M/s. LinkedIn Technology Information Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 706/DEL/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7246 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 23-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Keywords: Transfer pricing; Charitable institution; International transaction
• Section: 92C; 234B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1, NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NO.706/DEL/2016 (ASSESSMENT YEAR 2011-12) LINKED IN TECHNOLOGY VS. ACIT, CIRCLE 15(2), INFORMATION PVT. LTD., NEW DELHI 16-A,/20, WEA MAIN AJMALKHAN ROAD, KAROL BAGH, NEW DELHI 110 005 GIR / PAN : AABCL7284P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HIMANSHU S. SINHA, ADV. MS. VRINDA TULSIAN, ADV. RESPONDENT BY :SHRI AMRENDRA KUMAR, CIT DR DATE OF HEARING: 17.06.2016 DATE OF PRONOUNCEMENT: 23.06.2016 ORDER PER BEENA A. PILLAI, JM: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31/12/2015 PASSED BY ACIT CIRCLE 15 (2), NEW DELHI FOR ASSESSMENT YEAR 2011-1 2 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN ASSESSING THE TOTAL INCOME OF THE APPELLANT FOR THE RELEVANT AY AT RS.1,95,95,410/- AS AGAINST THE RETURNED INCOME OF RS.71,44,336/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') / AO / TRANSFER PRICING OFFICER (TPO') ERR ED IN MAKING A TRANSFER PRICING ADJUSTMENT OF RS.1,23,17,594/- IN RESPECT OF THE INTERNATIONAL TRANSACTION RELATING TO MARKETING SUPPORT SERVICE 2 I.T.A.N0.706./DEL/2016 ALLEGING THE SAME TO BE NOT AT ARM'S LENGTH IN TERM S OF THE PROVISIONS OF SECTION 92C OF THE ACT READ WITH RULE 10D OF THE INCOME-TAX RULES,1962 ('THE RULES'). 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP / AO / TPO WHILE REJECTING APPELLANT'S DETERMINATION OF ARM'S LENGTH PRICE FOR RENDERING MARKETING SUPPORT SERVICES HAVE ERRED IN INCLUDING INAPPROPRIATE COMPARABLES FROM THE APPELLANT'S SEARCH MATRIX. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP / AO / TPO HAVE ERRED, IN ARBITRARILY REJECTING CERTAIN FUNCTIONALLY COMPARAB LE COMPANIES IDENTIFIED BY THE APPELLANT, INTER ALIA, USING UNREASONABLE COMPARABILITY CRITERION. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN CHARGING INTEREST UNDER SECTIONS 234B AND 234D OF THE ACT. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMEN T OF INCOME. EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE, OR AT, THE TIME OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS THAT EMANATES FROM THE ORDERS OF THE AUTHORITIES BELOW ARE AS UNDER: 2.1 THE ASSESSEE HAD FILED ITS RETURN OF INCOME DEC LARING TOTAL INCOME OF RS.71,44,336/- ON 04/11/2011. THE S AME 3 I.T.A.N0.706./DEL/2016 WAS PROCESSED UNDER SECTION 143 (1) OF THE IT ACT. AS THERE INVOLVED INTERNATIONAL TRANSACTION, THE CASE WAS REFERRED TO THE TRANSFER PRICING OFFICER (TPO) FOR ASSESSING THE ARMS LENGTH PRICE OF THE TRANSACTION. 2.2 LD. TPO OBSERVED THAT ASSESSEE IS A WHOLLY OWNE D SUBSIDIARY OF LINKEDIN-IRELAND (AE), WHICH OPERATES AN ONLINE PROFESSIONAL NETWORK ON THE INTERNET THROUGH WHICH ITS MEMBERS ARE ABLE TO CREATE, MANAGE AND SHARE TH EIR PROFESSIONAL IDENTITIES ONLINE, BUILD AND ENGAGE TH EIR PROFESSIONAL NETWORKS, ACCESS SHARED KNOWLEDGE AND INSIGHTS AND FIND BUSINESS OPPORTUNITIES. ASSESSEE HAS ENTERED INTO AN INTER COMPANY MARKETING SERVICE AGREEMENT WITH ITS AE ON 29/01/2010, WHICH WAS LATE R ON AMENDED ON 17/06/2011 TO PROVIDE MARKETING SUPPORT SERVICES ASSOCIATED WITH LINKEDIN BUSINESS IN INDIA . THESE SERVICES INCLUDE PROMOTING THEIR LINKEDIN BUSINESS FOR THE ACCOUNT OF AND THE BENEFIT OF THE AE, LIAISON OF PO TENTIAL NEW CUSTOMERS, HOSTING CONFERENCES AND SALES EVENTS TO PROMOTE LINKEDIN PRODUCT IN THE LOCAL MARKET. THE ASSESSEE HAD ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS AES: TYPE OF TRANSACTION METHOD AMOUNT INR PROVISION OF MARKETING SUPPORT SERVICES TO LIKEDIN IRELAND PURSUANT TO INTERCOMPANY MARKETING SERVICES AGREEMENT DATED 29 TH JANUARY 2010 (REFER PAGE 119-128) TNMM (PLI+OP/OC) 8,71,82,854 4 I.T.A.N0.706./DEL/2016 2.3 IN CONNECTION WITH THE PROVISION OF MARKETING SERVICES TO ITS AE THE ASSESSEE APPLIED A MARKUP OF 10% ON THE COST INCURRED. THE ASSESSEE HAS SELECTED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD (MAM) FOR THE PURPOSES OF CALCUL ATING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION AND THE OPERATING MARGIN HAS BEEN CALCU LATED BY USING PROFIT LEVEL INDICATOR (PLI) AS OPERATING PROFIT OVER OPERATING COSTS (OP/OC). THE ASSESSEE HAD CALCULATE D ITS AVERAGE MEAN AT 10.21%. FOR THE BENCHMARKING THE ASSESSEE HAS SELECTED ITSELF AS THE TESTED PARTY AS THE SAME IS THE LEAST COMPLEX AND RELIABLE ACCURATE DAT A FOR COMPARISON AND IS EASILY AND READILY AVAILABLE. IT HAS ALSO SUBMITTED IN THE TP STUDY THAT THE ASSESSEE DOES NO T OWN ANY VALUABLE INTANGIBLE PROPERTY. 2.4 THE FUNCTIONS PERFORMED BY THE ASSESSEE AND THE RISK ASSUMED BY IT ARE SIMILAR TO THOSE OF SALES AN D MARKETING COMPANIES AS THE ASSESSEE IS MAINLY ENGAG ED IN SELLING AND MARKETING SUPPORT ACTIVITIES. ON THE BASIS OF THE FINANCIAL RESULTS, THE ASSESSEE HAD SELECTED THE FOLLOWING COMPARABLES WHOSE ARITHMETIC MEAN WAS 11.94% AS UNDER: SR. NO. COMPANY NAME DATA BASE 3 YEAR AVERAGE (FY 2009- 2011) 1 ASIAN BUSINESS EXHIBITION & CONFERENCES LTD. PROWESS 40.42% 5 I.T.A.N0.706./DEL/2016 2 CONCEPT COMMUNICATION LTD. PROWESS 3.59% 3 HINDUSTAN