF THE TRIBUNAL . 20. SO FAR AS INCLUSION OF CYBER MEDIA RESEARCH & SERVICES IN THE FINAL LIST OF COMPARABLES IS CONCERNED, IT IS THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT IT PASSES ALL THE FILTERS ADOPTED BY THE TPO. IT HAS ALSO BEEN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THIS CO MPANY IS FUNCTIONALLY SIMILAR AND WAS TAKEN AS ASSESSEES COMPARABLE IN PREVIOUS TWO YEARS I.E., 2010-11 AND 2011- 12, THEREFORE, THIS BEING A GOOD COMPARABLE IN THE EARLIER YEARS BECAUSE OF FUNCTIONAL SIMILARITY, IT SHOULD BE INCLUDED IN THE LIST OF COMPARABLES. IN VIEW OF THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O./TPO WITH A DIRECTION TO VERIFY AS TO WHETHER THE ABOVE COMPANY PASSES THE FILTERS ADOPTED BY THE TPO HIMSELF AND I N CASE IT PASSES ALL THE FILTERS ADOPTED BY THE TPO, THEN, THE TPO/A.O. IS DIRECTED TO INCLUDE THIS COMPANY AS A COMPARABLE FOR ARRIVING AT THE AVERAGE PLI OF THE C OMPARABLES. ITA NO.658/DEL/2017 18 21. SO FAR AS THE COMPANY CYBER MEDIA RESEARCH & SE RVICES IS CONCERNED, WE FIND THE TPO EXCLUDED THIS COMPANY MERELY BECAUSE I TS TURNOVER DECREASED FROM RS.12.70 CRORE THE PREVIOUS YEAR TO RS.3.33 CRORE I N THE YEAR UNDER CONSIDERATION. IT IS THE SUBMISSION OF THE LD. COUNSEL THAT IN SUB SEQUENT YEAR THE TURNOVER HAS GONE UP TO RS.5.61 CRORE. FURTHER, THE TPO HAS APPLIED THE TURNOVER CRITERIA OF MORE THAN RS.1 CRORE AND, THEREFORE, IT IS THE SUBMISSIO N OF THE LD. COUNSEL THAT THE TPO SHOULD NOT HAVE ARTIFICIALLY REJECTED THIS CRITERIA AND APPLIED ANOTHER TURNOVER TEST FOR REJECTING THIS COMPARABLE. WE FIND FORCE IN TH E ABOVE ARGUMENT OF THE LD. COUNSEL. HOWEVER, THE SUBMISSION OF THE LD. COUNSE L THAT THE TURNOVER OF THE ABOVE COMPARABLE COMPANY HAS GONE UP IN THE SUBSEQUENT YE AR AND THAT IT PASSES ALL THE FILTERS OF THE TPO NEEDS VERIFICATION AT THE LEVEL OF A.O./TPO. WE, THEREFORE, REMIT THIS ISSUE TO THE FILE OF A.O./TPO WITH A DIRECTION TO VERIFY AS TO WHETHER THE TURNOVER HAS GONE UP TO RS.5.61 CRORE IN THE SUBSEQ UENT YEAR AS AGAINST RS.3.33 CRORE IN THE CURRENT YEAR AND, IF THE SAME IS FOUN D TO BE CORRECT, THEN, THIS COMPANY SHOULD BE INCLUDED IN THE LIST OF COMPARABLES. 22. SO FAR AS OFFICE CARE SERVICES LTD. IS CONCERNE D, IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS COMPANY IS E NGAGED IN PROVIDING HOUSE KEEPING SUPPORT SERVICES FOR OFFICES AND HOMES, ELE CTRICAL MAINTENANCE WORK, CIVIL MANAGEMENT, MANPOWER SUPPORT SERVICES AND OTHER ALL IED SERVICES. THUS, IT IS HIS SUBMISSION THAT THIS COMPANY PERFORMS THE SIMILAR K IND OF SUPPORT FUNCTIONS AS THE FUNCTIONS PERFORMED BY THE ASSESSEE AND IT DOES NOT FAIL 75% SERVICE INCOME FILTER. ITA NO.658/DEL/2017 19 IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE THAT THIS COMPANY HAS EARNED THE REVENUE OF RS.7.16 CRORE AND NO REVENUE FROM TR ADING OR FINISHED GOODS SALE. WE, THEREFORE, DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE TPO WITH A DIRECTION TO VERIFY THAT THIS COMPANY DOES NOT FAIL THE 75% SERVICE INCOME FILTER AND PERFORMS THE SIMILAR KIND OF SUPPORT FUNCTIONS AS PERFORMED BY THE ASSESSEE COMPANY. IN CASE THE SAME IS FOUND TO BE CORRECT, THEN, THE A.O./TPO IS DIRECTED TO INCLUDE THIS COMPANY IN THE LIST OF COMPARABLES. 