ROLLS ROYCE MARINE INDIA P.LTD, NAVI MUMBAI V. DCIT CIR 15(3)(2), MUMBAI

ITA 689/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8864 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDEDR
• Assessee Lawyers: JIGNA TALARI
• Keywords: Transfer pricing; International transaction; Additional evidence; Reasonable cause
• Section: 92C

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./689/MUM/2017, /ASSESSMENT YEAR: 2012-13 ROLLS-ROYCE MARINE INDIA PRIVATE LIMITED PLOT NO. D-505, TTC INDUSTRIAL AREA, MIDC SHARAYA HUNDAI LANE, OPP.BALMER LAWRIE, TURBHE, NAVI MUMBAI-400 710. PAN:AAACU 4687 L VS. DY. CIT , CIRCLE-15(3)(1) ROOM NO.473, AAYAKAR BHAWAN M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SAURABH DESHPANDE-DR ASSESSEE BY: MS. KARISHMA R. PHATARPHEKAR/HARSH R. SHAH & JIGNA TALARI / DATE OF HEARING: 16.08.2017 / DATE OF PRONOUNCEMENT: 18.10.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED, 30/11/2016 OF THE ASSE SSING OFFICER (AO) PASSED U/S. 143 (3) R.W.S.144C(13)OF THE ACT,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY- ENGAGED IN THE BUSINESS OF SALES SUPPORT OF MARINE EQUIPMENT FOR GROUP COMPANIES,SERVICING OF MARINE EQUIPMENT,SALE OF MARINE SPARES AND ASSEM BLY OF MARINE ELECTRICAL SYSTEM/ SWITCH - BOARDS FOR GROUP COMPANIES-FILED ITS RETURN OF INCO ME ON 28/03/2014, DECLARING TOTAL INCOME AT RS. 5.56 CRORES. 2. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS (IT.S) WITH ITS ASSOCIAT ED ENTERPRISE(AES). HE MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO). AFTER RECEIV ING THE ORDER OF THE TPO, HE ISSUED A DRAFT ORDER TO THE ASSESSEE PROPOSING OFFERED ADJUSTMENTS UNDER THE HEADS PROVISION OF APPLICATION ENGINEERING SERVICES AND CORPORATE FEES.THE ASSE SSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL(DRP)-2, MUMBAI.AFTER RECEIVING THE DIRECTIONS OF THE DRP,DATED 09/09/ 2016,THE AO FINALISED THE ASSESSMENT, DETERMINING T HE INCOME OF THE ASSESSEE AT RS.11. 28 CRORES. 2.1 .VIDE ITS APPLICATION,DATED 25/07/2017,THE ASSESSEE HAS REQUESTED FOR ADMITTING ADDITIONAL EVIDENCES UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 (RULES).IN ITS APPLICATION,THE ASSESSEE HAS STATED THAT GROUND NUM BER 8 TO 12 WERE ABOUT TP ADJUSTMENT OF RS.4.88 CRORES RELATING TO CORPORATE FEES FOR INTRA -GROUP SERVICES, THAT IT HAD FURNISHED DETAILS ABOUT SERVICES RENDERED BEFORE THE TPO AND THE DRP, THAT BOTH THE AUTHORITIES COMPLETED THE 689 OF 2017- ROLLS ROYCE MARINE INDIA PVT.LTD. 2 ARMS LENGTH PRICE(ALP)AT NIL HOLDING THAT NO SERVI CES WERE RECEIVED BY THE ASSESSEE FROM THE AES,THAT IT WANTED TO FILE CERTAIN DOCUMENTS T O THE DECISION OF THE REVENUE AUTHORITIES WERE NOT BASED ON FACTS, THAT THE TPO AND THE DRP H AD ACKNOWLEDGED THE FACT THAT IT HAD RECEIVED SERVICES FROM ITS AES, THAT AFTER RECEIVI NG THE FINAL ORDER OF THE AO IT REALISED THAT THERE WAS AN UNDERSTANDING MISMATCH BETWEEN IT AND THE DEPARTMENT AUTHORITIES ABOUT THE EVIDENCES FOR RECEIVING SERVICES,THAT AT THE TIME O F PREPARATION OF PAPER BOOK FOR THE TRIBUNAL COUNSEL POINTED OUT THAT THERE WAS A DISCREPANCY IN PLACING THE EVIDENCE IN THE PAPER BOOK, THAT IT WAS FOUND THAT ASSESSEE HAD FAILED TO ATTAC H CERTAIN IMPORTANT DOCUMENTS,THAT THE DOCUMENTS SUBMITTED IN FORM OF ADDITIONAL EVIDENCES WOULD PROVE BEYOND DOUBT THAT THE ASSESSEE HAD RECEIVED SERVICES FROM AES, THAT THE EVIDENCES SHOULD BE TAKEN ON RECORD IN THE INTEREST OF JUSTICE. 2.2.D URING THE COURSE OF HEARING BEFORE US, THE AUTHORIS ED REPRESENTATIVE (AR) AND REITERATED THE ARGUMENTS THAT ARE PART OF THE APPLICATION FILE D BY THE ASSESSEE. THE DEPARTMENTAL REPRESENTATIVE (DR) OPPOSED THE ADMISSION OF EVIDEN CES. 2.3. WE HAVE PERUSED THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASSESSEE AND THE APPLICATION MADE BY IT.AFTER GOING THROUGH THE SAME, WE ARE OF THE OPINION THAT THEY WOULD BE USEFUL TO DECIDE THE ISSUE REGARDING TP ADJUSTMENT MADE UNDER THE HEAD CORPORATE FEES AND THE ASSESSEE WAS PREVENTED FROM SUBMITTING THEM BEFORE THE DEPARTMENTAL AUTHORITIES BY A REASONABLE CAUSE.THEREFORE, IN THE INTEREST OF JUST ICE,WE ADMIT THE ADDITIONAL EVIDENCES UNDER RULE 29 OF THE RULES. 3. FIRST EFFECTIVE GROUND OF APPEAL (GOA-2) IS ABOUT M ISTAKE IN CONSIDERING THE RETURNED INCOME OF THE ASSESSEE AT RS.5,60,97,490/-INSTEAD O F RS.5,56,17,488/-. WE DIRECT THE AO TO VERIFY THE FACT AND PASS NECESSARY ORDERS IF THE CL AIM MADE BY THE ASSESSEE IS FOUND FACTUALLY CORRECT.SECOND GROUND OF APPEAL IS DECIDED IN FAVOU R OF THE ASSESSEE, IN PART. 4. NEXT EFFECTIVE GROUND OF APPEAL(GOA 3-7)DEALS WITH TP ADJUSTMENT OF RS. 78.71 LAKHS UNDER THE HEAD PROVISION OF APPLICATION ENGINEERING SERVICE(AES).DURING THE TP PROCEEDINGS,THE TPO FOUND THAT THE ASSESSEE HAD ADO PTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD (MAM) USING OPERA TING PROFIT TO OPERATING COSTS (OP/ OC)AS PROFIT LEVEL INDICATOR (PLI), THAT IT HAD SEL ECTED FOR COMPARABLE COMPANIES HAVING A MARGIN OF 7.07%, THAT IT HAD EARNED MARGIN OF 5.60% , THAT IT WAS CLAIMED THAT MARGIN EARNED BY IT FELL WITHIN 5% SAFE HARBOUR AS PER THE PROVIS O TO SECTION 92C (2) OF THE ACT, THAT THE ASSESSEE CLAIMED THAT IT.S ENTERED INTO IT WITH ITS AES WERE AT ALP.THE TPO SELECTED THREE 689 OF 2017- ROLLS ROYCE MARINE INDIA PVT.LTD. 3 ADDITIONAL COMPARABLES NAMELY,ACROPETAL TECHNOLOGIE S LTD.(ATL),HOLTECH CONSULTING PRIVATE LTD.(HCPL) AND CATHER CONSULTING ENGINEERS LTD(CCEL) HAVING MARGIN OF 18.92%, 47.36% AND 54.5% RESPECTIVELY.HE DIRECTED THE ASSES SEE TO EXPLAIN AS TO WHY THE ABOVE- MENTIONED COMPARABLE SHOULD NOT BE CONSIDERED FOR D ECIDING THE ALP OF THE IT.S. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE TPO SELECTED SEVEN COMPANIES IN THE FINAL SET OF COMPARABLES AND ARRIVED AT ARITHMETIC MEAN OF 20 .51 FOR BENCHMARKING THE IT.S ENTERED INTO BY THE ASSESSEE. HE HELD THAT MARGIN EARNED BY THE ASSESSEE FELL BEYOND THE RANGE OF (+/-) 5%,THAT THE TRANSACTIONS WERE NOT AT ARMS LENGTH. HE PROPOSED AN ADDITION OF RS. 78.71 LAKHS. 4.1. AS STATED EARLIER,THE AO,IN HIS DRAFT ORDER PROPOSE D TO MADE THE ADDITION OF THE SAID AMOUNT UNDER THE HEAD AES.THE ASSESSEE FILED DETAIL ED OBJECTIONS BEFORE THE DRP STATING THAT TPO DID NOT CONDUCT A STRUCTURED SEARCH, THAT HE HAD DONE CHERRY PICKING OF COMPANIES AS COMPARABLES,THAT CHERRY PICKING OF COMPARABLES H AD DISTORTED THE COMPARABILITY ANALYSIS.IT ALSO RAISED OBJECTIONS ABOUT INCLUSION OF THREE NEW COMPARABLES BY THE TPO.AFTER CONSIDERING THE ORDER OF THE TPO AND THE SUBMISSION OF THE ASSESSEE,THE DRP HELD THAT THE TPO HAD NOT RESORTED TO CHERRY PICKING,THAT HE HAD MERELY ADDED A FEW COMPARABLES TO MAKE THE COMPARABILITY ANALYSIS MORE ACCURATE, SCIENTIFI C AND LOGICAL. REFERRING TO THE PROVISIONS OF SECTION 92C(3)(C) OF THE ACT THE DRP HELD THAT THE DETERMINATION OF ALP BY THE ASSESSEE WOULD BE DISTURBED IF THE INFORMATION OR DATA USED BY IT IN COMPUTATION OF ALP WAS NOT RELIABLE OR CORRECT, THAT THERE WAS NO VIOLATION OF THE TP PROVISIONS BY THE TPO IT REFERRED TO CERTAIN CASE LAWS. IT WAS FURTHER OBSERVED THAT IN THE TRANSFER PRICING STUDY REPORT THE ASSESSEE HAD CATEGORISED ITSELF AS A PROVIDER OF ADMINISTRAT IVE AND OTHER SERVICES, THAT IT WAS PROVIDING HIGHLY TECHNICAL ENGINEERING SERVICES AND DESIGN SO LUTION,THAT CATEGORISATION OF THE ASSESSEE COMPANY IS A MERE ADMINISTRATIVE SERVICE PROVIDER W AS INCORRECT,THAT THE COMPARABLES INTRODUCED BY THE TPO WERE PERFORMING BROADLY SIMIL AR FUNCTION AS WERE RENDERED BY THE ASSESSEE TO ITS AES, THAT BROADLY SIMILAR COMPARAB LES COULD BE USED FOR BENCHMARKING THE ALP UNDER TNMM. WITH REGARD TO ATL,THE DRP OBSERVED THAT THE ASSESS EE HAD RAISED OBJECTION ABOUT INCLUSION OF THE SAID COMPARABLE STATING THAT THERE WERE EXTR AORDINARY EVENTS,THAT IT COULD NOT JUSTIFY AS TO HOW THOSE EVENTS HAD IMPACTED THE MARGIN OF THE ENGINEERING DESIGN SEGMENT, THAT CCEL WAS PROVIDING CONSULTANCY SERVICES FOR POWER, OIL A ND GAS SECTORS,THAT HCPL WAS ALSO INTO PROVISION OF ENGINEERING CONSULTING SERVICES, THAT ALL THE FUNCTIONS PERFORMED BY THE COMPARABLE COMPANIES WERE SIMILAR TO THAT OF THE AS SESSEE.FINALLY,THE DRP REJECTED THE OBJECTIONS RAISED BY IT. 689 OF 2017- ROLLS ROYCE MARINE INDIA PVT.LTD. 4 5. BEFORE US,THE AR CONTENDED THAT THE TPO/DRP ERRED I N ARBITRARILY SELECTING COMPARABLE BASED ON INCORRECT APPRECIATION OF FUNCTIONAL ASSET AND RISK PROFILE, THAT IN THE CASE OF ATL VARIOUS EXTRAORDINARY EVENTS(MERGERS/AMALGAMATIONS) HAD TAKEN PLACE IN THE YEAR UNDER APPEAL,THAT APPROVAL TO GIVE EFFECT TO SUCH EVENTS WAS PENDING BEFORE THE HON'BLE HIGH COURT OF KARNATAKA,THAT THE IMPACT OF SUCH EVENTS WAS NOT TAKEN INTO ACCOUNT IN THE FINANCIAL STATEMENTS OF THE COMPARABLE,THAT ATL COULD NOT BE TAKEN AS A COMPANY COMPARABLE,THAT THE CORRECT MARGIN OF THE COMPARABLE WAS NOT TAKEN INTO CONSIDERATION.,THAT HCPL WAS INVOLVED IN PROVIDING COMPREHENSIVE SERVICES FROM CONCEPT TO COMMISSIONING FOR GREENFIELD MODERNI- SATION/CONVERSION/EXPANSION OF CEMENT AS WELL AS CA PTIVE POWER PLANT/WASTE HEAT RECOVERY BASED POWER PLANTS, THAT AS PER THE WEBSITE OF HCPL THE AUDITOR HAD QUALIFIED HIS REPORT AND HAD MENTIONED THAT THE COMPANY HAD NOT PROVIDED ANY SEGMENTAL REPORT AS REQUIRED BY THE ACCOUNTING STANDARDS (PAGE 474 OF PB), THAT IT WAS HAVING MACHINERY AS PART OF ITS FIXED ASSETS AND INVENTORY IN ITS BOOKS OF ACCOUNTS, THAT IT HAD ALSO LARGE PORTION OF COSTS AS SUB- CONTRACTING,THAT THE ASSESSEE WAS ENGAGED IN ENGINE ERING DESIGN AND DRAWING SERVICES FOR VARIOUS OVERSEAS CLIENTS.WITH REGARD TO CCEL,HE ARG UED THAT IT WAS INVOLVED IN PROVIDING COMPREHENSIVE SERVICES,THAT THE REPORT OF THE DIREC TOR OF THE COMPANY MENTIONED THAT IT HAD RECEIVED VARIOUS ORDERS FOR PROJECT MANAGEMENT SERV ICES FOR A THERMAL POWER PLANT AND ORDER FOR PREPARATION OF THERMAL POWER PLANT, THAT IT HAD ALSO RECEIVED ORDERS FOR BASIC AND DETAILED IMAGING SERVICES, THAT NO SEGMENTAL DETAILS WERE AV AILABLE FOR SUCH ACTIVITIES. REFERRING TO THE PAGE 56 OF THE PB,HE STATED THAT IT WAS OPERATING O NLY IN SEGMENT WHICH WAS ENGINEERING CONSULTANCY. HE REFERRED TO THE CASE OF BECHTEL IND IA PRIVATE LTD.(66 TAXMANN.COM 160) IN HIS SUPPORT. THE DR ARGUED THAT IN THE MATTER OF ATL THE ASSESSE E HAD FAILED TO PROVE THAT THE ALLEGED EXTRA ORDINARY EVENT AFFECTED THE PROFIT MARGIN,TH AT THERE WAS FUNCTIONAL SIMILARITIES IN THE JOB PROFILE OF THE ASSESSEE AND ATL,THAT IN TWO OTH ER CASES ALSO THERE WAS BROAD COMPARABILI TY,THAT IN TP PROCEEDINGS OVERALL COMPARISON HAD T O BE SEEN. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD SELECTED 4 COMPARABLES TO PROVE THAT I T.S ENTERED INTO WITH AE.S WERE AT ARMS LENGTH,THAT IT HAD ADOPTED TNMM AS MAM,THAT AS PER THE TPS THE PROFIT MARGIN OF THE ASSESSEE WAS WITHIN THE PERMISSIBLE LIMITS,THAT THE TPO ADDED THREE MORE COMPARABLES AND 689 OF 2017- ROLLS ROYCE MARINE INDIA PVT.LTD. 5 PROPOSED UPWARD ADJUSTMENTS OF RS.78.71 LAKHS UNDER THE HEAD AES,THAT THE DRP REJECTED THE OBJECTION RAISED BY THE ASSESSEE ABOUT THREE CO MPARABLES-NAMELY ATL,HPCL AND CCEL,THAT DRP HAD HELD THAT COMPANIES SELECTED BY T HE TPO WERE PERFORMING FUNCTIONS SIMILAR TO THE FUNCTIONS OF THE ASSESSEE,IT WAS ARG UED THAT THERE WAS NO FUNCTIONAL COMPARABILITY BETWEEN THE ASSESSEE AND THE COMPARA BLES SELECTED BY THE TPO. SO,IT WOULD BE USEFUL TO TAKE UP THE JUSTIFICATION OF INCLUSIONS OF ABOVE REFERRED THREE COMPARABLES IN THE FINAL LIST OF COMPANIES SELECTED FOR BENCHMARKING THE ALP.IN THE CASE OF CCEL IT IS FOUND THAT IT IS INVOLVED IN PROVIDING C OMPREHENSIVE CONSULTANCY SERVICES IN THE FIELDS OF POWER,OIL AND GAS SECTORS IN INDIA AND OV ERSEAS.AS PER THE REPORT OF THE DIRECTOR,DURING THE YEAR UNDER CONSIDERATION,IT HAD RECEIVED ORDERS FOR PROJECT MANAGEMENT SERVICES FOR A THERMAL POWER PLANT AND ORDER FOR PR EPARATION OF THERMAL POWER PLANT. IN OUR OPINION,THERE IS NO FUNCTIONAL COMPARABILITY BETWEE N THE ASSESSEE AND CCEL.ONE IS IN FIELD OF ENGINEERING CONSULTANCY SERVICES-SPECIALLY IN TH E AREAS OF POWER/OIL/GAS,WHEREAS THE OTHER IS ENGAGED IN THE BUSINESS OF SALES SUPPORT OF MARI NE EQUIPMENT FOR GROUP COMPANIES, SERVICING OF MARINE EQUIPMENT, SALE OF MARINE SPARE S AND ASSEMBLY OF MARINE ELECTRICAL SYSTEM/SWITCHBOARDS FOR GROUP COMPANIES.THE MAIN BU SINESS OF THE ASSESSEE IS WITH THE GROUP ENTITIES. SECONDLY,SEGMENTAL RESULTS OF BASIC AND DETAILED ENGINEERING SERVICES OF CCEL ARE NOT AVAILABLE FOR THE YEAR UNDER APPEAL.TH US,IN OUR OPINION THE DRP WAS NOT JUSTIFIED IN HOLDING THAT CCEL WAS A VALID COMPARAB LE AND THAT THE ASSESSEE AND CCEL WERE PERFORMING SIMILAR FUNCTIONS.HERE,WE WOULD LIKE TO REFER TO THE CASE OF BECHTEL INDIA (P.) LTD. (SUPRA).WE ARE REPRODUCING THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL AND IT READS AS UNDER : 13.A BARE PERUSAL OF THE PROFILE OF THE AFORESAID COMPANY GOES TO PROVE THAT THE SAME IS ENGAGED IN OFFERINGS COMPREHENSIVE SERVICES FROM CO NCEPT TO COMMISSIONING FOR GREEN-FIELD, MODERNIZATION/CONVERSION EXPANSION OF CEMENT AS WEL L AS CAPTIVE POWER PLANT/WASTE HEAT RECOVERY BASED POWER PLANT PROJECTS. HOLTEC ALSO EN GAGED IN PROVIDING ENGINEERING SUPPORT SERVICES FOR BULK MATERIAL HANDLING AND STRUCTURAL STEEL DETAILING ETC. HAVING PLANT AND MACHINERY AS PART OF ITS FIXED ASSETS AND INVENTORY IN ITS BOOKS, IT HAS ALSO LARGE PORTION OF COST AS SUB-CONTRACTING AND PROFILE OF HOLTEC IS D IAMETRICALLY OPPOSED TO THE ASSESSEE COMPANY WHICH IS ENGAGED IN ENGINEERING DESIGN AND DRAWING FOR VARIOUS OVERSEAS AES TO SUPPORT OVERSEAS OFFICES TURNKEY PROJECT EXECUTION. THE ASSESSEE COMPANY HAS NEITHER ANY PLANT AND MACHINERY AS PART OF ITS FIXED ASSETS AND INVENTORY IN ITS BOOKS NOR HAS LARGE PORTION OF ITS COST AS SUB-C0NTRACTING COST. SO, IT CANNOT BE TAKEN AS A COMPARABLE IN ANY CASE. IN CASE OF ATL IT IS FOUND THAT EXTRA ORDINARY EVEN TS HAD TAKEN PLACE AND THE IMPACT OF MERGERS/ACQUISITIONS WERE NOT CONSIDERED IN THE FIN ANCIAL FUNCTIONS OF THE COMPANY.SO,IT CANNOT BE TAKEN AS A VALID COMPARABLE.AS FAR AS HPC L IS CONCERNED,WE FIND THAT IT IS ENGAGED IN PROVIDING CONSULTING SERVICES IN THE AREAS OF PO WER,HIGHWAY,BRIDGES,ENGINEERING SUPPORT 689 OF 2017- ROLLS ROYCE MARINE INDIA PVT.LTD. 6 SERVICES FOR BULK MATERIAL HANDLING AND STRUCTURAL STEEL DETAILING.ITS PORTFOLIO OF SERVICES INCLUDE ALL DISCIPLINE OF ENGINEERING,BUSINESS CONS ULTING,GEOLOGY AND MINING,PROJECT AND CONSTRUCTION-MANAGEMENT,ENVIRONMENT-MANAGEMENT AND PERFORMANCE-MANAGEMENT.CLEARLY, HPCL IS ENGAGED IN PROVIDING COMPREHENSIVE SERVICE S FROM CONCEPT TO COMMISSIONING FOR GREEN FIELD,MODERNIZATION/EXPANSION OF CEMENT AS WE LL AS CAPTIVE POWER PLANT,THAT THE ASSESSEE UNLIKE HPCL IS NOT PROVIDING ENGINEERING S UPPORT SERVICES FOR BULK MATERIAL HANDLING AND STRUCTURAL STEEL DETAILING.BESIDES SEG MENTAL DATA OF HPCL ARE NOT AVAILABLE THAT COULD BE COMPARED.IT IS ALSO A FACT THE HPCL IS HAV ING PLANT AND MACHINERY AS PART OF ITS FIXED ASSETS AND INVENTORY IN ITS BOOKS OF ACCOUNTS .SUB-CONTRACTING IS A LARGE PORTION OF COST OF HPCL.IN OUR OPINION,THERE IS NO SIMILARITY BETWE EN THE FUNCTIONS OF THE ASSESSEE AND HPCL. IN SHORT,ALL THE THREE COMPARABLES,SELECTED BY THE TPO AND APPROVED BY THE DRP,HAVE TO BE REJECTED FOR ARRIVING AT THE ALP OF THE IT.S OF THE ASSESSEE .IF THESE COMPARABLES ARE NOT CONSIDERED FOR BENCHMARKING THE MARGIN OF PROFIT FO R THE YEAR UNDER APPEAL,AS COMPARED TO OTHER COMPARABLES,IS WITHIN THE PRESCRIBED LIMITS I .E.(+/- 5%).THEREFORE,WE DECIDE THE SECOND EFFECTIVE GROUND OF APPEAL (GOA 3-7) IN FAVOUR OF T HE ASSESSEE. 7. LAST GROUND OF APPEAL DEALS WITH LEVY OF INTEREST U /S.234 OF THE ACT,IS OF CONSEQUENTIAL NATURE.HENCE,IT IS NOT BEING ADJUDICATED. AS A RESULT,APPEAL FILE BY THE ASSESSEE STANDS PART LY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER, 2017. , 2017 SD/- SD /- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 18.10.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.