M/s Rio Tinto India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6854/DEL/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4421 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 30-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIDHI SHARMA
• Keywords: Capital asset; Transfer pricing; Opportunity of being heard; International transaction; Initiation of penalty proceedings; Tax effect; Capital expenditure; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI !' !' !' !' #$'% #$'% #$'% #$'% &'( &'( &'( &'( )* ) )* ) )* ) )* ) + + + + BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTAN T MEMBER ' ' ' ', ,, , / ITA NO.1850/DEL/2015 (( (( (( (( / ASSESSMENT YEAR: 2010-11 AND ' ' ' ', ,, , / ITA NO.6854/DEL/2015 (( (( (( (( / ASSESSMENT YEAR: 2011-12 M/S. RIO TINTO INDIA PVT. LTD., APARTMENT NO. 100, A/5, GROUND FLOOR, THE CAPITAL COURT, OLOF PALME MARGE, MUNIRKA, NEW DELHI - -- - PAN:AAACR5591A) ......... ./ /APPELLANT VS DCIT, CIRCLE-21(2), NEW DELHI . #0./ / RESPONDENT AND ' ' ' ', ,, , / ITA NO.6799/DEL/2015 (( (( (( (( / ASSESSMENT YEAR: 2011-12 DCIT, CIRCLE-21(2), NEW DELHI .......... ./ /APPELLANT VS. M/S. RIO TINTO INDIA PVT. LTD., APARTMENT NO. 100, A/5, GROUND FLOOR, THE CAPITAL COURT, OLOF PALME MARGE, . #0./ / RESPONDENT MUNIRKA, NEW DELHI - -- - PAN:AAACR5591A) 2 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 (1%23) / ASSESSEE BY : SHRI NAGESHWAR RAO, ADV. SHRI SANDEEP KARHAIL, ADV. '4523) / DEPARTMENT BY : MS. NIDHI SHARMA, SR.DR 2%6* / DATE OF HEARING : 20.11.2019 78 2%6* / DATE OF PRONOUNCEMENT: 27.11.2019 / ORDER PER SUSHMA CHOWLA, JM: OUT OF THIS BUNCH OF APPEALS, ONE APPEAL FILED BY T HE ASSESSEE IS AGAINST THE ORDER OF THE A.O. DATED 29.01.2015 PASS ED UNDER SECTION 143(3)/144C/92CA(4) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) RELATING TO ASSESSMENT YEAR 2010-11. FURTHER, BOTH THE ASSESSEE AND THE REVENUE HAVE FILED CROSS-APPEALS R ELATING TO ASSESSMENT YEAR 2011-12 AGAINST THE ORDER OF THE AO UNDER SECT ION 143(3)/144C/92CA(4) OF THE ACT. 2. ALL THE APPEALS ON SIMILAR ISSUE WERE HEARD TOGETH ER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE. ITA NO.1850/DEL/2015 ASSESSMENT YEAR: 2010-11 3. THE ASSESSEE IN ASSESSMENT YEAR 2010-11, HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) ERRED IN ASSESSING THE TOTAL INCOME OF THE APPELLANT AT RS. 49,577,793 /- AS AGAINST A RETURNED TOTAL INCOME OF NIL. 3 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 TRANSFER PRICING ADJUSTMENT OF RS 41,666,810/- 2. THAT ON FACTS AND IN LAW THE AO/TRANSFER PRICIN G OFFICER (HEREINAFTER REFERRED TO AS THE TPO)/ DISPUTE RES OLUTION PANEL (HEREINAFTER REFERRED TO AS THE DRP) ERRED IN MAKING/PROPOSING/CONFIRMING TRANSFER PRICING ADJUST MENT OF RS. 41,666,810 /- UNDER CHAPTER X OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED AS THE ACT). 2.1 THE AO/TPO/DRP ERRED IN FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW BY MISUNDERSTANDING RTIPL'S BUSINESS MOD EL AND FUNCTIONAL & RISK PROFILE. 