23. SO FAR AS VATIKA MARKETING LTD. IS CONCERNED, H ERE ALSO, IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IT IS ENGAGED IN PROVIDING BUILDING REPAIR & MAINTENANCE SERVICES AND PERFORMS THE SIMILAR KIND OF SUPPORT FUNCTIONS AS THE FUNCTIONS PERFORMED BY THE ASSESSE E AND DOES NOT FAIL 75% SERVICE INCOME FILTER. ACCORDING TO THE LD. COUNSEL, OUT O F THE TOTAL REVENUE OF RS.11.13 CRORE, AN AMOUNT OF RS.9.85 CRORE IS FROM SERVICE I NCOME AND THERE IS NO REVENUE FROM TRADING OR FINISHED GOODS SALE AS THERE IS NO OR NEGLIGIBLE COST OF GOODS AND NIL INVENTORY. WE, THEREFORE, DEEM IT PROPER TO RE STORE THIS ISSUE TO THE FILE OF THE A.O./TPO WITH A DIRECTION TO VERIFY THAT IT DOES NO T FAIL 75% SERVICE INCOME FILTER AS ALLEGED BY HIM IN THE ORDER AND ALSO TO VERIFY A S TO WHETHER THE ABOVE COMPANIES PERFORM SIMILAR KIND OF SUPPORT FUNCTIONS AS PERFOR MED BY THE ASSESSEE COMPANY AND IF FOUND CORRECT, THEN TO RETAIN THIS COMPANY I N THE FINAL LIST OF COMPARABLES. GROUND OF APPEAL NO.5 TO 7 ARE ACCORDINGLY ALLOWED IN THE TERMS INDICATED ABOVE. ITA NO.658/DEL/2017 20 24. GROUND OF APPEAL NO.8 WAS NOT PRESSED BY THE AS SESSEE FOR WHICH LD. DR HAS NO OBJECTION. ACCORDINGLY THE SAME IS DISMISSE D. 25. THE CORPORATE TAX GROUNDS AND OTHER GROUNDS ARE AS UNDER:- CORPORATE TAX 10. THAT THE LD. DRP/AO HAS ERRED IN LAW IN CONFIR MING THE ADDITION ON ACCOUNT OF UNBILLED REVENUE WRITE OFF AND SECURITY DEPOSIT WRITE OFF OF RS. 1,15,59,310 & RS. 12,98,441/- RESPECTIVELY. 11. THAT THE HONBLE DRP HAS ERRED IN LAW AND ON F ACTS IN HOLDING THAT UNBILLED REVENUE WRITE OFF SHALL BE ENTITLED TO BE ALLOWED ONLY WHEN FOUND TO BE CREDITED AGAIN IN BOOKS OF THE ASSESSEE IN SUBSE QUENT YEAR. 12. THAT THE HONBLE DRP HAS ERRED IN LAW IN NOT A PPRECIATING THAT THE CONDITION OF SEC 36(L)(VII) READ WITH SEC 36(2) HAS ALREADY BEEN COMPLIED WITH TO CLAIM THE ALLOWANCE OF UNBILLED REVENUE WRITE OF F. 13. THAT THE HONBLE DRP AND CONSEQUENTLY LD. A O HAS GROSSLY ERRED IN LAW AND ON FACTS, IN THE CIRCUMSTANCES OF THE APPEL LANTS CASE IN CONFIRMING THE ADDITION OF SECURITY DEPOSIT WRITTEN OFF AMOUNTING TO RS. 12,98,441/- MERELY ON THE BASIS OF ASSUMPTIONS, SURMISES AND CONJECTUR ES. 14. THAT THE HONBLE DRP HAS ERRED IN LAW IN HOLDI NG THAT THE CLAIM OF SECURITY DEPOSIT WRITE OFF SHALL BE ALLOWED ONLY IF IT WAS RECEIVED AGAINST CONTRACT EARNED BY THE ASSESSEE IN THE COURSE OF IT S BUSINESS. COMMON GROUNDS 15. THAT THE PENALTY PROCEEDINGS INITIATED U/S SEC 271(L)(C ) ARE ON WHOLLY ILLEGAL AND UNTENABLE GROUNDS SINCE THERE WA S NO CONCEALMENT OF ANY INCOME NOR SUBMISSION OF INACCURATE PARTICULARS OF INCOME, NOR ANY DEFAULT ACCORDING TO LAW BY THE ASSESSEE. 