Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 98006 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-11-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I2
Next Hearing Date
27-08-2015
Assessment Year
2009-2010
Appeal Filed On
11-02-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.780/DEL./2014 (ASSESSMENT YEAR : 2009-10) ELI LILLY & CO. (INDIA) PVT. LTD., VS. ACIT, CIRCL E 1 (1), PLOT NO.92, SECTOR 32, GURGAON. GURGAON. (PAN : AAACE8901F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, SENIOR ADVOCATE, SHRI NEERAJ JAIN, ADVOCATE SHRI ABHISHEK AGARWAL, CA & MS NITYA GUPTA CA REVENUE BY : SHRI SYED NASIR ALI, CIT DR DATE OF HEARING : 28.08.2015 DATE OF PRONOUNCEMENT : 24.11.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : ITA NOS.780/DEL/202 THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE ASSESSMENT ORDER DATED 24.12.2013 PASSED U/S 14 3(3) R.W.S 144C OF THE I.T. ACT. 2. THE ASSESSEE IS, ESSENTIALLY AGGRIEVED BY THE TP ADJUSTMENTS MADE IN RESPECT OF THE BUSINESS SUPPORT SERVICES RE NDERED BY THE ASSESSEE TO ITS AES, AND RAISED THE FOLLOWING GROU NDS OF APPEAL :- 1. THAT THE ASSESSING OFFICER ERRED ON FACTS AND I N LAW IN COMPLETING ASSESSMENT UNDER SECTION 144C/143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT) AT AN INCOME O F RS. 20,06,38,576 AS AGAINST THE INCOME OF RS. 19,61,38,326 RETURNED BY THE APPELLANT. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN MAKING AN ADJUSTMENT OF RS. 45,00,250 IN THE INTERNATIONAL TRANSACTIONS OF BUSINESS SUPPORT SE RVICES, ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA (3) OF THE ACT BY THE TPO. 2.1 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN REJECTING EDUCATIONAL CONSULTANTS INDIA LIMITED FROM THE SET OF COMPARABLE COMPANIES ALLEGEDLY HOLDING THAT TECHNICAL ASSISTANCE AND HUM AN RESOURCE DEVELOPMENT SEGMENT OF THE SAID COMPANY ARE FUNCTIONALLY NOT COMPARABLE TO THE APPELLANT. 2.2 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN REJECTING EDUCATIONAL CONSULTANTS INDIA LIMITED FROM THE SET OF COMPARABLE COMPANIES WITHOU T APPRECIATING THAT THE SAID COMPANY WAS CONSIDERED B Y THE DRP IN THE PRECEDING YEAR AS COMPARABLE TO THE ITA NOS.780/DEL/203 APPELLANT AND THERE OUGHT TO BE CONSISTENCY IN THE APPROACH OF THE REVENUE. 2.3 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN CONSIDERING FOLLOWING COMPANIES IN THE FI NAL SET OF COMPARABLE COMPANIES ALLEGEDLY HOLDING THEM TO BE FUNCTIONALLY COMPARABLE TO THE APPELLANT: I. CHOKSI LABORATORIES LTD. II. WAPCOS LIMITED III. BASIZ FUNDS SERVICES PRIVATE LIMITED 2.4 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN CONSIDERING BASIZ FUNDS SERVICES PRIVATE LIMITED IN FINAL SET OF COMPARABLE COMPANIES WITHOU T APPRECIATING THAT THE COMPANY IS EARNING SUPER NORM AL PROFIT MARGIN OF 46.75%. 2.5 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN NOT CONSIDERING THE FOLLOWING COMPARABLE COMPANIES PLACED ON RECORD BY THE APPELLANT DURING THE COURSE OF PROCEEDINGS BEFORE THE DRP: (I) M.N. DASTUR & COMPANY (P) LIMITED (II) SIMON INDIA LIMITED (III) TELECOMMUNICATIONS CONSULTANTS INDIA LIMITED (IV) MA FOI GLOBAL SERVICES LIMITED (V) MICROGENETICS SYSTEM LIMITED (VI) ALLSEC TECHNOLOGIES LIMITED (VII) CG-VAK SOFTWARE & EXPORTS LIMITED 2.6 THAT THE ASSESSING OFFICER/DRP ERRED ON FACTS A ND IN LAW IN REJECTING COMPARABILITY ADJUSTMENT TO ACC OUNT FOR DIFFERENCE IN WORKING CAPITAL EMPLOYED BY THE APPELLANT VIS--VIS COMPARABLE COMPANIES CONSIDERED BY THE TPO, ALLEGEDLY HOLDING THAT THE ONUS IN THIS ITA NOS.780/DEL/204 REGARD WAS ON THE APPELLANT TO DEMONSTRATE THE REAS ONS AND CALCULATION OF WORKING CAPITAL ADJUSTMENT, WHIC H WAS NOT DISCHARGED. 2.7 THAT THE DRP / TPO ERRED ON THE FACTS AND IN LA W IN NOT BEING CONSISTENT WHILE DENYING ON THE CLAIM OF WORKING CAPITAL ADJUSTMENTS HAVE BEEN ALLOWED IN CA SE OF OTHER ASSESSES. 3. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTION 234B AND SECTION 234C OF THE ACT. 3. THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF ELI LILLY NETHERLANDS B.V. AND ENGAGED IN THE BUSINESS OF TRA DING OF FORMULATIONS IN THE DOMESTIC MARKET WHICH IS PURCHA SED FROM ITS AES AND THIRD PARTIES. IT IS ALSO INTO MARKETING A ND SELLING OF LIFE SAVING DRUGS FORMULATIONS THAT FIND USAGE IN THE TR EATMENT OF SEVERAL DISEASE SEGMENTS RANGING FROM ONCOLOGY, CNS , CARDIOVASCULAR, CANCER, INFECTIOUS DISEASES, ENDOCR INE, ETC. IT FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING TAXABL E INCOME OF RS. 19,61,38,326/-, WHICH CAME TO BE ASSESSED AT AN INC OME OF RS. 20,06,38,580/- DATED 24.12.2013 U/S 144C/143(3) OF THE ACT AND, HENCE THIS APPEAL BY APPELLANT COMPANY. 4. GROUND NO. 1 IS GENERAL IN NATURE AND, THEREFORE , DOES NOT REQUIRE ANY ADJUDICATION. ITA NOS.780/DEL/205 5. GROUND NOS.2 TO 2.7 RELATE TO AN ADJUSTMENT OF R S. 45,00,250 IN THE INTERNATIONAL TRANSACTIONS OF BUSINESS SUP PORT SERVICES, ON THE BASIS OF AN ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TPO. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL MADE HIS SUBMISSION IN SUPPORT OF GROUNDS 2.1 AND 2.2 OF THE GROUNDS OF APPEAL. THE FACTS IN RELATION TO THE ABOVE GROUND A RE THAT FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD UNDERTAK EN THE FOLLOWING INTERNATIONAL TRANSACTIONS: SR. NO . TYPES OF INTERNATIONAL TRANSACTION METHOD SELECTED TOTAL VALUE OF TRANSACTION 1 PURCHASE OF FORMULATIONS TNMM 1,45,72,55,486 2 CO-ORDINATION OF CLINICAL TRIALS IN INDIA TNMM 21,95,64,342 3 PROVISION OF BUSINESS SUPPORT SERVICES TNMM 7,71,49,367 4 PAYMENT OF INTEREST ON EXTERNAL COMMERCIAL BORROWINGS CUP 1,14,33,577 5 COST RECHARGES TO AES - 93,74,320 6 COST REIMBURSEMENTS TO AES - 41,58,397 6. DURING THE PREVIOUS YEAR, RELEVANT TO THE A.Y. 2 009-10, THE ASSESSEE RECEIVED AN AMOUNT OF RS. 7,71,49,367/- FO R BUSINESS SUPPORT SERVICES. THE ASSESSEE SOUGHT TO JUSTIFY TH E CONSIDERATION RECEIVED FOR THE INTERNATIONAL TRANSACTIONS ENTERED INTO WITH THE AES TO BE AT ALP. THE ASSESSEE SUBMITTED A TRANSFER PRICING REPORT ADOPTING OPERATING PROFITS TO THE TOTAL COST AS ITS PROFIT LEVEL INDICATOR (HEREAFTER PLI) FOR THE TRANSFER PRICIN G STUDIES. THE ITA NOS.780/DEL/206 ASSESSEE APPLIED THE TRANSACTIONAL NET MARGIN METHO D (HEREAFTER 'TNMM'), WHICH WAS CONSIDERED TO BE THE MOST APPROP RIATE METHOD FOR THE PURPOSES OF BENCHMARKING THE INTERNA TIONAL TRANSACTION. THE ASSESSEE'S OPERATING PROFIT MARGIN (I.E. OPERATING PROFIT/TOTAL COST) WAS COMPUTED AT 9.82% AND THE AS SESSEE CLAIMED THAT THE SAME WAS COMPARABLE WITH OTHER COMPANIES R ENDERING BUSINESS SUPPORT SERVICES. FOR THE PURPOSES OF THE TRANSFER PRICING STUDY, THE ASSESSEE CHOSE 14 COMPARABLE ENTITIES AN D THE RESULT OF THE BENCHMARKING ANALYSIS IS AS UNDER: SR. NO. NAME OF THE COMPANY WEIGHTED AVERAGE OP/TC (%) 1 CYBER MEDIA INDIA ONLINE LIMITED 8.43% 2 IDC (INDIA) LIMITED 15.08% 3 TIMES INNOVATIVE MEDIA LIMITED -2.21% 4 EDUCATIONAL CONSULTANT IND LIMITED (SEGMENT) (TECHNICAL ASSISTANCE & HRD) 7.39% 5 CAPITAL TRUST LIMITED -6.71% 6 CRISIL LIMITED 21.41% 7 ICRA MANAGEMENT CONSULTING SERVICES LIMITED 4.04% 8 ACCESS INDIA ADVISOR LIMITED 37.75% 9 BESANT RAJ INTERNATIONAL LIMITED -11.74% 10 ITDC LIMITED 10.29% 11 SAKET PROJECTS LIMITED 23.65% 12 IN HOUSE PRODUCTION LIMITED (SEGMENT) (HEALTHCARE DIVISION) 0.31% 13 OVERSEAS MANPOWER CORPN. LIMITED 13.10% 14 ACQUIRE TALENT SERVICES LIMITED -3.54% AVERAGE 8.37% ITA NOS.780/DEL/207 7. IT WAS SUBMITTED THAT SINCE, ARITHMETIC AVERAGE OF THE OPERATING PROFIT MARGINS OF THE SAID COMPARABLES WA S COMPUTED 8.37%. ACCORDING TO THE ASSESSEE, AS THE PRICE CHAR GED IN ITS INTERNATIONAL TRANSACTIONS IS MORE THAN THE SAID AR ITHMETICAL MEAN PRICE, THE PRICE CHARGED IN THE INTERNATIONAL TRANS ACTIONS IS TREATED AS AT ARMS LENGTH. 8. THE TPO, BY AN ORDER DATED 29 TH JANUARY, 2013, PASSED UNDER SECTION 92CA(3) OF THE ACT, COMPUTED THE TP ADJUSTM ENT AT RS. 63,40,748/- (RUPEES SIXTY THREE LACS FORTY THOUSAND SEVEN HUNDRED AND FORTY EIGHT). THE TPO ACCEPTED THE METH OD ADOPTED BY THE ASSESSEE (I.E. TNMM), BUT REJECTED THE BENCH MARKING REPORT. THE TPO ALSO REJECTED THE ASSESSEE'S CLAIM FOR ANY ADJUSTMENT ON ACCOUNT OF WORKING CAPITAL PROVIDED T O THE ASSESSEE AND/OR RISKS BORNE BY THE AE. 9. FURTHER, TPO APPLIED THE FOLLOWING FILTERS FOR S ELECTION OF COMPARABLE COMPANIES IN ORDER TO BENCHMARK THE INTE RNATIONAL TRANSACTION OF PROVISION OF BUSINESS SUPPORT SERVIC ES: I) COMPANIES WHOSE DATA IS NOT AVAILABLE FOR FY 2008-0 9 ARE EXCLUDED II) COMPANIES WHOSE MARKET/BUSINESS SUPPORT SERVICE INCOME < RS. 1 CR. ARE EXCLUDED ITA NOS.780/DEL/208 III) COMPANIES WHOSE REVENUE FROM MARKET/BUSINESS SUPPORT SERVICES IS LESS THAN 75% OF TOTAL OPERATIN G REVENUES ARE EXCLUDED. IV) COMPANIES HAVING MORE THAN 25% RELATED PARTY TRANSACTIONS OF INCOME ARE EXCLUDED V) COMPANIES HAVING DIFFERENT FINANCIAL YEAR ENDING (I .E. NOT MARCH 31, 2009) OR DATA OF THE COMPANY DOES NOT FALL WITHIN 12 MONTH PERIOD I.E. 01.04.2008 TO 31.03.2009, ARE REJECTED VI) COMPANIES THAT ARE FUNCTIONALLY DIFFERENT FROM THE TAXPAYER ARE EXCLUDED VII) COMPANIES THAT ARE HAVING PECULIAR ECONOMIC CIRCUMSTANCES ARE EXCLUDED. 10. THE TPO APPLIED THE AFORESAID CRITERIA OF ACCEP TANCE/ REJECTION AND ACCORDINGLY, REJECTED FOLLOWING COMPA NIES FROM THE SET OF COMPANIES SUBMITTED BY THE ASSESSEE: SR. NO. NAME OF THE COMPANY REMARKS OF THE TPO 1 CYBER MEDIA INDIA ONLINE LIMITED FUNCTIONALLY NOT COMPARABLE 2 TIMES INNOVATIVE MEDIA LIMITED FUNCTIONALLY NOT COMPARABLE 3 EDUCATIONAL CONSULTANT IND LIMITED (SEGMENT) (TECHNICAL ASSISTANCE & HRD) FUNCTIONALLY NOT COMPARABLE 4 CAPITAL TRUST LIMITED FUNCTIONALLY NOT COMPARABLE ITA NOS.780/DEL/209 5 CRISIL LIMITED FUNCTIONALLY NOT COMPARABLE RPT > 25% 6 ICRA MANAGEMENT CONSULTING SERVICES LIMITED FUNCTIONALLY NOT COMPARABLE 7 ACCESS INDIA ADVISOR LIMITED FUNCTIONALLY NOT COMPARABLE SALES ONLY 18 LACS 8 BESANT RAJ INTERNATIONAL LIMITED FUNCTIONALLY NOT COMPARABLE 9 ITDC LIMITED FUNCTIONALLY NOT COMPARABLE 10 SAKET PROJECTS LIMITED FUNCTIONALLY NOT COMPARABLE 11 IN HOUSE PRODUCTION LIMITED (SEGMENT) (HEALTHCARE DIVISION) FUNCTIONALLY NOT COMPARABLE 12 OVERSEAS MANPOWER CORPN. LIMITED FUNCTIONALLY NOT COMPARABLE 13 ACQUIRE TALENT SERVICES LIMITED DATA NOT AVAILAB LE 11. ALSO, THE TPO BROUGHT FOLLOWING COMPANIES IN TH E FINAL SET OF COMPARABLE COMPANIES WHICH WERE REJECTED BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY ON ACCOUNT OF FUNCTIONAL DISSIMILARITY: SR. NO. NAME OF THE COMPANY OP/TC (%) 1 BEST MULYANKAN CONSULTANTS LTD. 9.91% 2 BASIZ FUND SERVICES PVT. LTD. 46.75% 3 INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 6.45% 4 IMMACS MANAGEMENT SERVICES LTD. 14.54% 5 SHRISTI URBAN INFRASTRUCTURE DEVELOPMENT LTD. 8.66% 6 CHOKSI LABORATORIES LTD. 23.19% 7 TATA CONSULTING SERVICES LTD. (SEGMENT) 26.08% 8 WAPCOS LTD. (SEGMENT) 23.60% ITA NOS.780/DEL/2010 12. THE FINAL SET OF 9 COMPARABLE COMPANIES CONSIDE RED BY THE TPO IN THE IMPUGNED ORDER, HAVING AN AVERAGE OPERAT ING PROFIT MARGIN OF 18.85%, IS AS UNDER: SR. NO. NAME OF THE COMPANY OP/TC (%) 1 BEST MULYANKAN CONSULTANTS LTD. 9.91% 2 IDC (INDIA) LTD. 10.46% 3 BASIZ FUND SERVICES PVT. LTD. 46.75% 4 INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 6.45% 5 IMMACS MANAGEMENT SERVICES LTD. 14.54% 6 SHRISTI URBAN INFRASTRUCTURE DEVELOPMENT LTD. 8.66% 7 CHOKSI LABORATORIES LTD. 23.19% 8 TATA CONSULTING SERVICES LTD. (SEGMENT) 26.08% 9 WAPCOS LTD. (SEGMENT) 23.60% AVERAGE 18.85% 13. ACCORDINGLY, THE TPO COMPUTED AN ADJUSTMENT OF RS. 63,40,748/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DIFFERENCE IN ARMS LENGTH PRICE OF PROVISION OF BU SINESS SUPPORT SERVICES BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRI SES, AS UNDER: OPERATIONAL COST FOR BUSINESS SUPPORT SERVICE SEGMENT 7,02,48,000 ARMS LENGTH PRICE AT A MARGIN OF 118.85% 8,34,89,7 48 PRICE RECEIVED 7,71,49,000 ADJUSTMENT 63,40,748 ITA NOS.780/DEL/2011 14. UPON RECEIVING THE DRAFT ASSESSMENT ORDER FORWA RDED BY THE ASSESSING OFFICER TO ASSESSEE AND SERVED UPON THE A SSESSEE ON 2 ND MARCH, 2013 UNDER SECTION 143(3) OF THE ACT READ WI TH SECTION 144C(1) OF THE ACT, THE ASSESSEE FILED ITS OBJECTIO NS TO THE SAME BEFORE THE DISPUTE RESOLUTION PANEL-1, NEW DELHI (H EREAFTER DRP) AGAINST THE ADJUSTMENT PROPOSED BY THE ASSES SING OFFICER IN ITS DRAFT ORDER. THE DRP HAS DISCUSSED IN DETAIL , ALL THE OBJECTIONS RAISED BY THE ASSESSEE AND VIDE AN ORDER DATED 05.09.2013 DIRECTED TO INCLUDE IN HOUSE PRODUCTION LIMITED AND TO EXCLUDE TATA CONSULTING ENGINEERS LIMITED FROM THE FINAL SET OF COMPARABLES. AS A RESULT, THE FINAL SET OF 9 COMPAR ABLE COMPANIES HAVING AN AVERAGE OPERATING PROFIT MARGIN OF 16.23% , IS AS UNDER :- SR. NO. NAME OF THE COMPANY OP/TC (%) 1 BEST MULYANKAN CONSULTANTS LTD. 9.91% 2 IDC (INDIA) LTD. 10.46% 3 BASIZ FUND SERVICES PVT. LTD. 46.75% 4 INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 6.45% 5 IMMACS MANAGEMENT SERVICES LTD. 14.54% 6 SHRISTI URBAN INFRASTRUCTURE DEVELOPMENT LTD. 8.66% 7 CHOKSI LABORATORIES LTD. 23.19% 8 IN HOUSE PRODUCTION LIMITED 2.51% 9 WAPCOS LTD. (SEGMENT) 23.60% AVERAGE 16.23% ITA NOS.780/DEL/2012 15. CONSEQUENTLY, ASSESSING OFFICER VIDE AN ORDER D ATED 24.12.2013 READ WITH ORDER OF TPO UNDER SECTION 144C(10)/92CA(3) OF THE ACT, MADE AN ADDITION OF RS . 45,00,250/- TO THE TOTAL INCOME OF ASSESSEE AS UNDER :- OPERATIONAL COST FOR BUSINESS SUPPORT SERVICE SEGMENT 7,02,48,000 ARMS LENGTH PRICE AT A MARGIN OF 116.23% 8,16,49,250 PRICE RECEIVED 7,71,49,000 ADJUSTMENT U/S 92CA 45,00,250 16. IN THE ABOVE BACKGROUND, THE ASSESSEE IS IN APP EAL AGAINST THE FINAL ASSESSMENT ORDER, INTER ALIA ON THE GROUND TH AT DRP/TPO ERRED IN EXCLUDING EDUCATIONAL CONSULTANT INDIA LIM ITED (EDCIL) (TECHNICAL ASSISTANCE & HRD) (SEGMENT) FROM THE FIN AL SET OF COMPARABLE COMPANIES. THE TPO HAS HELD THAT EDCIL ENGAGED IN EDUCATIONAL CONSULTANCY BUSINESS AND IS NOT PROVIDI NG ANY SERVICES AND THEREFORE FUNCTIONALLY NOT COMPARABLE TO THE AP PELLANT. FURTHER, DRP IN THIS REGARD HAS HELD AS UNDER: ACCORDING TO THE ASSESSEE EDCIL OPERATES IN THREE SEGMENTS: TECHNICAL ASSISTANCE, INSTITUTIONAL DEVELOPMENT AND HUMAN RESOURCES DEVELOPMENT. THE SERVICES PROVIDED UNDER TECHNICAL ASSISTANCE AND HUMAN RESOURCE DEVELOPMENT ARE CONSIDERED TO BE DIFFERENT FROM THE ITA NOS.780/DEL/2013 ASSESSEE. THE COMPARABLE SEGMENT COVER SERVICES INCLUDING FEASIBILITY STUDIES, TRAINING, MGMT SERVI CES, RECRUITMENT SERVICES ETC. HENCE EDCILS SERVICES CANNOT BE CONSIDERED TO BE COMPARABLE WITH THAT OF ASSESSEE. THE OBJECTION OF THE TAXPAYER IS REJECTE D. 17. IN PURSUANCE TO THE ABOVE, THE ASSESSEE SUBMITT ED THAT THIS COMPANY IS ENGAGED IN PROVISION OF SUPPORT SERVICES IN THE FOLLOWING AREAS: STUDENT PLACEMENT: THE OBJECTIVE IS TO PLACE INTERNATIONAL/NRIS/PIO IN INDIAN INSTITUTIONS, RECOGNIZED BY THE REGULATORY BODIES, GOVERNMENT OF INDIA. SECONDMENT OF EXPERTS: THE OBJECTIVE IS TO FACILITA TE HUMAN RESOURCE DEVELOPMENT THROUGH SECONDMENT OF FACULTY/TEACHERS AND EXPERTS IN DIVERSE FIELDS TO V ARIOUS COUNTRIES IN ASIA AND AFRICA. TECHNICAL ASSISTANCE: TECHNICAL ASSISTANCE DIVISION IS ENGAGED IN THE SERVICES OF TAILORING SOLUTIONS IN IDENTIFYING KEY ISSUES SUCH AS VISION, MISSION, CON CEPT DEVELOPMENT AND DETAILED MAPPING OF THE INSTITUTIONAL/EDUCATIONAL ENTITIES INCLUDING DELIVE RY MECHANISM. THE ISSUE ADDRESSED BY THE DEPARTMENT INCLUDES-FEASIBILITY, GOVERNANCE PLAN, ACADEMIC PLA N, INFRASTRUCTURE PLAN, FINANCIAL PLAN AND IMPLEMENTAT ION PLAN. PROCUREMENT SERVICES: EDCIL ASSISTS IN THE CAPACITY BUILDING OF EDUCATIONAL INSTITUTIONS IN IN DIA AND ABROAD THROUGH PROCUREMENT OF EDUCATIONAL AIDS ITA NOS.780/DEL/2014 RANGING FROM SCHOOL KITS TO HI-TECH LABORATORY EQUIPMENT. TESTING AND RECRUITMENT SERVICES: EDCIL OFFERS RECRUITMENT SOLUTIONS IN SELECTION AND RECRUITMENT OF EXECUTIVES, PROFESSIONALS, TEACHERS AND SKILLED STA FF TO VARIOUS MINISTRIES AND DEPARTMENTS OF CENTRAL AND S TATE GOVERNMENTS, PUBLIC SECTOR ENTERPRISES, AUTONOMOUS BODIES AND ACADEMIC INSTITUTIONS ACROSS THE COUNTRY . TECHNICAL SUPPORT GROUP: EDCIL OFFERS SERVICES AS A STRATEGIC PARTNER CONSULTANCY ORGANIZATION PROVIDIN G CORE COMPETENCE IN THE SPECIFIED AREAS. TRAINING & MANAGEMENT SERVICES: EDCIL ORGANIZES NEED BASED SHORT TERM AND LONG TERM TRAIN ING PROGRAMS FOR FOREIGN NATIONS SPONSORED BY THEIR GOVERNMENTS/INTERNATIONAL FUNDING AGENCIES AT REPUT ED EDUCATIONAL INSTITUTIONS/TRAINING ESTABLISHMENTS. THE COMPANY IS INVOLVED IN THE DESIGN AND MANAGEMENT OF CUSTOMIZED SHORT TERM AND LONG TERM TRAINING PROGRA MS INCLUDING STUDY VISITS TO MEET THE REQUIREMENTS OF THE INTERNATIONAL CLIENTS INCLUDING FOREIGN GOVERNMENTS AND FUNDING AGENCIES. 18. FURTHER, IT WAS SUBMITTED THAT, AS PER THE ANNU AL REPORT OF THE COMPANY, IT OPERATES IN THREE SEGMENTS, NAMELY, TECHNICAL ASSISTANCE, INSTITUTIONAL DEVELOPMENT AND HUMAN RES OURCES DEVELOPMENT. IT WAS ALSO SUBMITTED THAT THE TECHNI CAL ASSISTANCE AND HUMAN RESOURCE DEVELOPMENT SEGMENT OF EDCIL I S COMPARABLE TO THE SERVICES PROVIDED BY IT TO ITS AS SOCIATED ITA NOS.780/DEL/2015 ENTERPRISE AS THESE SEGMENT COVERS SERVICES INCLUDI NG FEASIBILITY STUDIES, TRAINING, MANAGEMENT SERVICES, RECRUITMENT SERVICES, STRATEGIC CONSULTANCY, ETC. IT WAS THEREFORE SUBMIT TED THAT ACCORDINGLY THE ASSESSEE IN ITS TRANSFER PRICING ST UDY HAS CONSIDERED TECHNICAL ASSISTANCE AND HUMAN RESOURCE DEVELOPM ENT SEGMENTS OF EDCIL AS COMPARABLE TO THE ASSESSEE AND TPO/DRP WERE INCORRECT IN CONCLUDING THAT THE SAME IS NOT F UNCTIONALLY COMPARABLE. A REFERENCE WAS ALSO MADE TO THE ORDER OF DRP FOR ASSESSMENT YEAR 2008-09 WHEREBY EDCIL HAD BEEN INCL UDED A COMPARABLE. THE LEARNED DR SUPPORTED THE ACTION OF EXCLUSION OF AUTHORITIES BELOW. 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND, PERUSE D THE MATERIAL ON RECORD. IN THE PRESENT CASE, THE ASSESS EE WANTS INCLUSION OF EDCIL, A GOVERNMENT COMPANY, IN THE FI NAL SET OF COMPARABLES ADOPTED BY TPO/DRP. THE ASSESSEE INTER- ALIA SUBMITTED THAT IN THE APPELLANTS OWN CASE FOR THE A SSESSMENT YEAR 2008-09. DRP HAD DIRECTED THE TPO TO CONSIDER THE A FORESAID SEGMENT, NAMELY, TECHNICAL ASSISTANCE AND HUMAN RESOURCE AS COMPARABLE TO THE ASSESSEE AND SINCE THE BUSINES S OF EDCIL AND ASSESSEE HAS REMAINED UNCHANGED FROM PRECEDING YEAR S, EDCIL CONTINUES TO BE COMPARABLE TO THE ASSESSEE AND THER E EXISTS NO LEGITIMATE REASON TO REJECT THE COMPANY IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE PLACED HIS RELIANCE ON THE JUDGMENT OF ITA NOS.780/DEL/2016 HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LIMITED 358 ITR 295, WHEREIN THEIR LORDSHIPS REITER ATED THE LAW LAID DOWN IN RADHASOAMI SATSANG VS. CIT 193 ITR 321 TO HOLD THAT, WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAVE BEEN FOUND AS A FACT ONE WAY OR THE OTHER, AND THE PARTIES HAVE ALLOWED THE POSITION TO BE SUS TAINED BY NOT CHALLENGING THE ORDER, IT IS NOT ALLOWED TO CHANGE THE POSITION IN ANY SUBSEQUENT YEAR. HAVING GONE THROUGH THE ORDER DATED 30.8.2012 FOR ASSESSMENT YEAR 2008-09 IN THE CASE O F APPELLANT, IT IS STATED THAT DRP HAS HELD IN REGARD TO THE ABOVE COMPARABLE AS UNDER: 1 EDUCATIONAL CONSULTANTS INDIA LTD. (EDCIL) ACCORDING TO THE ASSESSEE EDCIL OFFER SUPPORT SERVI CES IN THE FOLLOWING AREAS: STUDENT PLACEMENT SECONDMENT OF EXPERTS TECHNICAL ASSISTANCE PROCUREMENT SERVICES TESTING AND RECRUITMENT SERVICES TECHNICAL SUPPORT GROUP TRAINING AND MANAGEMENT SERVICES THE COMPANY OPERATES IN THREE SEGMENTS: TECHNICAL ASSISTANCE, INSTITUTIONAL DEVELOPMENT AND HUMAN RESOURCES DEVELOPMENT. THE SERVICES PROVIDED UNDER TECHNICAL ASSISTANCE AND HUMAN RESOURCE DEVELOPMENT HAVE BEEN CONSIDERED AS COMPARABLE TO ITA NOS.780/DEL/2017 THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO ITS AE. FURTHER, WE WISH TO SUBMIT THE EDCIL WAS ACCEPTED A S COMPARABLE TO THE ASSESSEE BY THE LEARNED TPO DURIN G THE ASSESSMENT PROCEEDINGS FOR AY 2007-08 AS WELL A S EARLIER YEARS. HENCE SINCE THE BUSINESS OF EDCIL A ND THE ASSESSEE HAS REMAINED UNCHANGED FROM LAST YEAR, EDCIL CONTINUES TO BE COMPARABLES TO THE ASSESSEE A ND THERE EXIST NO LEGITIMATE REASON TO REJECT THE COMP ANY THIS YEAR. AFTER CONSIDERING THE ABOVE FACTS, WE FIND THAT FUNCTIONALLY IT IS COMPARABLE AND TPO IS DIRECTED T O INCLUDE IT IN THE LIST OF COMPARABLES FOR COMPUTATI ON OF ALP 20. FOR THE FOREGOING REASON AND THERE BEING NO CHA NGE IN THE FACTS FOR THE INSTANT ASSESSMENT YEAR, THE AO/DRP I S DIRECTED TO INCLUDE EDCIL IN THE FINAL SET OF COMPARABLE COMPAN IES. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING OBSERVATI ON OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS . NGC NETWORK INDIA (P) LTD. 10 TAXMANN.COM 140 WHEREIN I T HAS BEEN HELD AS UNDER: THESE COMPARABLES AND THE METHOD OF COMPUTATION OF ARMS LENGTH PRICE HAS BEEN ACCEPTED BY THE DEPARTM ENT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 2004-05. THEREFORE IN OUR VIEW COMPARABLES SELECTED BY THE ASSESSEE HAVE TO BE ADOPTED FOR THE PURPOSE OF COMPUTATION OF TRANSFER PRICING ADJUSTMENTS THIS YE AR ALSO. ITA NOS.780/DEL/2018 21. THUS, AFTER INCLUDING EDCIL IN THE FINAL SET OF COMPARABLE COMPANIES CONSIDERED BY THE TPO, THE AVERAGE OPERAT ING PROFIT TO COST MARGIN OF THE COMPARABLE COMPANIES WORKS OUT T O 14.98%, AS UNDER: SR. NO. NAME OF THE COMPANY OP/TC (%) 1 BEST MULYANKAN CONSULTANTS LTD. 9.91% 2 IDC (INDIA) LTD. 10.46% 3 BASIZ FUND SERVICES PVT. LTD. 46.75% 4 INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 6.45% 5 IMMACS MANAGEMENT SERVICES LTD. 14.54% 6 SHRISTI URBAN INFRASTRUCTURE DEVELOPMENT LTD. 8.66% 7 CHOKSI LABORATORIES LTD. 23.19% 8 IN HOUSE PRODUCTIONS (SEGMENT) 2.51% 9 WAPCOS LTD. (SEGMENT) 23.60% 10 EDUCATIONAL CONSULTANT INDIA LIMITED (TECHNICAL ASSISTANCE & HRD SEGMENT) 3.80% AVERAGE 14.98% 22. SINCE, THE OPERATING PROFIT TO COST OF THE APPE LLANT AT 9.82% IS WITHIN THE +/-5% RANGE OF THE AVERAGE OPERATING PRO FIT TO COST RATIO OF THE AFORESAID 10 COMPARABLE COMPANIES AT 14.98%, THE INTERNATIONAL TRANSACTION OF PROVISION OF BUSINESS SUPPORT SERVICES OF ASSESSEE DURING THE RELEVANT YEAR IS CONSIDERED TO BE AT ARMS LENGTH AND THE ADJUSTMENT MADE BY THE TPO IN THE IM PUGNED ORDER IS LIABLE TO BE DELETED, FOR THIS REASON ALONE. TH E GROUNDS ARE ALLOWED TO THE EXTENT DISCUSSED ABOVE. ITA NOS.780/DEL/2019 23. AS FAR AS GROUND NO. 3 IS CONCERNED I.E. WITH R EGARD TO LEVY OF INTEREST UNDER SECTION 234C, IT IS HELD THAT INT EREST UNDER SECTION 234C IS LEVIABLE ON THE SHORTFALL OF ADVANCE TAX AS COMPARED TO THE TAX DUE ON RETURNED INCOME. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 24 TH DAY OF NOVEMBER, 2015. SD/- SD/- (S.V.MEHROTRA) (A.T.VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 24 TH DAY OF NOVEMBER, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