2.2 WITHOUT PREJUDICE TO ANY OTHER GROUND, THE AO/ TPO/DRP ERRED IN COMPUTING THE CORRECT OPERATING MARGIN OF THE ASSES SEE WHILE MAKING/PROPOSING/CONFIRMING TRANSFER PRICING ADJUST MENT. 2.3 THE AO/TPO/DRP ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, BY INAPPROPRIATELY MODIFYING THE ECONOMIC A NALYSIS UNDERTAKEN BY THE ASSESSEE AND RE-COMPUTING THE ALP OF THE TRANSACTIONS BY CONDUCTING A FRESH SEARCH. 2.4 THE AO/TPO/DRP ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN REJECTING CERTAIN COMPANIES AS COMPARABL E. 2.5 WITHOUT PREJUDICE TO ANY OTHER GROUND, THE AO/ TPO/DRP ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN C ONSIDERING COMPANIES FUNCTIONALLY, DIFFERENT FROM RTIPL AS COM PARABLE. 2.6 WITHOUT PREJUDICE TO ANY OTHER GROUND, THE AO/ TPO/DRP ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, BY INAPPROPRIATELY ADDING QUANTITATIVE SEARCH FILTERS TO MODIFY THE ECONOMIC ANALYSIS UNDERTAKEN BY THE ASSESSEE. 2.7 WITHOUT PREJUDICE TO ANY OTHER GROUND, THE AO/T PO/DRP HAS ADOPTED A FLAWED APPROACH BY USING SINGLE YEAR DATA AS AGAINST THE MULTIPLE YEAR DATA USED BY THE ASSESSEE, TO COM PUTE THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF THE ASSESSEE USING TNMM METHOD. 2.8 WITHOUT PREJUDICE TO ANY OTHER GROUND, THE AO/ TPO/DRP ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN NOT ALLOWING ECONOMIC ADJUSTMENTS FOR DIFFERENCES ON ACCOUNT OF RISKS ASSUMED BY THE ASSESSEE VIS-A-VIS THE COMPARABLE CO MPANIES. 2.9 WITHOUT PREJUDICE TO ANY OTHER GROUND, THE AO/ TPO/DRP ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, BY NOT APPLYING 4 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 THE PROVISO TO SECTION 92C(2) OF THE ACT AND HAS FA ILED TO ALLOW THE ASSESSEE THE BENEFIT OF UPWARD VARIATION OF 5 PERCE NT IN DETERMINING THE ARMS LENGTH PRICE. 2.10 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE TPO/AO/DRP ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, BY NOT TAKING COGNIZANCE OF THE FACT THAT SAME INTERNATIONAL TRANSACTIONS OF ASSESSEE HAS BEEN ACCEPTED BY REVEN UE AUTHORITIES TO BE AT ARMS LENGTH IN PREVIOUS YEARS . 2.11 WITHOUT PREJUDICE TO ANY OTHER GROUND, THE AO/ TPO ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, BY INCORR ECTLY APPLYING THE DIRECTIONS ISSUED BY DRP. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED THE RETURN OF INC OME DECLARING NIL INCOME. THE ASSESSEE HAD ENTERED INTO VARIOUS INTER NATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AES), HENCE, REFER ENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) UNDER SECTION 92CA(1 ) OF THE ACT. THE TPO NOTED THE BUSINESS PROFILE OF THE ASSESSEE AND ALSO NOTED THAT THE ASSESSEE HAD UNDERTAKEN THE TRANSACTIONS OF PROVISI ON OF MANAGEMENT CONSULTANCY AND SUPPORT SERVICES AND PAYMENT OF SER VICE CHARGES TO ITS AES, TOTALING RS.21,49,37,293/-. THE ASSESSEE HAD BENCHMARKED THE SAID TRANSACTION BY USING TRANSACTIONAL NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD WITH PROFIT LEVEL INDICATOR (PLI) OF OP/OC. THE MARGIN OF THE ASSESSEE AT 11.82% WAS COMPARED WITH THE MEAN MARGINS OF SELECTED COMPARABLE COMPANIES AT 7.42% AND THE A SSESSEE CLAIMED THE TRANSACTION TO BE AT ARMS LENGTH. THE ASSESSEE HAD SELECTED 8 COMPARABLES FOR BENCHMARKING ITS INTERNATIONAL TRAN SACTION. THE TPO ISSUED THE SHOW CAUSE NOTICE TO THE ASSESSEE AND NO TED THE FACT THAT THE 5 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 ASSESSEE HAD APPLIED WEIGHTED AVERAGE MARGINS OF TH E COMPARABLES, AS AGAINST THE MARGIN OF CONTEMPORANEOUS PERIOD TO BEN CHMARK THE INTERNATIONAL TRANSACTION. THE USE OF MULTIPLE YEAR DATA WAS OBSERVED TO BE INAPPROPRIATE AND SHOW CAUSE NOTICE WAS ISSUED T O THE ASSESSEE IN THIS REGARD. FURTHER, VIDE PARA 8 OF THE SHOW CAUSE NOTICE, THE TPO ALSO NOTED VARIOUS SERVICE AGREEMENTS ENTERED INTO BY TH E ASSESSEE WITH ITS AES AND NATURE OF SERVICES WERE ANALYZED. THE TPO W AS OF THE VIEW THAT AS THE MD OF THE ASSESSEE COMPANY WAS PHD. (GEOLOGY ), AND THAT SINCE THE IDENTIFICATION OF BUSINESS OPPORTUNITIES INVOLV ED TECHNICAL EVALUATION OF MINES, TECHNICAL DATA ETC.; HENCE COMPANIES PROV IDING TECHNICAL SERVICES SHOULD BE CONSIDERED AS COMPARABLE IN THE CASE OF THE ASSESSEE. HE, THUS, APPLIED CERTAIN FILTERS AND WAS OF THE VI EW THAT ICRA MANAGEMENT CONSULTING SERVICES LTD. AND IDC INDIA L TD. COULD BE SELECTED FROM THE LIST OF THE COMPARABLES PREPARED BY THE ASSESSEE. BALANCE SIX CONCERNS WERE HELD TO BE NOT FUNCTIONAL LY COMPARABLE TO THE ASSESSEE. HE THEN SELECTED TWO SETS OF COMPARABLES, TOTALING 20 CONCERNS, I.E., IN ALL 22 CONCERNS, AS PER LIST AT PAGES 14 & 15 OF THE TPO'S ORDER AND SHOW CAUSED THE ASSESSEE AS TO WHY THE SAID CON CERNS SHOULD NOT BE PICKED UP AS FUNCTIONALLY COMPARABLE TO THE ASSESSE E. THE ASSESSEE OBJECTED TO THE SAID EXERCISE CARRIED ON BY THE TPO . HOWEVER, THE TPO WAS OF THE VIEW THAT THE ASSESSEE HAD ONLY SEARCHED FOR COMPARABLE, WHICH WERE ENGAGED IN THE MANAGEMENT CONSULTANCY AN D SUPPORT SERVICES, IMMATERIAL OF THE VERTICAL/FUNCTIONAL OR SERVICE LINE, IN WHICH THE 6 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 COMPANY WAS ENGAGED AND HENCE, SEARCH PROCESS WAS N OT CORRECT. THE TPO VIDE PARA 4.4 AT PAGE 18, ANALYZED THE EMPLOYEE PROFILE OF THE ASSESSEE FOR PROVIDING VARIOUS BUSINESS SERVICES TO ITS AES AND HE WAS OF THE VIEW THAT THE ASSESSEE WAS PROVIDING HIGH-END S ERVICES. THE TPO, THUS, BENCHMARKED THE INTERNATIONAL TRANSACTION AFT ER DEALING WITH OBJECTIONS RAISED BY THE ASSESSEE AND FINALLY SELEC TED 20 CONCERNS AS FUNCTIONALLY COMPARABLES. THE MEAN MARGIN OF COMPAR ABLES IS COMPUTED AT 34.53% AND HE PROPOSED AN UPWARD ADJUSTMENT OF R S.5,06,79,911/-. THE AO ISSUED DRAFT ASSESSMENT ORDER TO THE ASSESSE E PROPOSING UPWARD ADJUSTMENT OF RS.5.06 CRORES. THE ASSESSEE FILED OB JECTIONS BEFORE THE DRP, WHO REJECTED THE SAME AND THE AO PASSED THE FI NAL ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFO RE US. 5. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT T HE CONCERNS WHICH WERE FINALLY SELECTED BY THE TPO WERE OBJECTE D BY THE ASSESSEE IN THE TRANSFER PRICING PROCEEDINGS ITSELF. EVEN BEFOR E THE DRP, OBJECTIONS WERE RAISED IN RESPECT OF CONCERNS FINALLY SELECTED BY THE TPO AND ALSO IN RESPECT OF CONCERNS WHICH WERE SELECTED BY THE ASSE SSEE, BUT EXCLUDED BY THE TPO. THE LEARNED AR FOR THE ASSESSEE STRESSED T HAT BOTH ON FACTUAL AND LEGAL ASPECTS, THE OBJECTIONS RAISED BY THE ASS ESSEE BEFORE THE DRP HAVE NOT BEEN DEALT WITH BY THE PANEL, I.E., WHERE THE ASSESSEE WAS PROVIDING ONLY SUPPORT SERVICES TO ITS AES FOR INVE STMENT IN INDIA, THEN THE MARGIN OF THE ASSESSEE WOULD BE COMPARED WITH S UCH CONCERNS WHICH WERE CARRYING ON SIMILAR FUNCTIONS. ON THE OTHER HA ND, BOTH THE STAND OF 7 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 THE DRP AND THE TPO WERE THAT THE ASSESSEE WAS PROV IDING HIGH-END SERVICES TO ITS AES, SO THE COMPANIES PROVIDING HIG H-END SERVICES WERE SELECTED AS COMPARABLES. HE TOOK US THROUGH THE OBJ ECTIONS FILED BEFORE THE DRP AND STRESSED THAT THE DRP HAS FAILED TO TAK E COGNIZANCE OF THE SAME AND THE ORDER OF THE AO/DRP SUFFERS FROM INFIR MITY. HE FAIRLY SUGGESTED THAT THE ISSUE MAY BE LOOKED INTO BY THE DRP AND THE ISSUE BE DECIDED AFTER MEETING THE OBJECTIONS RAISED BY THE ASSESSEE. 6. THE LEARNED DR FOR THE REVENUE, ON THE OTHER HAND, STRONGLY PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE WAS A SU BSIDIARY OF RIO TINTO (MAURITIUS) PVT. LTD. AND WAS ENGAGED IN RENDERING MANAGEMENT CONSULTANCY AND SUPPORT SERVICES TO ITS AES IN THE MINING INDUSTRY. IT ALSO ACTED AS SEPARATE SHARED SERVICE CENTRE FOR CO MMON BUSINESS SUPPORT PROCESSES SUCH AS PAYROLL PROCESSING, HUMAN RESOURCE MANAGEMENT, ACCOUNTS, FINANCE, INFORMATION TECHNOLO GY, HEALTHY SAFETY ENVIRONMENT AND COMMUNITY FUNCTIONS FOR ITS AES. TH E COMPANY HAD OFFICES IN DELHI, BHUBANESWAR AND BANGALORE. WHILE RENDERING THE SERVICES TO ITS AES, THE KEY SERVICES/FUNCTIONS PER FORMED BY THE ASSESSEE HAD BEEN DOCUMENTED IN THE TRANSFER PRICING STUDY REPORT AND ALSO AS NOTICED BY THE TRANSFER PRICING OFFICER IN HIS ORDE R, WHICH WERE AS UNDER: 8 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 ANALYZING INVESTMENT OPPORTUNITIES RTIPL PREPARES REPORTS AND ANALYZE ON SPECIFIC PROJ ECTS OF AES WHICH ASSIST ITS AES IN TAKING AN INVESTMENT DECISI ON. IN ADDITION TO THIS, RTIPL ALSO ANALYSES PROBABLE BUSINESS OPPORTU NITIES FOR ITS ADS AND PREPARES AND DELIVERS REPORTS TO ITS AES ON THE BASIS OF SUCH ANALYSIS. HOWEVER, ANY DECISION TO INVEST LIES WITH THE AES ONLY. MANAGEMENT CONSULTANCY RTIPL PROVIDES CONSULTANCY SERVICES FROM TIME TO TI ME IN RELATION TO COAL AND OTHER METALS AND MINERAL MARKETING OPPORTU NITIES IN INDIA. THEY PROVIDE INFORMATION TO AES ON SUCH OPPORTUNITI ES IN INDIA. LIAISON WITH GOVERNMENT OFFICES RTIPL LIAISES WITH THE GOVERNMENT OFFICES, ON BEHAL F OF ITS AES FOR THE PURPOSES OF TAKING APPROVALS OR ENSURING STATUT ORY COMPLIANCE. SUPPORT IN RELATION TO PROCUREMENT ACTIVITY RTIPL PROVIDES SUPPORT IN RELATION TO PURCHASE OF G OODS FROM INDIA TO SOME OF ITS AES. 8. THE ASSESSEE HAD SELECTED TNMM AS MOST APPROPRIATE METHOD WITH PLI OVER OP/OC AND THE MARGIN OF THE ASSESSEE WORKE D OUT TO 11.82%. FURTHER, THE ASSESSEE HAD SELECTED 8 CONCERNS AS FU NCTIONALLY COMPARABLE WHOSE MEAN MARGIN ON WEIGHTED AVERAGE METHOD WORKED OUT TO 7.42%. HENCE, THE ASSESSEE CLAIMED THAT ITS TRANSACTION WA S AT ARMS LENGTH. THE TPO AFTER ANALYZING THE BUSINESS PROFILE OF THE ASSESSEE IN THE FIELD OF PROFESSION, MANAGEMENT CONSULTANCY AND SUPPORT SERV ICES BY THE ASSESSEE TO ITS AES, FIRST REJECTED THE WEIGHTED AV ERAGE MEAN MARGIN, WHICH WAS OBJECTED BY THE ASSESSEE. THERE IS NO DIS PUTE WITH REGARD TO THE SAID APPROACH OF TPO AND ONLY THE DATA FOR CONT EMPORANEOUS PERIOD NEEDS TO BE APPLIED. ON ANALYSIS OF VARIOUS/DIFFERE NT AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH ITS AES, THE TPO WAS OF T HE VIEW THAT, WHERE THE 9 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 SERVICES PROVIDED BY THE ASSESSEE TO THE AES WERE I N THE NATURE OF MANAGEMENT CONSULTANCY, INVESTMENT ADVISORY, LIAISO N SERVICES AND PROCUREMENT SUPPORT, AND ALSO WHERE THE EMPLOYEE PR OFILE INCLUDED SEVERAL GEOLOGIST AND GEOSCIENTIST AND WHERE THE M D OF THE ASSESSEE COMPANY WAS ALSO HIGHLY QUALIFIED, THEN THE COMPANI ES PROVIDING TECHNICAL SERVICES SHOULD BE CONSIDERED AS COMPARAB LE IN THE CASE OF THE ASSESSEE. CONSEQUENTLY, HE REVISED THE FILTERS TO B E APPLIED AND IN THE FINAL ANALYSIS SELECTED 20 CONCERNS AS COMPARABLES, FOR WHICH, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. HE ALSO RE JECTED 6 COMPARABLES SELECTED BY THE ASSESSEE AND ONLY ACCEPTED TWO OF T HE COMPARABLES; IN ALL 22 COMPARABLES WERE SELECTED. SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY THE MEAN MARGIN OF THE SAID CONC ERNS SHOULD NOT BE APPLIED TO BENCHMARK THE INTERNATIONAL TRANSACTION OF THE ASSESSEE. IT MAY BE POINTED OUT HEREIN THAT THE ASSESSEE RAISED OBJECTIONS TO THE SELECTION OF COMPARABLE COMPANIES BEFORE THE TPO BO TH WITH REGARD TO THE FRESH SELECTION AND ALSO WITH REGARD TO THE EXC LUSION OF THE COMPANIES, WHICH WERE SELECTED BY THE ASSESSEE IN I TS TRANSFER PRICING REPORT. THE TPO HAD CONSIDERED THE OBJECTIONS OF TH E ASSESSEE, BUT HE FINALLY DREW-UP LIST OF 19 CONCERNS AS COMPARABLES TO THE ASSESSEE WHOSE MEAN MARGINS WORKED OUT TO 34.53% AND MADE UPWARD A DJUSTMENT OF RS.5.06 CRORES. 9. BEFORE THE DRP, THE ASSESSEE FILED OBJECTIONS, FIR STLY, ON THE ANALYSIS DRAWN-UP BY THE TPO VIS--VIS BUSINESS PRO FILE OF THE ASSESSEE 10 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 AND CALLING IT TO BE HIGH-END SERVICE PROVIDER. THE ASSESSEE ALSO FILED OBJECTIONS AGAINST THE SELECTION OF CONCERNS BY THE TPO AND ALSO FILED OBJECTIONS AGAINST THE REJECTION OF THE CONCERNS, W HICH WERE SELECTED BY THE ASSESSEE. THE DRP UPHELD THE ORDER OF THE TPO A GAINST WHICH THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 10. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSE SSEE STRONGLY OPPOSED THE ORDERS OF THE AUTHORITIES BELOW AND POI NTED OUT THAT BOTH THE DRP AND TPO HAVE NOT CONSIDERED THE FACTUAL ASPECTS OF THE CASE IN THE RIGHT PERSPECTIVE. IT WAS STRESSED BY HIM THAT THE ASSESSEE WAS ONLY PROVIDING SUPPORT SERVICES TO ITS AES, WHICH IN TUR N WERE ENGAGED IN PROVIDING HIGH-END SERVICES. BUT NO SUCH HIGH-END S ERVICES WERE BEING PROVIDED BY THE ASSESSEE. THOUGH THE MANAGING DIREC TOR OF THE ASSESSEE COMPANY WAS HIGHLY QUALIFIED BUT THE SERVICES PROV IDED BY THE ASSESSEE TO ITS AES WERE SUPPORT SERVICES. HE TOOK US THROUG H THE OBJECTIONS FILED BEFORE DRP AND IN FAIRNESS SUBMITTED THAT MATTER S HOULD BE REMITTED BACK TO DRP. 11. THE LEARNED DR FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST THE BENCHMA RKING OF INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE WITH ITS AES AND THE SELECTION OF COMPARABLE. THE DISPUTE WHICH NEEDS ADJUDICATION IS THE SELECTION OF 11 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 COMPARABLES WHEREIN OUT OF 8 COMPARABLES SELECTED B Y THE ASSESSEE, 2 WERE HELD TO BE FUNCTIONALLY COMPARABLES AND 6 COMP ANIES WERE REJECTED. THE ASSESSEE IS AGGRIEVED BY THE REJECTION OF THE S AID COMPARABLES. FURTHER, THE ASSESSEE IS ALSO AGGRIEVED BY THE FRES H SELECTION MADE BY THE TPO BY APPLYING DIFFERENT SET OF FILTERS BOTH ON FU NCTIONALITY AND OTHER ASPECTS. THE COPY OF THE OBJECTIONS FILED BEFORE DR P ARE PLACED ON RECORD AND HAVE BEEN PERUSED BY US, AT THE INSTANCE OF THE LEARNED AR FOR THE ASSESSEE. THE ASSESSEE HAD RAISED VARIOUS FACETS OF THE DIFFERENT CONCERNS FINALLY PICKED-UP, AS TO ITS DISSIMILARITY TO THE F UNCTIONS OF ASSESSEE VIS-- VIS THE FUNCTIONAL PROFILE AND OTHER ASPECTS OF COM PARABLES. 13. WE FIND THAT THE DRP HAS IN MECHANICAL MANNER REJE CTED THE OBJECTIONS RAISED BY THE ASSESSEE AND HAS CONCLUDED BY OBSERVING THAT WHERE THE TPO'S ORDER MAKES IT CLEAR THAT THE AFORE SAID SEGMENT CARVED OUT WAS BASICALLY TO IDENTIFY THE HIGH-END TRANSACT IONS, THEN TO BENCHMARK THE SAME BY USING COMPANIES WHICH WERE PR OVIDING HIGH-END SERVICES. IT CONCLUDED BY HOLDING THAT SINCE THE AS SESSEE HAD NOT DISPUTED THAT THE ASSESSEE WAS PROVIDING HIGH-END S ERVICES, THEREFORE, THE REASON GIVEN BY THE TPO WERE JUSTIFIED. WE FIND NO MERIT IN THE AFORESAID OBSERVATIONS OF THE DRP AS IT HAD FAILED TO CONSIDER THE DIFFERENT FACETS OF THE OBJECTIONS RAISED BY THE ASSESSEE VIS --VIS SELECTION/REJECTION OF THE COMPANIES AS COMPARABLES . IT IS INCUMBENT UPON THE DRP TO CONSIDER THE OBJECTIONS RAISED BY T HE ASSESSEE AND THEN DECIDE THE SAME. BUT NO SUCH EXERCISE HAS BEEN CARR IED OUT BY THE DRP. 12 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 WE FIND NO MERIT IN THE ORDER OF THE DRP. ACCORDING LY, WE REMIT THIS ISSUE BACK TO THE FILE OF THE DRP WITH THE DIRECTION TO L OOK INTO THE FUNCTIONS PERFORMED BY THE ASSESSEE COMPANY AND THE ACTIVITIE S CARRIED OUT BY THE ASSESSEE AND WHETHER THE SAME WERE HIGH-END OR LOW- END ACTIVITIES. THE DRP IS ALSO DIRECTED TO CONSIDER WHETHER THE CONCER NS FINALLY SELECTED BY THE TPO WERE FUNCTIONALLY COMPARABLE OR NOT AND ALS O LOOK INTO THE FUNCTIONALITY AND OTHER ASPECTS OF THE CONCERNS, WH ICH WERE SELECTED BY THE ASSESSEE, BUT WERE REJECTED BY THE TPO. THE DRP AFTER EXAMINING THE FACTS, AND MAKING FAR ANALYSIS OF THE ACTIVITIES PE RFORMED BY THE ASSESSEE AND FUNCTIONAL PROFILE OF THE COMPARABLES SELECTED , SHALL BENCHMARK INTERNATIONAL TRANSACTION OF MANAGEMENT CONSULTANCY AND SUPPORT SERVICES PROVIDED BY THE ASSESSEE COMPANY TO ITS AE S AND DETERMINE THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION , IF ANY. REASONABLE OPPORTUNITY OF BEING HEARD SHALL BE AFFORDED TO THE ASSESSEE IN THIS REGARD. HENCE, THE MATTER IS SET ASIDE TO THE FILE OF THE DRP WITH OUR DIRECTION MENTIONED ABOVE. 14. THE GROUND OF APPEAL NO. 1.1 IS GENERAL IN NATURE, WHICH DOES NOT REQUIRE ANY ADJUDICATION, ACCORDINGLY, THE SAME IS DISMISSED AS SUCH. THE GROUND OF APPEAL NOS. 2 TO 2.6 ON THE TRANSFER PRICING ADJUSTMENT, I.E., INCLUSION/EXCLUSION OF COMPARABLES TO BENCHMA RK THE INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. THE GROUND OF APPEAL NO. 2.7 RELATED TO U SE OF SINGLE YEAR DATA IS AGAINST THE ASSESSEE AND HENCE, DISMISSED. THE GROUND OF APPEAL NO. 13 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 2.8 OF APPEAL IS NOT PRESSED, HENCE DISMISSED AS NO T PRESSED. THE GROUND OF APPEAL NO. 2.9 IS AGAINST THE ALLOWABILITY OF BE NEFIT OF UPWARD VARIATION OF + 5% IN DETERMINING THE ARMS LENGTH PRICE, IS ALSO DECIDED AGAINST THE ASSESSEE BY VARIOUS DECISIONS AND HENCE, THE SAME I S DISMISSED. THE GROUND OF APPEAL NOS. 2.10 AND 2.11 ARE GENERAL IN NATURE, WHICH DO NOT REQUIRE ANY ADJUDICATION, ACCORDINGLY, THE SAME ARE DISMISSED. ITA NO. 6854/DEL/2015 ASSESSMENT YEAR : 2011-12 15. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT T HE ISSUE RAISED OF TRANSFER PRICING ADJUSTMENT IN THE PRESENT APPEAL I S SIMILAR TO THE ISSUE RAISED IN THE APPEAL FOR ASSESSMENT YEAR 2010-11, E XCEPT THE GROUND NO. 10. SINCE THE ISSUE RAISED IN THE PRESENT APPEAL FO R ASSESSMENT YEAR 2011-12 VIS--VIS TRANSFER PRICING ADJUSTMENT IS SI MILAR TO THE ISSUE RAISED IN THE ASSESSMENT YEAR 2010-11, FOLLOWING OU R DECISION IN THE FORGOING PARAGRAPHS, WE REMIT THE ISSUE BACK TO THE FILE OF THE DRP, TO ADJUDICATE THE ISSUE ON TRANSFER PRICING ADJUSTMENT , FOLLOWING OUR DIRECTIONS FOR ASSESSMENT YEAR 2010-11 AND AFTER AL LOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HENCE, THE GROUND OF APPEAL NOS. 4 TO 9 RAISED IN THIS REGARD ARE ALLOWED FOR S TATISTICAL PURPOSES. 16. THE GROUND OF APPEAL NOS. 11 & 12 ARE NOT PRESSED, HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. THE GROUND OF APPEAL NO. 13 RELATING TO USE OF MULTIPLE YEAR FINANCIAL DATA AND GROUND O F APPEAL NO. 14 RELATING TO THE BENEFIT OF DEDUCTION OF + 5% ARE AGAINST THE ASSESSEE AND 14 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 HENCE, THE SAME ARE DISMISSED. THE GROUND OF APPEAL NO. 15 AGAINST INITIATION OF PENALTY PROCEEDINGS IS PREMATURE, HEN CE, THE SAME IS DISMISSED. 17. NOW, COMING TO GROUND OF APPEAL NO. 10 RAISED BY T HE ASSESSEE, WHICH IS WITH REGARD TO THE COMPUTATION OF SEGMENTA L PROFIT MARGIN OF COMPANY PRIYA INTERNATIONAL AGENCIES LTD. (SEGMENT) . THE SAID CONCERN WAS SELECTED AS COMPARABLE AND DRP VIDE PARA 10 DIR ECTED THE AO/TPO TO RE-VERIFY THE COMPUTATION OF PROFIT MARGINS AND ADOPT THE CORRECT MARGINS. HOWEVER, THE AO/TPO HAS FAILED TO CARRY OU T THE SAID EXERCISE AND DETERMINE THE PROFIT MARGIN OF THE CONCERN, M/S . PRIYA INTERNATIONAL AGENCIES LTD. THE AO IS DIRECTED TO VERIFY THE STAN D OF ASSESSEE. ACCORDINGLY, THE GROUND OF APPEAL NO. 10 IS ALLOWED FOR STATISTICAL PURPOSES. 18. NOW, COMING TO GROUND OF APPEAL NOS. 1 TO 3, THE ISSUE IS AGAINST THE DISALLOWANCE MADE OF RS.7,31,504/- IN RESPECT O F LEASE RENTAL PAID BY THE ASSESSEE, I.E., PRINCIPAL PAYMENT TOWARDS FINAN CE LEASE IN RESPECT OF MOTOR VEHICLES TAKEN ON LEASE. THE ASSESSEE CLAIMED THE SAID EXPENDITURE AS DEDUCTIBLE AND THE CASE OF THE REVENUE IS THAT T HE PAYMENTS MADE WERE TOWARDS ACQUISITION OF CAPITAL ASSET AND WERE CAPITAL EXPENDITURE AND NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE. 19. THE LEARNED AR OF THE ASSESSEE STRESSED THAT THE I SSUE STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. NIIT LTD. VS. 15 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 DCIT, PASSED IN ITA NO. 376/DEL/2014 FOR ASSESSMENT YEAR 2009-10, ORDER DATED 01.11.2019. 20. THE LEARNED DR FOR THE REVENUE, ON THE OTHER HAND, POINTS OUT THAT THE ISSUE STANDS COVERED AGAINST THE ASSESSEE BY TH E ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 REPORTED IN [2012] 24 TAXMANN.COM 124 (DELHI) 21. THE LEARNED AR FOR THE ASSESSEE STRESSED THAT THE TRIBUNAL IN ITA NO.6495/DEL/2012 RELATING TO ASSESSMENT YEAR 2008-0 9, VIDE ORDER DATED 26.06.2018, HAD REMITTED THE ISSUE BACK TO THE FILE OF THE AO. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. WITHOUT GOING INTO THE MERITS OR DEMERITS OF THE DE DUCTION CLAIMED BY THE ASSESSEE, WE ARE OF THE VIEW THAT IN VIEW OF THE IS SUE BEING SET ASIDE BY THE TRIBUNAL TO THE FILE OF AO IN LATER DECISION RE LATING TO ASSESSMENT YEAR 2008-09, WE DEEM IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF AO TO DECIDE THE SAME IN THE LIGHT OF THE DIRECTION OF TH E TRIBUNAL IN ASSESSMENT YEAR 2008-09. HENCE, GROUNDS NO. 1 TO 3 RAISED BY T HE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.6799/DEL/2015 ASSESSMENT YEAR AY: 2011-12 23. NOW, COMING TO THE APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2011-12, THE LEARNED DR FAIRLY POINTED OUT THA T THE TAX EFFECT 16 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 INVOLVED IN THE PRESENT APPEAL WAS BELOW THE PRESCR IBED LIMIT FIXED BY CBDT VIDE CIRCULAR NO.17/2019 DATED 08.08.2019. 24. THE CBDT VIDE CIRCULAR NO.17/2019 DATED 08.08.201 9 HAS REVISED THE MONETARY LIMIT FOR FILING THE APPEALS BEFORE TH E TRIBUNAL TO RS.50 LACS. FURTHER, CBDT VIDE LETTER DATED 20.08.2019 H AS ALSO CLARIFIED THAT CIRCULAR NO.17/2019 WOULD BE APPLICABLE TO ALL PEND ING APPEALS. IN SUCH CIRCUMSTANCES, THE PRESENT APPEAL FILED BY THE REVE NUE IN CASE OF LOW TAX EFFECT IS NOT MAINTAINABLE. 25. BEFORE PARTING, WE CLARIFY HERE THAT THE REVENUE S HALL BE AT LIBERTY TO APPROACH THE TRIBUNAL FOR RE-INSTITUTION OF APPE AL, IF THE REQUISITE MATERIAL IS BROUGHT TO SHOW THAT THE APPEAL IS PROT ECTED BY THE EXCEPTIONS PRESCRIBED IN PARA 10 OF THE CIRCULAR DATED 11.07.2 018. 26. IN CONCLUSION, BY APPLYING THE CBDT CIRCULAR DATED 08.08.2019 AND LETTER DATED 20.08.2019 (SUPRA), THE CAPTIONED APPEAL OF THE REVENUE IS DISMISSED AS WITHDRAWN/NOT PRESSED. 27. HENCE, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF NOVEMBER, 2019. SD/- SD/- (PRASHANT MAHARISHI) (SUSHMA CH OWLA) )* )* )* )* /ACCOUNTANT MEMBER /JUDICIAL MEMBER / ' DATED : 27 TH NOVEMBER, 2019 . RK/- 17 ITA NO.1850/DEL/2015; 6854/DEL/2015 & 6799/DEL/2015 )$2#%'9)'%: COPY OF THE ORDER IS FORWARDED TO : 1. ./ / THE APPELLANT 2. #0./ / THE RESPONDENT 3. ; - < / THE CIT(A) 4. = ; / THE PR. CIT 5. 6. '45#% / DR, ITAT, DELHI 5>(?: GUARD FILE. )$ )$ )$ )$ / BY ORDER , 0'%#% // TRUE COPY // @A B , ASSISTANT REGISTRAR, ITAT, DELHI