16. THAT THE INTEREST CHARGED U/S SEC 234B AND 234 C OF THE ACT IS ON WHOLLY ILLEGAL AND UNTENABLE GROUNDS AND IS PRAYED NOT TO BE UPHELD. _ 17. THAT EACH GROUND IS INDEPENDENT OF AND WITHOUT PREJUDICE TO THE OTHER GROUNDS RAISED HEREIN. ITA NO.658/DEL/2017 21 26. GROUND NOS. 13 AND 14 WERE NOT PRESSED BY THE L D. COUNSEL DUE TO SMALLNESS OF THE AMOUNT FOR WHICH LD. DR HAS NO OBJ ECTION. ACCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED. GROUND NOS.15 AND 16 ARE EITHER PREMATURE OR CONSEQUENTIAL IN NATURE. ACCORDINGLY, THE SAME ARE DISMISSED. GROUND NO.10-17 BEING GENERAL IN NATURE ARE DISMISSED. 27. SO FAR AS GROUND NO.11 TO 12 ARE CONCERNED, THE Y RELATE TO THE ADDITION ON ACCOUNT OF UNBILLED REVENUE WRITTEN OFF AND SECURIT Y WRITTEN OFF OF RS.1,15,59,310/- 28. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING TH E ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIM ED UNBILLED REVENUE WRITTEN OFF TO THE EXTENT OF RS.1,15,59,310/- U/S 36(2)(VII) OF THE ACT. ON BEING QUESTIONED BY THE ASSESSING OFFICER, THE ASSESSEE REPLIED AS UNDE R:- IN THIS RESPECT, WE WOULD LIKE TO SUBMIT BEFORE YOU R GOOD SELF THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE COMPA NY WRITTEN OFF UNBILLED REVENUE OF RS. 1,15,59,310/- DURING THE RELEVANT YE AR. THIS REVENUE HAS ALREADY ACCRUED TO THE ASSESSEE COMPANY EARLIER YEA RS, SO THE SAME HAD ALREADY BEEN OFFERED TO TAXATION IN EARLIER YEARS. SO, IT I S ALLOWABLE .FURTHER RELIANCE IS PLACED ON THE CASE OF M/S NORTEL NETWORKS INDIA PVT . LTD. ITA NO. 1938/DEL/2009. RELYING ON THE ABOVE FACTS AND THE CASE LAWS, WE H EREBY SUBMIT BEFORE YOUR HONOUR THAT THE ASSESSEE CASE IS VERY M UCH IDENTICAL TO THE CASE NORTEL NETWORKS INDIA PVT. LTD. AS MENTIONED SUPRA THAT IS ASSESSEE COMPANY CLAIMED THE AMOUNT OF UNBILLED REVENUE WRIT TEN OFF HENCE IT SHOULD BE ALLOWED. 29. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT T HE SUBMISSIONS MADE BY THE ASSESSEE AND MADE ADDITION OF RS.1,15,59,310/-. THE ASSESSEE APPROACHED THE DRP AND THE DRP RESTORED THE ISSUE TO THE FILE OF T HE ASSESSING OFFICER WITH ITA NO.658/DEL/2017 22 CERTAIN DIRECTIONS. SUBSEQUENTLY, THE ASSESSING OF FICER PASSED THE ORDER RETAINING THE SAME ADDITION BY OBSERVING AS UNDER:- 6.5 I HAVE CONSIDERED THE SUBMISSION AND ACCOMPANY ING DOCUMENTS. HOWEVER, UPON A PERUSAL OF THE SUBMISSION OF THE AS SESSEE, IT IS NOT CLEAR WHETHER THE AMOUNT ACTUALLY BOOKED AS REVENUE OF RS . 38.98 CR. FROM M/S ROLLS ROYCE INTERNATIONAL LTD. DURING F.Y 2011-12 I NCLUDES THE SUM OF RS. 1,15,59,310/- BOOKED AS UNBILLED-REVENUE DURING F.Y . 2010-11. AS PER DIRECTIONS OF DRP, THE CLAIM OF ASSESSEE SHALL BE A LLOWED ONLY IF A CONTRA ENTRY OF RS.1,15,59,310/- IS FOUND CREDITED AGAIN DURING THE YEAR UNDER CONSIDERATION. SINCE, THE CONTRA REVERSAL ENTRY IS ALLOWABLE SUBJECT TO THE SAME AMOUNT BEING CREDITED DURING FY 201-12, THE CLAIM O F THE ASSESSEE IS NOT ALLOWED IN THE ABSENCE OF CREDIT AMOUNT BOOKED IN T HE ACCOUNTS. IN VIEW OF THIS, THE AMOUNT OF RS. 1,15,59,310/- ON ACCOUNT OF UNBILLED REVENUE WRITTEN OFF SHALL BE DISALLOWED. SINCE, I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME, PENALTY PROCE EDINGS UNDER SECTION 271(1)(C) ARE BEING INITIATED SEPARATELY. 30. AGGRIEVED WITH SUCH ORDER OF THE A.O./TPO/DRP, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 31. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DUE TO CERTAIN SMALL ERROR, THE ASSESSING OFFICER HAS REPEATED THE ADDITION, HO WEVER, THE FUNDAMENTAL PRINCIPLE IS SAME AND SINCE THE ASSESSEE IN THE PRE CEDING YEAR HAS OFFERED THE AMOUNT TO TAXATION AND IN THE CURRENT YEAR IT HAS R EVERSED THE SAME, THEREFORE, THIS BEING A CONTRA ENTRY, THE ADDITION IS UNCALLED FOR. HE ACCORDINGLY SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER SHOULD B E DELETED. 32. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT T HE ASSESSEE HAS FAILED TO SUBSTANTIATE WITH EVIDENCE THAT THE AMOUNT BOOKED A S REVENUE OF RS.38.98 CRORES FROM M/S ROLLS ROYCE INTERNATIONAL LTD. FOR F.Y. 20 11-12 INCLUDES THE SUM OF RS.1,15,59,310/- BOOKED AS UNBILLED REVENUE DURING F.Y. 2010-11. HE SUBMITTED ITA NO.658/DEL/2017 23 THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SA ME BEFORE THE ASSESSING OFFICER AFTER THE DIRECTION OF THE DRP, THEREFORE, THE ORDE R OF THE ASSESSING OFFICER SHOULD BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE SHOULD BE DISMISSED. 33. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ASSESSING OFFICER, IN THE INSTANT CASE, MADE AN ADDITION OF RS.1,15,59,310/- ON ACCOUNT OF UNBILLED REVENUE WRITTEN OFF ON THE GROUND THAT THE ASSESSEE COULD N OT EXPLAIN PROPERLY AS TO WHETHER THE AMOUNT ACTUALLY BOOKED AS REVENUE OF RS.38.98 C RORE FROM M/S ROLLS ROYCE INTERNATIONAL LTD. DURING F.Y. 2011-12 INCLUDES THE SUM OF RS.1,15,59,310/- BOOKED AS UNBILLED REVENUE DURING F.Y. 2010-11. I T IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DUE TO CERTAIN SMALL ARITHMETICAL ERROR THERE IS SOME MINOR DIFFERENCE IN THE FIGURES SHOWN IN 2012-13. HOWEVER, IT IS HIS SUBMISSION THAT GIVEN AN OPPORTUNITY, THE ASSESSEE IS IN A POS ITION TO RECONCILE THE SAME BEFORE THE A.O/TPO THAT THESE ARE MERE CONTRA ENTRIES AND NO ADDITION IS CALLED FOR. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE T HE ISSUE TO THE FILE OF THE A.O./TPO WITH A DIRECTION TO GRANT ONE MORE OPPORTUNITY TO T HE ASSESSEE TO SUBSTANTIATE ITS CASE. THE A.O./TPO SHALL DECIDE THE ISSUE AS PER F ACT AND LAW, AFTER GIVING DUE OPPORTUNITY OF BEING HEARD. WE HOLD AND DIRECT ACC ORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATIST ICAL PURPOSES. ITA NO.658/DEL/2017 24 34. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 3 0.10.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: 30 TH OCTOBER, 2019 DK COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI