DHL EXPRESS (INDIA) P. LTD, MUMBAI V. ASST CIT 10(1), MUMBAI

ITA 7360/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48629 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SPONTHIL KUMAR
• Assessee Lawyers: RAJU VAKHARIA
• Keywords: Transfer pricing; International transaction; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH BEFORE SHRI D.MANMOHAN, VICE PRESIDENT & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.7360/MUM/2010 A.Y 2006-07 M/S DHL EXPRESS (INDIA) PRIVATE LIMITED, 8 TH FLOOR, DHEERAJ ARMA, A.K.MARG, BANDRA (EAST), MUMBAI 400 051. PAN:AABCD 3611 Q VS. ASST. COMMISSIONER OF I.T. 10 (1), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI KANCHAN KAUSHAL & RAJU VAKHARIA. RESPONDENT BY : SHRI SPONTHIL KUMAR. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BU T AT THE TIME OF HEARING LD.COUNSEL OF THE ASSESSEE SUBMITTED THA T THE ONLY DISPUTE IS REGARDING ADJUSTMENT OF RS.14.82 CRORES ON ACCOU NT OF ARMS LENGTH PRICE IN ACCORDANCE WITH THE ORDER PASSED B Y THE TRANSFER PRICING OFFICER [FOR SHORT TPO] UNDER SEC.92CA(3) . 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF COURIERS AND PICKS UP AND DELIVERS EXPRESS SHIPMENTS MAINLY AS AN INTERNATIONAL COURIER. THE ASSESSEE COMPANY BELONGS TO DHL GROUP WHICH IS ENGAGED IN THE BUSINESS OF OPERATING AN INTERNATION AL AIR EXPRESS NET WORK WHICH PROVIDE COURIER SERVICES FOR DOOR-TO-DOO R DELIVERY OF THE DOCUMENTS AND LIGHT PARCELS IN MORE THAN 200 COUNTR IES AROUND THE 2 WORLD. THE GROUP HAS 450 HUBS, WAREHOUSES AND TERMI NALS AND APPROXIMATELY 230 GATEWAYS. DHL WORLD WIDE B.V. NET HERLANDS (FOR SHORT DHL) HOLDS 100% OF THE TOTAL EQUITY OF THE AS SESSEE COMPANY. THE ASSESSEE COMPANY HAD ENTERED INTO AN AGREEMENT WITH DHL BY WHICH DHL HAD GRANTED THE ASSESSEE COMPANY ACCESS T O THE DHL NET WORK FOR TRANSPORTATION AND DELIVERY OF CONSIGNMENT S IN CONSIDERATION OF WHICH THE ASSESSEE COMPANY WAS REQUIRED TO PAY A NET WORK FEES TO DHL AS PER THE TERMS OF THE AGREEMENT. THE ASSESSEE COMPANY ALSO RENDERED SIMILAR SERVICES TO DHL AS FORWARDERS AND COURIERS IN INDIA AND WAS RECEIVING FEES ACCORDINGLY. SINCE ASSESSEE COMPANY HAD CERTAIN INTERNATIONAL TRANSACTIONS BY WAY OF PAYMEN T OF NET WORK FEES, REIMBURSEMENT EXPENSES, PURCHASE OF MARKETING MATER IAL ETC. THE SAME WAS REFERRED TO THE TRANSFER PRICING OFFICER ( FOR SHORT TPO) TO DETERMINE THE ARMS LENGTH PRICE. INITIALLY, THE AS SESSEE COMPANY ADOPTED TWO COMPARABLES WHOSE AVERAGE ARITHMETIC ME AN WAS 3.91% AGAINST ASSESSEES MARGIN OF 7.70%. SUBSEQUENTLY A LIST OF SIX COMPARABLES BY UPDATING THE COMPARABLE SEARCH WAS S UBMITTED. THE LIST OF COMPARABLES FURNISHED IS AS UNDER: I) DTDC COURIER AND CARGO LTD: TOTAL TURNOVER ` `` ` .106.42 CRORES. IT IS INTO AIR COURIER SERVICES. HENCE ACCEPTED AS COMPARABLE. II) FIRST FLIGHT COURIERS LTD: TOTAL TURNOVER IS ` `` ` .241.75 CRORES. IT IS ALSO INTO AIR COURIER SERVICES. HENCE ACCEPTED. III) ON-DOT COURIERS & CARGO LTD. TOTAL TURNOVER IS ` `` ` .27.29 CRORES WHICH IS HARDLY 5% OF THIS TURNOVER OF THE ASSESSEE . HENCE CANNOT BE TREATED AS COMPARABLES. HENCE REJECTED. IV) OVERTIME EXPENSES LTD. TOTAL TURNOVER IS ` `` ` .94.99 CRORES. THE TURNOVER IS NOT EVEN 20% OF THE TURNOVER OF THE ASS ESSEE. HENCE REJECTED. 3 V) SKYPAK SERVICES SPECIALISTS LTD. TURNOVER IS ` `` ` .18.48 CRORES WHICH BELOW 5% OF THE ASSESSEE. HENCE REJECTED. VI) TRANSPORT CORPORATION INDIA LTD. IT IS FUNCTIONALLY DIFFERENT. THIS COMPANY IS INTO SURFACE/ROAD TRANSPORT OF GOOD S. HENCE REJECTED. INITIALLY TPO WANTED TO INCLUDE M/S. BLUE DART EXPR ESS LTD. ALSO AS COMPARABLES, BUT AFTER CONSIDERING THE OBJECTION OF THE ASSESSEE THE SAME WAS DROPPED. OUT OF THE OTHER SIX COMPARABLES FOUR WERE DROPPED BECAUSE IN THE CASE OF ON-DOT COURIERS & CA RGO LTD. AND SKYPAK SERVICES SPECIALISTS LTD. THE TURN OVER WAS RS.27.19 CRORES AND RS.18.48 CRORES WHICH WAS BELOW 5% OF ASSESSEES TU RNOVER. IN THE CASE OF OVERNITE EXPRESS LTD. ALSO THE TURNOVER WAS ONLY RS.94.99 CRORES WHICH WAS LESS THAN 20% AND, THEREFORE, SAME WAS ALSO REJECTED. IN THE CASE OF TRANSPORT CORPORATION 0F I NDIA IT WAS OBSERVED THAT IT WAS FUNCTIONALLY A DIFFERENT COMPANY AND TH E MAIN ACTIVITY OF THIS COMPANY WAS OF SURFACE/ROAD TRANSPORT OF GOODS . ACCORDINGLY, ONLY TWO COMPARABLES I.E. DTDC COURIER & CARGO LTD. AND FIRST FLIGHT COURIERS LTD. WERE CONSIDERED. 3. THE ASSESSEE COMPANY HAD ALSO OBJECTED TO THE IN CLUSION OF MISCELLANEOUS INCOME IN THE OPERATING PROFITS IN TH E CASE OF DTDC COURTIERS AND CARGO LTD. [FOR SHORT DTDC] AND FIRST FLIGHT COURIERS LTD. HOWEVER, ON EXAMINING THE DETAILS, THE TPO NOTED TH AT IN THE CASE OF DTDC NON OPERATING INCOME WAS ONLY 0.18 CRORES ON A CCOUNT OF INTEREST AND PRIOR PERIOD AND EXTRA ORDINARY INCOME OF RS.0.20 CRORES AND, ACCORDINGLY, HE ADDED A SUM OF RS.1.84 CRORES OF THE OTHER INCOME IN TO THE OPERATING PROFITS. IN THE CASE OF FIRST FLIGHT COURIERS 4 LTD. HE OBSERVED THAT ONLY NON OPERATING INCOME AND INTEREST WAS 0.39 CRORES AND ACCORDINGLY HE ADDED A SUM OF RS.0.51 CR ORES TO THE OPERATING PROFITS. THUS, THE TPO CONSIDERED ONLY TW O COMPARABLES I.E. DTDC AND FIRST FLIGHT COURIERS LTD. AND FINALLY WOR KED OUT THE ADJUSTMENT AS UNDER: TOTAL TURNOVER OF THE ASSESSEE DURING THE YEAR ` `` ` .503.41 CRORES DESIRED TOTAL COSTS BASED AN ARITHMETIC MEAN OF 7.34% DETERMINED ABOVE ` `` ` .466.46 CRORES LESS: ACTUAL COSTS CLAIMED BY ASSESSEE, OTHER THAN NET WORK FEE (481.28 269. 52) ` `` ` .211.76 CRORES DESIRED COST OF NET WORK FEE PAID TO AE ` `` ` .254.70 CRORES ACTUAL NETWORK FEE PAID TO AE DURING THE YEAR ` `` ` .269.52 CRORES EXPRESS NETWORK FEE PAID TO THE AE DURING THE YEAR ` `` ` . 14.82 CRORES APPLYING SAFE HABOUR LIMITS : DESIRED COST OF NETWORK FEE TO AE BASED ON ARITHMETIC MEAN ` `` ` .254.70 CRORES SAFE HARBOUR LIMITS + 5% = ` `` ` .267.44 CRORES - 5% = ` `` ` .241.97 CRORES ACTUAL TOTAL EXPENSES OF NETWORK CHARGES CLAIMED BY THE ASSES SEE: ` `` ` .269.72 CRORES SINCE, THE ASSESSEES TRANSACTION IS BEYOND THE SA FE TURNOVER LIMITS OF + OR 5% THE ALP OF THE INTERNATIONAL TRAN SACTION OF NETWORK FEE PAID TO AES IS ADOPTED AT ` `` ` .254.70 CRORES, AS AGAINST ` `` ` .269.52 CRORES CLAIMED BY THE ASSESSEE, REQUIRING A DOWNWAR D ADJUSTMENT OF ` `` ` .14.82 CRORES, AS BELOW: ALP OF NETWORK FEE TO AE, AS SHOWN BY ASSESSEE ` `` ` .269.52 CRORES ALP OF THE TRANSACTION AS DETERMINED ABOVE ` `` ` .254.70 CRORES ADJUSTMENT (DOWNWARD) TO BE MADE) ` `` ` . 14.82 CRORES . 4. THE AO PASSED A DRAFT ASSESSMENT ORDER AND ADDED THE SUM OF RS.14.82 CRORES TO THE INCOME OF THE ASSESSEE ON AC COUNT OF TRANSFER PRICING ADJUSTMENT. THE MATTER WAS TAKEN UP BEFORE THE LD. DISPUTE 5 RESOLUTION PANEL. BEFORE THE DRP SIMILAR SUBMISSION S WERE MADE AND THE LD. DRP DECIDED THE ISSUE VIDE PARA-1 WHICH IS AS UNDER: OBJECTION NO.1 : THIS OBJECTION RELATES TO TRANSFER PRICING ADJUSTM ENT AMOUNTING TO ` `` ` .14.82 CRORE. THE NATURE OF ACTIVITIES OF THE ASSES SEE ARE COURIER SERVICES WITHIN THE COUNTRY AS WELL AS TO C OUNTRIES OUTSIDE. THE ASSESSEE PAID NETWORK FEES TO THE ASSOCIATE ENTERPR ISE M/S DHL OPERATIONS BV ON ACCOUNT OF THE SERVICES PROVIDED T O THE ASSESSEE RELATING TO AIR COURIER SERVICES OUTSIDE INDIA. THE ASSESSEE CONDUCTED TIS TAINWALA POLYCONTAINERS LTD. RESEARCH AND WORKED OU T ITS MARGIN AT 4.40% AS AGAINST THE AVERAGE MARGIN OF 3 COMPARABLE COMPANIES SELECTED BY THE ASSESSEE AT 3.4K9% AND NO ADJUSTMEN T WAS MADE BY THE ASSESSEE. THE TPO ASKED THE ASSESSEE TO CONDUCT A F RESH SEARCH, DURING WHICH THE ASSESSEE GAVE THE LIST OF 7 COMPANIES, OU T OF WHICH THE TPO REJECTED 5 COMPANIES AND SELECTED ONLY 2 COMPANIES WHICH WERE ALSO SELECTED BY THE ASSESSEE AND THE TPO WORKED OUT THE MARGIN AT 7.35% AS AGAINST THE MARGING OF 4.40$ AND MADE AN ADJUSTM ENT OF ` `` ` .14.82 CRORES. THE ASSESSEE HAS OBJECTED TO THE REJECTION OF OTHER COMPANIES LIKE PATEL ON-BOARD COURIERS LTD. FOR WHICH THE TPO HAD GIVEN THE REASONS FINANCIAL RESULTS ARE NOT AVAILABLE, WH ICH APPEARS TO BE CORRECT APPROACH AND THE DRP AGREES WITH THE FINDIN G RECORDED BY THE TPO. THE TPO REJECTED 3 OTHER COMPANIES OVERNITE EXPRESS LTD., ON-DOT COURIERS & CARGO LTD & SKYPAK SERVICES SPECI ALISTS LTD. ON THE GROUND THAT THE TURNOVER OF THESE COMPANIES IS LESS THAN 20% OF THE ASSESSEES TURNOVER. THE ASSESSEE HAS OBJECTED TO A OS REJECTION ON THE GROUNDS THAT THE AO SHOULD NOT HAVE APPLIED THE FIL TER OF 20%. THE DRP HAS PERUSED THE TURNOVER OF THESE 3 COMPANIES, WHICH IS 27.79 CRORES FOR ON-DOT COURIERS & CARGO LTD, 18.84 CRORE FOR SKYPAK SERVICES SPECIALISTS LTD. THESE TURNOVERS ARE NOT E VEN 5% OF THE ASSESSEES TURNOVER. THE TURNOVER OF OVERNITE EXPRE SS LTD. IS ` `` ` .94 CRORES WHICH IS 18.8% OF THE ASSESSEES TURNOVER. T HUS, THE TURNOVER OF THESE COMPANIES IS SUBSTANTIALLY LOWER AND OBVIOUSL Y DUE TO LOWER TURNOVER, THEIR PROFITABILITY WOULD BE LOWER AND NO T PROPERLY COMPARABLE. THE AO HAS COMPARED THE TURNOVER OF THE COMPANIES WHICH HAS REASONABLY HIGH TURNOVER AND BECOME MORE COMPARABLE, HENCE THE DRP DOES NOT FIND ANY IRREGULARITY IN APP LYING THE FILTER OF 20% FOR REJECTING 3 COMPANIES AND THE ASSESSEES OB JECTION ON THIS ACCOUNT IS OVERRULED. THE ASSESSEE HAS OBJECTED TO COMPUTATION OF PROFIT MARGIN BY APPLYING TNNM METHOD ON THE GROUND THAT MISC. INCOME HAS BEEN INCLUDED IN THE TURNOVER. THE DRP C ALLED FOR THE DETAILS OF MISC. INCOME WHICH INCLUDED INTEREST ALS O. THE ASSESSEE DID NOT PROVIDE THE NATURE OF BALANCE MISC. INCOME. HEN CE, THE DRP IS OF THE VIEW THAT THE AO SHOULD RE-WORK THE MARGIN OF P ROFIT BY EXCLUDING THE INTEREST INCOME INCLUDED IN THE MISC. INCOME FR OM THE GROSS TOTAL TURNOVER AS WELL AS THE INTEREST EXPENDITURE FROM T HE EXPENSES SIDE. THE AO SHALL WORK OUT THE MARGINS AFRESH AND CONSEQUENT IAL ADJUSTMENT. 6 THE ASSESSEES OBJECTION FOR REJECTING TRANSPORT CO RPORATION OF INDIA AS COMPARABLE IS ALSO DEVOID OF ANY MERITS, BECAUSE WHEN PROPER COMPARABLE COMPANIES ARE AVAILABLE, THERE IS NO REQ UIREMENT FOR MAKING COMPARISON WITH SEGMENTAL RESULTS WHICH DOES NOT GIVE A TRUE PICTURE. THE ASSESSEES NEXT OBJECTION RELATES TO NOT APPLYI NG PLUS MINUS 5% FACTOR FOR FINDING OUT THE ADJUSTMENT, WHETHER IT I S COVERED WITHIN THE PLUS MINUS 5% OR NOT. PERUSAL OF THE DRAFT ASSESSME NT SHOWS THAT THE AO HAD APPLIED THE PLUS MINUS 5% FACTOR FOR FINDING OUT WHETHER THE ASSESSEE FALLS WITHIN THE PERMITTED LIMITED. HENCE, THE ASSESSEES OBJECTION IS REJECTED. HOWEVER, IN VIEW OF RE-COMPU TATION OF NET MARGIN AS DIRECTED ABOVE, THE AO SHALL RE-WORK OUT THE PLUS MINUS LIMIT AND APPLY THE SAME ACCORDINGLY. 5. BEFORE US, LD.COUNSEL OF THE ASSESSEE MADE THREE FOLD SUBMISSIONS. HIS FIRST SUBMISSION WAS THAT COMPARAB LE IN THE CASE OF ON-DOT COURIERS & CARGO LTD. AND OVERNITE EXPRESS L TD. AND SKYPAK SERVICES SPECIALISTS LTD. HAS BEEN WRONGLY REJECTED BY APPLYING 20% FILTER. HE EMPHASIZED THAT THE COMPARABLE IN THE CA SE OF ON-DOT COURIERS & CARGO LTD. AND OVER NIGHT EXPRESS LTD. W ERE ACCEPTED AS COMPARABLES IN THE EARLIER YEAR I.E. A.Y 2005-06 AN D, THEREFORE, THE SAME SHOULD NOT HAVE BEEN REJECTED. HIS SECOND OBJE CTION IS THAT COMPARABLE IN THE CASE OF TRANSPORT CORPORATION OF INDIA COULD NOT HAVE BEEN REJECTED AS SEGMENTAL RESULT WHICH SHOULD NOT HAVE REJECTED MERELY BECAUSE DIRECT COMPARABLES WERE AVAILABLE. I T WAS ARGUED THAT TRANSPORT CORPORATION OF INDIA LTD. (TCI) WAS ALSO ENGAGED IN THE BUSINESS OF COURIERS AND SEGMENTAL DATA OF COURIER BUSINESS WAS EASILY AVAILABLE. HE SUBMITTED THAT AS PER OECD GUIDELINES IF SEGMENTAL DATA IS AVAILABLE AND IF THE SAME CAN PROVIDE BETTER COM PARABLES, THEN SAME SHOULD BE CONSIDERED. HIS LAST SUBMISSION ON WHICH HE PLACED LOT OF 7 EMPHASIS IS THAT WHILE MAKING COMPARISONS ONLY OPER ATING PROFITS SHOULD BE CONSIDERED AND OTHER INCOME INCLUDING MIS CELLANEOUS RECEIPTS ETC. COULD NOT BE CONSIDERED FOR THE PURPO SE OF COMPARISON. THE TPO HAS WRONGLY REJECTED THIS ARGUMENT BY INCLU DING SOME PORTION OF THE OTHER RECEIPTS. THEN HE REFERRED TO VARIOUS PAGES IN THE PAPER BOOK AND POINTED OUT THAT DATA REGARDING OTHER INCO ME IN THE CASE OF DTDC AND FIRST FLIGHT COURIERS LTD. WAS AVAILABLE. HE ACCEPTED THAT IN THE CASE OF DTDC E-MAIL FACILITY, BAD DEBT, DISCOUN T RECEIPTS AND HANDLING CHARGES COULD BE CONSIDERED AS OPERATING P ROFITS, BUT IN ANY CASE ITEMS LIKE INTEREST INCOME, RENT RECEIPTS, DIV IDEND COULD BE TAKEN AS OPERATING INCOME. SIMILARLY, SINCE DETAILS FOR O THER EXPENSES AMOUNTING TO RS.88,86,724/- IN THE CASE OF DTDC AND RS.47,24,722/- IN THE CASE OF FIRST FLIGHT COURIERS LTD. ARE NOT A VAILABLE, THEREFORE SAME SHOULD NOT HAVE BEEN INCLUDED IN THE OPERATING RECEIPTS. ON A QUERY BY THE BENCH WHETHER DETAILS OF OTHER RECEIPT S ARE AVAILABLE, HE SUBMITTED THAT SO FAR ASSESSEE HAS NOT BEEN ABLE TO OBTAIN SUCH DETAILS AND HE WOULD HAVE NO OBJECTION IF THE MATTER IS REM ITTED BACK TO THE FILE OF THE TPO/DRP AND ASSESSEE WOULD TRY TO FURNI SH THESE DETAILS. 6. ON THE OTHER HAND, LD.DR SUBMITTED THAT THERE IS NO FORCE IN THE SUBMISSIONS OF THE LD.COUNSEL OF THE ASSESSEE BECAU SE THE TURNOVER IN THE CASE OF ON-DOT COURIERS & CARGO LTD. WAS RS.27. 29 CRORES AND THE TURNOVER OF SKYPAK SERVICES SPECIALISTS LTD. WAS RS .18.48 CRORES WHICH WAS BELOW 5% OF THE TURNOVER OF THE ASSESSEE AND, T HEREFORE, THE FILTERING HAS BEEN APPLIED AT 5% WHICH IS TOTALLY J USTIFIED. ONLY IN THE 8 CASE OF OVER TIME EXPRESS LTD. THE TURNOVER WAS OF RS.94.99 CRORES WHICH WAS LESS THAN 20%. EVEN 20% FILTERING IS JUST IFIED. IT IS A KNOWN FACT THAT ONLY COMPARABLES CAN BE COMPARED BECAUSE OPERATIONS OF SMALL BUSINESSES ARE TOTALLY DIFFERENT FROM LARGE B USINESSES AND WHEN TURNOVER OF A COMPARABLE COMPANY IS ONLY LESS THAN 20%, THEN SAME CANNOT BE CALLED AS A COMPARABLE. IF THE COMPARABLE IN THE CASE OF ON- DOT COURIERS & CARGO LTD. AND OVERNITE EXPRESS LTD. ARE AVAILABLE, THEN THE SEGMENTAL RESULT OF TCI HAS BEEN CORRECTLY REJE CTED. IT IS A KNOWN FACT THAT SEGMENTAL RESULTS MAY NOT BE ALWAYS BE CO RRECT AND PRECISE BECAUSE IT IS ALMOST IMPOSSIBLE TO DISTRIBUTE CERTA IN COMMON EXPENSES. AS FAR AS THE LAST SUBMISSION REGARDING EXCLUSION O F OTHER INCOME IS CONCERNED, HE SUBMITTED THAT THE LD.COUNSEL OF THE ASSESSEE HIMSELF AGREED TO TREAT FOUR ITEMS OF INCOME, NAMELY, BAD D EBT RECOVERED, DISCOUNT RECEIPTS, LINK CHARGES AND E-MAIL FACILITY CHARGES AS OPERATING INCOME. SINCE THE NATURE OF OTHER EXPENSES IS NOT C LEAR, THEREFORE, SAME HAS ALSO TO BE TREATED AS OPERATING INCOME. HE ALSO REFERRED TO PAGE 233 OF THE PAPER BOOK AND POINTED OUT THAT IN THE CASE OF DTDC EVEN SMALL ITEM LIKE DIVIDEND RECEIPTS OF RS.11,839 /- HAS BEEN SEGREGATED SEPARATELY, THEN OBVIOUSLY THE LARGEST I TEM BEING RS.88,82,624/- MUST BE RELATING TO THE OPERATIONAL RECEIPTS BECAUSE ALL OTHER ITEMS LIKE INTEREST INCOME, RENT INCOME, PENA LTY COLLECTED, INSURANCE CHARGES ETC., HAVE ALREADY BEEN LISTED SE PARATELY. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE ARE UNABLE TO AGREE WITH THE FIRST SUBMISSION OF THE AS SESSEE BECAUSE IN 9 THE CASE OF ON-DOT COURIERS & CARGO LTD. AND SKYPAK SERVICES SPECIALISTS LTD. THE TURNOVER IS LESS THAN 5% AND, THEREFORE, THESE TWO COMPARABLES ARE TOTALLY NON COMPARABLES. EVEN IN TH E CASE OF OVER NIGHT EXPRESS LTD. THE TURNOVER IS LESS THAN 20%. I T IS A UNIVERSAL FACT THAT THERE ARE LOT OF DIFFERENCES BETWEEN THE LARGE BUSINESSES AND SMALL BUSINESSES OPERATING IN THE SAME FIELD. IN TH E CASE OF SMALL BUSINESS ECONOMIES OF SCALE ARE NOT AVAILABLE AND, THEREFORE, GENERALLY LESS PROFITABLE. THEREFORE, MERELY BECAUSE THESE TW O COMPANIES WERE CONSIDERED AS COMPARABLES IN A.Y 2005-06 IT IS NOT NECESSARY THAT THIS YEAR ALSO THEY SHOULD BE CONSIDERED PARTICULARLY WH EN WE DO NOT KNOW THE DETAILS AS TO WHY THEY WERE CONSIDERED AS COMPA RABLES IN THE PREVIOUS YEAR. IN ANY CASE, THERE IS NO RES JUDICAT A IN INCOME TAX PROCEEDINGS. WE FURTHER DO NOT FIND ANY FORCE IN TH E SUBMISSION THAT SEGMENTED RESULT IN THE CASE OF TCI SHOULD HAVE BEE N CONSIDERED. THOUGH SEGMENTED RESULTS ARE NOW REQUIRED TO BE PUB LISHED IN INDIA, BUT STILL IT IS A COMMON EXPERIENCE THAT IN MANY SU CH RESULTS CERTAIN EXPENDITURES, PARTICULARLY EXPENDITURE ON ACCOUNT O F INTEREST AND HEAD OFFICE, ARE GENERALLY NOT ALLOCATED AND SHOWN IN TH E PUBLISHED RESULTS AS SEPARATE EXPENDITURE. THEREFORE, THE TPO WAS COR RECT THAT WHEN DIRECT COMPARABLES WERE AVAILABLE, THEN THERE WAS N O NEED TO CONSIDER THE SEGMENTED RESULTS OF TCI. AS FAR AS THE LAST SU BMISSIONS IS CONCERNED, WE AGREE PRINCIPALLY WITH THE SUBMISSION S OF THE LD.COUNSEL OF THE ASSESSEE THAT IT IS ONLY THE OPERATING PROFI T WHICH CAN BE CONSIDERED. THE DETAILS OF OTHER INCOME IN THE CASE OF DTDC AND FIRST 10 FLIGHT COURIERS LTD. HAVE BEEN SUMMARIZED AT PAGE 2 33 OF THE PAPER BOOK WHICH READ AS UNDER: PARTICULARS DTDC COURIER & CARGO LTD. FIRST FLIGHT COURIER LTD WHETHER NON- OPERATING IN NATURE (YES/NO) OTHER INCOME INTEREST INCOME 18,18,341 39,43,360 YES RENT RECEIVED 5,87,508 - YES DIVIDEND RECEIVED 11,839 - YES BAD DEBTS RECOVERED 7,01,046 - NO PENALTY COLLECTED 15,65,480 - YES E-MAIL FACILITY CHARGES COLLECTION 59,915 - NO DISCOUNT RECEIVED 43,42,262 - NO HANDLING CHARGES 79,23,451 NO RENT DEPOSIT WRITTEN BACK 9,24,358 YES OTHER RECEIPTS/MISCELLANEOUS INCOME - 47,24,772 YES INSURANCE CHARGES - 2,69,611 YES FOREIGN EXCHANGE FLUCTUATION - 27,608 PROFIT ON SALE OF ASSETS - 32,435 YES YES TOTAL 2,68,16,826 89,97,786 FROM THE ABOVE CHART, IT IS CLEAR THAT THE ASSESSEE HAS ITSELF ACCEPTED THAT THE BAD DEBTS RECOVERED, EMAIL FACILITY CHARGE S, DISCOUNT RECEIPTS AND HANDLING CHARGES WOULD BE PART OF THE OPERATING INCOME. THERE IS NO DISPUTE ON THAT. WE AGREE WITH THE SUBMISSIONS O F THE LD.COUNSEL OF THE ASSESSEE THAT INTEREST INCOME, RENT RECEIPTS, D IVIDEND RECEIPTS, PENALTY COLLECTED, RENT DEPOSITS RETURNED BACK, FOR EIGN EXCHANGE FLUCTUATIONS AND PROFIT ON SALE OF ASSETS DO NOT FO RM PART OF THE OPERATIONAL INCOME BECAUSE THESE ITEMS HAVE NOTHING TO DO WITH THE MAIN OPERATIONS OF THE ASSESSEE. AS FAR AS INSURANC E CHARGES ARE 11 CONCERNED, IT WOULD DEPEND ON THE NATURE OF INSURAN CE CHARGES, FOR EXAMPLE, IF THE INSURANCE CHARGES WERE ON ACCOUNT O F LOSS OF SOME PARCEL OR COURIER AGAINST WHICH COURIER HAS MADE A PAYMENT OF COMPENSATION, THEN SUCH CHARGES WOULD CONSTITUTE OP ERATIONAL INCOME. AS FAR AS THE OTHER RECEIPTS ARE CONCERNED, WHICH A MOUNTS TO RS.88,82,624/- IN THE CASE OF DTDC AND RS.47,24,772 /- IN THE CASE OF FIRST FLIGHT COURIERS LTD., THESE ARE LARGE AMOUNTS , BUT IN THE ABSENCE OF DETAILS IT IS DIFFICULT TO COMMENT ON THE NATURE OF THESE RECEIPTS THOUGH LD.DR HAS MADE A GOOD POINT THAT WHEN SMALL ITEMS HAVE BEEN SEGREGATED, CHANCES ARE THAT THESE RECEIPTS MAY BE RELATED TO OPERATIONAL INCOME. SINCE THE DETAILS ARE NOT AVAIL ABLE AND THE LD.COUNSEL OF THE ASSESSEE HAS AGREED THAT HE WILL TRY TO FIND OUT FURTHER DETAILS AND FURTHER PERHAPS BOTH THESE COMP ARABLE COMPANIES ARE BEING ASSESSED IN MUMBAI EVEN THE DEPARTMENT CA N FIND OUT THE DETAILS. THEREFORE, IN THE INTERESTS OF JUSTICE, WE SET ASIDE THE ORDER OF THE LD. DRP AND REMIT THE MATTER TO THE FILE OF THE TPO FOR RE- EXAMINATION OF THE ISSUE IN THE LIGHT OF OUR ABOVE OBSERVATIONS. 8. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 7/4/2011. SD/- SD/- (D.MANMOHAN) (T.R.SOOD) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: 27/4/2011. P/-* 12