UNILEVER FIELD SERVICES PVT. LTD. PROWESS 10.69% 4 IDC (INDIA) LTD. CAPITALINE 13.18% 5 INDIA EXPOSITION MART LTD. PROWESS -4.36 6 MARKETING CONSULTANTS & AGENCIES LTD. PROWESS 8.11% 7 ARITHMETIC MEAN 11.94% 2.5 FROM THE ABOVE, THE LD. TPO ACCEPTED IDC INDIA LTD., CONCEPT COMMUNICATIONS LTD. AND HINDUSTHAN UNILEVER FIELD SERVICES PVT. LTD. THE LD. TPO, APP LIED QUANLITATIVE FILTER AND ARRIVED AT NEW SET OF COMPA RABLES, OF WHICH THE AVERAGE MEAN CALCULATED WAS 23.20%, WH ICH ARE AS UNDER: S.NO. COMPANY NAME OP/TC 1 IDC (INDIA) LTD. 10.60 2 MEDIA RESEARCH USERS COUNCIL 40.53 3 QUADRANT COMMUNICATIONS LTD. 14.58 4 INFO EDGE (INDIA) LTD. 45.53 5 CONCEPT COMMUNICATION LTD. 4.73 6 HINDUSTAN UNILEVER FIELD SERVICES P. LTD. 6.45% AVERAGE 23.20% 2.6 THIS LEAD TO THE PROPOSAL FOR A TRANSFER PRICIN G ADJUSTMENT AMOUNTING TO RS.80,61,649/-. THEREAFTER THE ASSESSEE CARRIED THE MATTER BEFORE THE DISPUTE RESO LUTION 6 I.T.A.N0.706./DEL/2016 PANEL (DRP)-1, NEW DELHI. THE DRP UNDER SECTION 144 C (5) OF THE IT ACT, 1961 GAVE DIRECTIONS ON 24/11/20 15, DETERMINING THE TOTAL INCOME CONFIRMING THE ADDITIO N MADE BY THE LD.TPO AT RS.80,61,649/-, TO THE ARMS L ENGTH PRICE. THE DRP EXCLUDED 2 COMPARABLES BEING QUADRAN T COMMUNICATIONS LTD. AND CONCEPT COMMUNICATIONS LTD. AND ACCEPTED THE REMAINING COMPARABLES, WHICH ARE A S UNDER: S.NO. COMPANY NAME OP/OC% 1 IDC (INDIA) LTD. 10.60% 2 MEDIA RESEARCH USERS COUNCILS 40.53% 3 INFO EDGE INDIA LTD. 45.53% 4 HINDUSTAN UNILEVER FIELD SERVICES P. LTD. 6.45% 5 AVERAGE 25.78 2.7 ON RECEIPT OF THE DIRECTIONS PASSED BY THE DRP, THE LD. AO PASSED THE ASSESSMENT ORDER ON 31/12/2015, MAKING THE IMPUGNED ADDITIONS. 3. AGGRIEVED BY THE ORDER OF THE LD. AO THE ASSESSE E IS IN APPEAL BEFORE US IN RESPECT OF THE ADJUSTMENTS M ADE TO ALP. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE SIDES, PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW, THE PAPER BOOKS FILED BY THE ASSESSEE AND THE CASE LAWS RELIED UPON BY BOTH THE SIDES. 4.1 AT THE OUTSET, IT IS SUBMITTED BY THE LD. AR TH AT THE ASSESSEE IS NOT SERIOUSLY DISPUTING THE TNMM AS THE MAM ADOPTED BY THE TRANSFER PRICING OFFICER. THUS THE O NLY DISPUTE THAT ARISES IS WITH RESPECT TO SELECTION OF THE COMPARABLES. TO BE PRECISE, THE CONTROVERSY ROTATES 7 I.T.A.N0.706./DEL/2016 AROUND THE EXCLUSION OF THE FOLLOWING COMPARABLES I N THE LIST OF COMPARABLES:- 1. MEDIA RESEARCH USERS COUNCILS 2. INFO EDGE INDIA LTD. 4.2 APART FROM THAT THE ASSESSEE IS INSISTING ON IN CLUSION OF THE FOLLOWING 2 COMPARABLES, WHICH WERE NOT INCL UDED BY THE DRP AS WELL AS THE TPO IN THEIR LIST OF COMPARABLES:- 1. CONCEPT COMMUNICATION LTD. 2. INDIAN EXPOSITION MART LTD. 4.3 WE SHALL TAKE UP THESE COMPANIES ONE BY ONE TO ASCERTAIN THEIR COMPARABILITY OR OTHERWISE WITH THE ASSESSEE COMPANY. BEFORE EMBARKING UPON THIS EXERC ISE, IT IS SINE QUA NON TO PRECISELY CONSIDER THE FUNCTIONAL PROFILE OF THE ASSESSEE. 5. FUNCTIONAL ANALYSIS OF THE ASSESSEE FROM THE TP STUDY: 5.1 LINKEDIN CORPORATION HEADQUARTERED IN MOUNTAIN VIEW, CALIFORNIA IN THE UNITED STATES WAS INCORPORA TED ON 06/03/2003. THE COMPANY OPERATES AN ONLINE PROFESSIONAL NETWORK ON THE INTERNET THROUGH WHICH THE COMPANYS MEMBERS ARE ABLE TO CREATE, MANAGE AND SH ARE THEIR PROFESSIONAL IDENTITIES ONLINE, BUILD AND ENG AGE THEIR PROFESSIONAL NETWORKS, ACCESS SHARED THEIR KNOWLEDG E AND INSIGHTS AND FIND BUSINESS OPPORTUNITIES. ON LINKED IN, MORE THAN 1 20 MILLION PROFESSIONALS FIND JOBS, PEO PLE AND SERVICE PROVIDERS THROUGH THEIR NETWORK OF BUSINESS 8 I.T.A.N0.706./DEL/2016 RELATIONSHIP. LINKEDIN OFFERS 4 TYPES OF ACCOUNT BA SIC, PREMIUM FOR BUSINESS, PREMIUM FOR JOBSEEKERS AND PREMIUM FOR RECRUITERS AND EMPLOYERS. LINKEDIN PLAT FORM PROVIDES MEMBERS WITH SOLUTIONS INCLUDING APPLICATI ONS AND TOOLS TO SEARCH CONNECT AND COMMUNICATE WITH BUSINESS CONTACTS, LEARN ABOUT CAREER OPPORTUNITIES , JOIN INDUSTRY GROUPS RESEARCH ORGANISATION AND SHARE INFORMATION. 5.2 DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E HAS GENERATED REVENUE UNDER THE FOLLOWING CATEGORIE S HIRING SOLUTIONS, MARKETING SOLUTIONS, PREMIUM SUBSCRIPTIONS. IT IS OBSERVED FROM THIS TP STUDY TH AT THE ASSESSEE DOES NOT BEAR ANY RISKS ASSOCIATED WITH TH E INTANGIBLES INCLUDING TECHNOLOGY ACT SYMPTOMS, TECHNOLOGY OBSOLESCENCE, TECHNOLOGY FAILURE AND INTELLECTUAL INFRINGEMENT RISKS. FURTHER IT DOES NO T BEAR ANY MARKET RISK, FOREIGN-EXCHANGE RISK OR CREDIT RI SK. ALL THE RISKS ARE BORNE BY THE AE. THE ASSESSEE PROVI DES THE FOLLOWING PRIMARY FUNCTIONS TO SUPPORT THE SALES: 1. MARKETING 2. PROMOTION 3. FACILITATING THE SALES OF LINKEDIN PRODUCTS AND SERVICES IN INDIA. 4. PROVIDE LOCAL SUPPORT ON SALES OPPORTUNITIES 5. BUILD AND MAINTAIN THE RELATIONSHIP WITH PROSPECTIV E AND EXISTING CUSTOMERS 6. ENGAGES IN VARIOUS PROMOTIONAL AND MARKETING ACTIVITIES 9 I.T.A.N0.706./DEL/2016 5.3 THUS THE COMPANY HAS CHARACTERISED ITSELF AS BE ING ENGAGED IN MARKETING AND SALES PROMOTION ACTIVITIES WITH ITS AE AND IS A SUPPORT SERVICE PROVIDER THAT DOES NOT OWN ANY INTANGIBLES. WITH THE ABOVE UNDERSTANDING OF TH E NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO ITS AES, WE WILL NOW PROCEED TO EXAMINE THE COMPATIBILITY OR OT HERWISE OF THE COMPANIES DISPUTED BY THE ASSESSEE TO THE EX TENT. 6. MEDIA RESEARCH USERS COUNCIL: 6.1 THE ASSESSEE OBJECTED THE INCLUSION OF THIS COM PANY PROPOSED TO BE USED IN THE FINAL SET OF COMPARABLES BY THE TPO BY CONTENDING THAT IT WAS NOT FUNCTIONALLY COMPARABLE. THE LD.TPO INCLUDED THIS COMPANY ON THE GROUND THAT THIS COMPARABLE COMPANY RENDERS MARKET RESEARCH SURVEYS TO VARIOUS MEMBERS AND IT IS A PAR T AND PARCEL OF THE MARKET SUPPORT SERVICES. ON THE OTHER HAND THE LD.AR CONTENDED THAT THIS COMPARABLE IS FUNCTIO NALLY NOT SIMILAR DUE TO ABNORMAL PROFITS AND THE FINANCI AL BEING NOT SAME. THE FUNCTIONS OF THIS COMPARABLE HA S BEEN PLACED AT PAGE 191 TO 193 OF THE PAPER BOOK. T HIS COMPANY UNDERTAKES RESEARCH WORK FOR THE BENEFIT OF ITS MEMBERS ONLY. THE LD.AR HAS PLACED RELIANCE UPON TH E CERTIFICATE OF INCORPORATION OF THIS COMPARABLE FRO M THE MINISTRY OF CORPORATE AFFAIRS WHICH SHOWS THAT IT I S A SECTION 25 COMPANY, WHICH DO NOT DISTRIBUTE PROFITS TO SHAREHOLDERS AND ARE BASICALLY SETUP FOR CHARITABLE AND PUBLIC PURPOSES. HE FURTHER BROUGHT OUR ATTENTION T O THE FINANCIAL ACCOUNTS OF THIS COMPARABLE AT PAGE 465 W HICH SHOWS THAT THE COMPARABLE HAS GENERATED ITS REVENUE 10 I.T.A.N0.706./DEL/2016 BASICALLY FROM THE SUBSCRIPTION FEES RECEIVED FROM ITS MEMBERS. HE FURTHER SUBMITTED THAT THIS COMPARABLE BEING A CHARITABLE ORGANISATION DOES NOT HAVE SEGME NTAL REPORTING AND RELATED PARTY DISCLOSURES. THUS THIS COMPANY DOES NOT HAVE ADEQUATE REQUISITE DATA AVAIL ABLE. 6.2 WE HAVE PERUSED THE ANNUAL REPORTS OF THIS COMPARABLE AND HAVE FOUND THAT THE MAIN REVENUE HAS BEEN GENERATED ONLY FROM THE SUBSCRIPTION FEES FROM MEMBERS AND IT MEETS ITS EXPENSES THROUGH THESE SUBSCRIPTION FEES. FURTHER IT IS OBSERVED THAT THIS COMPANY IS A NON-PROFIT MAKING ORGANISATION. WE ARE THUS OF THE CONSIDERED OPINION THAT THIS COMPANY SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES. 7. INFO EDGE INDIA LTD.: 7.1 THE ASSESSEE OBJECTED THE INCLUSION OF THIS COM PANY PROPOSED TO BE USED IN THE FINAL SET OF COMPARABLES BY THE TPO BY CONTENDING THAT IT WAS NOT FUNCTIONALLY COMPARABLE. THE LD.TPO INCLUDED THIS COMPANY ON THE GROUND THAT THIS COMPARABLE IS PROVIDING SERVICES W HICH FALL WITHIN THE BROAD CATEGORY OF CONSULTANCY SERVI CES. ON THE CONTRARY THE LD.AR SUBMITTED THAT THIS COMPARAB LE IS AN INTERNET BASED SERVICE PROVIDER OPERATING IN 4 V ERTICALS THROUGH WEB PORTALS NAMELY NAUKRY.COM FOR RECRUITME NT RELATED SERVICES, JEEVAN SATHI.COM FOR MATRIMONY RE LATED SERVICES, 99 ACRES.COM FOR REAL ESTATE RELATED SERV ICES AND SHIKSHA.COM FOR EDUCATION AND RELATED SERVICES. HE SUBMITTED THAT THIS COMPARABLE IS SPREAD ACROSS WID E SPECTRUM OF DOMAINS IN THE INDIAN INTERNET SPACE AN D ITS 11 I.T.A.N0.706./DEL/2016 SIGNIFICANT REVENUE COMES FROM THESE VERTICAL PORTA LS. APART FROM A WIDE RANGE OF DOMAINS THE COMPARABLE H AS ACQUIRED 40% STAKE IN APPLECT LEARNING SYSTEMS PRIV ATE LIMITED AND 49% IN ETECHACES CONSULTING AND MARKETI NG PRIVATE LIMITED DURING THE FINANCIAL YEAR 2009 AND HAS CONTINUED TO EXPLORE MORE SUCH OPPORTUNITIES DURING THE YEAR UNDER CONSIDERATION. THE LD.AR TOOK US THROUGH THE FINANCIALS OF THIS COMPARABLE PLACED AT PAGE 259 TO 437. 7.2 WE HAVE PERUSED THE ANNUAL REPORTS OF THIS COMPARABLE AND HAVE FOUND THAT THE MAIN REVENUE HAS BEEN GENERATED FROM SUBSCRIPTION FEES RECEIVED FROM THE WIDE RANGE OF DOMAINS ON INTERNET. FURTHER IT IS OB SERVED THAT THIS COMPANY IS IN THE PROCESS OF BUILDING ITS OWN BRAND AND HAS INCURRED HUGE ADVERTISING EXPENSES TO PROMOTE ITSELF. FURTHER IT IS OBSERVED FROM THE TP STUDY OF THIS COMPARABLE THAT ALL THE RISKS ASSOCIATED TO TH E BUSINESS IS BORNE BY THE COMPARABLE, WHICH IS NOT T HE CASE WITH THE ASSESSEE BEFORE US. THE EMPLOYEE COST OF THE COMPARABLE COMPANY COMES AT 55.98% AS COMPARED TO 32.93% IN ASSESSEES CASE. IT IS THUS OBSERVED THAT THIS COMPARABLE OWNS VALUABLE ONLINE PORTALS THROUGH WHI CH IT EARNED SERVICE FEE FROM THIRD-PARTY CUSTOMERS MAKIN G IT FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE. WE ARE THUS OF THE CONSIDERED OPINION THAT THIS COMPANY SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES. 8. INDIA EXPOSITION MART LTD 12 I.T.A.N0.706./DEL/2016 8.1 THE ASSESSEE HAS PRAYED FOR INCLUSION OF THIS COMPANY AS A COMPARABLE. IT HAS BEEN SUBMITTED THAT THIS COMPANY IS ENGAGED IN THE BUSINESS OF ORGANIZING TR ADE FAIRS, CONFERENCES AND EXHIBITIONS. IT IS ALSO INVO LVED IN PROVIDING EVENT MANAGEMENT SERVICES, ADVERTISING AN D INTERIOR DECORATION SERVICES. THE LD. A.R. SUBMITS THAT THE CURRENT YEAR DATA OF THIS COMPARABLE IS AVAILABLE. HE FURTHER SUBMITTED THAT THE RELATED PARTY TRANSACTIO NS OF THIS COMPARABLE COMPANY DOES NOT EXCEED 25% OF ITS SALES AND IT IS NOT A LOSS-MAKING COMPANY AND SUBMITTED T HAT THIS COMPARABLE QUALIFIES FOR ALL THE FILTERS THAT HAVE BEEN APPLIED BY THE LD.TPO. 8.2 ON THE CONTRARY, THE LD. DR RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW. ON THE CONTRARY THE LD. DR R ELIED UPON THE ORDER OF THE DRP AND PRAYED FOR EXCLUSION OF THIS COMPARABLE AS THE ACTIVITIES OF THIS COMPARABLE COM PANY ARE SUBSTANTIALLY DIFFERENT FROM THE BUSINESS ACTIV ITIES OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THIS COMPAR ABLE COMPANY IS A MEDIA COMPANY AND THUS, DOES NOT MATCH FUNCTIONALLY WITH THE ASSESSEE IN ANY MANNER WHATSO EVER. 8.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL PLACED BEFORE US. IT IS OBSERVED THAT THIS COMPARABLE COMPANY IS INTO A WIDE RANGE OF SERVICES INCLUDING ADVERTISING, INTERIOR DECORATION AND EVEN T MANAGEMENT. ON A SIMILAR FOOTING WE HAD EXCLUDED IN FOR EDGE INDIA LTD AS IT WAS INVOLVED IN VARIOUS WEB PO RTALS. THERE CANNOT BE A DIFFERENT YARDSTICK FOR DECIDING 13 I.T.A.N0.706./DEL/2016 COMPARABILITY OF CASES. ACCORDINGLY, WE DIRECT THIS COMPARABLE TO BE EXCLUDED FROM THE LIST. 9. CONCEPT COMMUNICATION LTD 9.1 THE ASSESSEE HAS PRAYED FOR INCLUSION OF THIS COMPANY AS A COMPARABLE. IT HAS BEEN SUBMITTED THAT THIS COMPANY IS ENGAGED IN PROVIDING COMMUNICATION AGENC Y SERVICES, DIGITAL ADVERTISING AND MARKETING SERVICE S, EVENT MANAGEMENT SERVICES AND CONSULTANCY, MEDIA PLANNING AND BUYING, PUBLIC RELATIONS SERVICES ETC. THE LD. AR SUBMITTED THAT THIS COMPARABLE PASSES THROUGH THE F ILTERS APPLIED BY THE TPO. HE FURTHER SUBMITTED THAT ONLY BROAD FUNCTIONAL AND PRODUCT COMPATIBILITY IS TO BE CONSI DERED AS NET MARGINS ARE LESS INFLUENCED BY PRODUCT AND FUNCTIONAL DIFFERENCES. 9.2 ON THE CONTRARY THE LD. DR RELIED UPON THE ORDE R OF THE DRP AND PRAYED FOR EXCLUSION OF THIS COMPARABLE AS THE ACTIVITIES OF THIS COMPARABLE COMPANY ARE SUBSTANTIALLY DIFFERENT FROM THE BUSINESS ACTIVITIE S OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THIS COMPARABLE COMPANY IS A MEDIA COMPANY AND THUS, DOES NOT MATCH FUNCTIONALLY WITH THE ASSESSEE IN ANY MANNER WHATSO EVER. 9.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL PLACED BEFORE US. IT IS OBSERVED THAT THIS COMPARABLE COMPANY IS INTO A WIDE RANGE OF SERVICES INCLUDING ADVERTISING AND PUBLIC RELATIONS MANAGEME NT. ON A SIMILAR FOOTING WE HAD EXCLUDED INFO EDGE INDI A LTD., 14 I.T.A.N0.706./DEL/2016 AS IT WAS INVOLVED IN VARIOUS WEB PORTALS. THERE CA NNOT BE A DIFFERENT YARDSTICK FOR DECIDING COMPARABILITY OF CASES. ACCORDINGLY, WE DIRECT THIS COMPARABLE TO BE EXCLUD ED FROM THE LIST. 9.4 IN VIEW OF THE DISCUSSIONS AND FINDINGS RECORDE D HEREINABOVE, WE DIRECT THE LD TPO/AO TO WORK OUT TH E ARMS LENGTH PRICE ADJUSTMENT, IF ANY. 10. ACCORDINGLY, GROUND NO. 3 AND 4 OF THE ASSESSEES APPEAL STAND DISPOSED OF AS DISCUSSED ABOVE. 11. GROUND NO. 5 BEING CONSEQUENTIAL IN NATURE, IS NOT ADJUDICATED UPON. GROUND NO. 6 BEING PREMATURE AT THIS STAGE IS DISMISSED AND GROUNDS NO. 1 AND 2 BEING GE NERAL IN NATURE, DO NOT CALL FOR ANY INTERFERENCE. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 23 RD JUNE, 2016 SD./- SD./- (N. K. SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:23.06. 2016 SP. 15 I.T.A.N0.706./DEL/2016 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) S.NO. DETAILS DATE INITIALS DESIGNATION 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 23/6/16 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 23/6 SR. PS/PS 7 FILE SENT TO BENCH CLERK 24/6 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER