Kyocera Asia Pacific India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 829/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0692 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 16-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S D KAPILA; R R MAURYA
• Keywords: Business income; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E I - 1 , NEW DELHI BEFORE SH. N. K. SAINI, HON BLE VICE PRESIDENT AND SH. KULDIP SINGH, JUDICIAL MEMBER ITA NO. 829/DEL/2016 : ASSTT. YEAR : 2011 - 1 2 KYOCERA A SIA PACIFIC INDIA PVT. LTD., LEVEL - 4, RECTANGLE - 1, COMMERCIAL COMPLEX, D - 4, SAKET, NEW DELHI - 110017 VS D CIT, CIRCLE - 1 4 ( 2 ), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A DCK7160K ASSESSEE BY : SH . S. D. KAPILA , ADV. & SH. R. R. MAURYA, ADV. REVENUE BY : SH. KUMAR PARNAV , SR. DR DATE OF HEARING : 07.09 .201 8 DATE OF PRONOUNCE MENT : 26 .11 .201 8 ORDER PER N. K. SAINI, VICE PRESIDENT : THIS IS AN APPEAL BY THE ASSESSEE AGAIN ST THE ORDER DATED 30.12.2015 PASSED BY THE AO U/S 143(3) R.W.S. 92CA(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE LD DRP ERRED IN UPHOLDING LD T PO'S APPROACH OF RE JECTING THE COMPARABLE SET SELECTED BY THE APPELLANT IN ITS TRANSFER PRICING STUDY ( TP STUDY') FOR BENCHMARKING THE INTERNATIONAL OF PROVISION OF TECHNICAL SUPPORT SERVICES. THE REJECTION IS NEITHER SUPPORTED BY AN ANALYSIS NOR CORROBORATIVE EVIDENCE, WHI CH RENDERS THE PROCESS ARBITRARY AND LIABLE FOR OUTRIGHT REJECTION. 2. THAT THE LD DRP ERRED IN ACCEPTING THE FRESH BENCHMARKING PROCESS UNDERTAKEN BY LD TPO WITHOUT IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 2 IDENTIFYING ANY SPECIFIC DEFICIENCY OR INSUFFICIENCY IN TH E SEARCH PROCESS ADOPTED BY THE APPELLANT. THE FRESH BENCHMARKING UNDERTAKEN BY LD TPO IS UNWARRANTED, ILLEGAL AND WITHOUT JURISDICTION. 3. THAT THE LD DRP/TPO ERRED IN REJECTION OF FILTERS APPLIED B Y THE APPELLANT AND APPLYING IN SUFFICIENT /INAPPROPRIATE ADDITIONAL FILTERS. THIS EXHIB ITS THE ERRONEOUS APPROACH AND BLATANT IRREGULARITY IN THE ASSESSMENT UNDERTAKEN BY THE LD TPO. 4. THAT THE LD DRP/TPO ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE I N REJECTING A COMPARABLE C OMPANY IDENTIFIED BY THE APPELLANT BASED ON THE SKETCHY UNDERSTA NDING OF FUNCTIONAL ANALYSIS OF THE APPELLANT WITH RESPECT TO THE PROV ISION OF TECHNICAL SUPPORT SERVI CES. 5. THAT THE LD DRP/TPO ERRED IN SELECTING FUNCTIONALLY DIFFERENT COMPANIES AS COMPARABLES TO THE APPELLANT WITH RESPECT TO THE PROVISION OF TECHNICA L SUPPORT SERVICES. 6. THAT THE LD DRP/TPO ERRED ON FACTS AND IN LAW IN ACCEPTING THE INCONSISTENT APPROACH OF LD. TPO WHILE ANALYZING ARMS' LENGTH PRICE AS COMPARED TO PREVIOUS ASSESSMENT YEAR EVEN WHEN THE BUSINESS MODEL, NATURE OF TRANSACTION OF THE AP PELLANT HAD NOT UNDERGONE ANY CHANGE. 7. THAT THE LD DRP/TPO ERRED BY USING SINGLE YEAR DATA AS AGAINST THE MULTIPLE YEAR DATA USED BY THE APPELLANT, TO COMPUTE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRA NSACTION OF THE APPELLANT USING T RANSACTIONAL N ET MARGIN METHOD ( TNMM'). THE LD DRP HAS ALSO ERRED IN USING COMPARABLE DATA WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF PREPARING TP STUDY. 8. THE LD DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 14(2), NEW DELHI ('THE LD AO') ERRED IN FACTS AN D IN LAW IN INITIATING T HE PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT AGAINST THE APPELLANT FOR CONCEALING THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 9. THAT THE LD AO ERRED IN COMPUTING THE TOTAL AMOUNT PAYABLE/REFUNDABLE TO THE APPELLANT. THE GROUNDS OF APPEAL ARE NOTWITHSTANDING EACH OTHER. IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 3 THE GROUNDS OF APPEAL ARE NOTWITHSTANDING EACH OTHER. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER OR ADD FRESH GROUNDS OF APPEAL DUR ING THE COURSE OF PROCEEDING. 3. DURING THE COURS E OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NOS. 2 TO 4, 7 & 8. GROUND NOS. 6 & 9 ARE GENERAL IN NATURE. AS REGARDS TO GROUND NO. 1, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS TO BE TREATED AS IN FRUCTUOUS AND ALSO GAVE IN WRITING THAT ONLY GROUND NO. 5 IS PRESSED. THE SAID GROUND RELATES TO THE SELECTION OF COMPARABLE COMPANIES WHILE WORKING OUT THE ARM S LENGTH PRICE. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 27.09.2012 DECLARING A N INCOME OF RS.1,75,29,130/ - WHICH WAS PROCESSED U/S 143(1) OF THE ACT. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE AO REFERRED THE MATTER TO THE TPO U/S 92CA(3) OF THE ACT IN RESPECT OF INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE , FOR DET ERMINING THE ARM S LENGTH PRICE. THE TPO NOTED THAT THE PRIMARY FUNCTION S PE RFORMED BY THE ASSESSEE WERE FOLLOWING: I. LOCAL SALES AND MARKETING II. MARKETING SUPPORT SERVICE III. TECHNICAL SUPPORT SERVICE 5. THE ASSESSEE HAD CHOOSEN FOLLOWING SIX COMPA RABLES IN THE TRADING SEGMENTS : I. A C L COMPONENTS LTD. II. ASSOCIATED AUTO PARTS PVT. LTD. III. INDIA MOTOR PARTS & ACCESSORIES LTD. IV. JULLUNDUR MOTOR AGENCY (DELHI) LTD. V. SAI SERVICE SPARES & ACCESSORIES IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 4 VI. STANES MOTOR PARTS LTD. 6. THE TPO RE JECTED M/S SAI SERVICE SPARES & ACCESSORIES LTD. AND M/S STANES MOTOR PARTS LTD. THE TPO ALSO INCLUDED A NEW COMPARABLE M/S CUPRUM BAGRODIA LTD. AND WORKED OUT THE OPERATING MARGIN AT 10 .70 % INSTEAD OF 4.47% DECLARED BY THE ASSESSEE IN THE FOLLOWING MANNER : S. NO. NAME OF THE COMPARABLE OP/OC 1. A C L COMPONENTS LTD. 11.07% 2. ASSOCIATED AUTO PARTS PVT. LTD. 9.20% 3. INDIA MOTOR PARTS & ACCESSORIES LTD. 8.92% 4. JULLUNDUR MOTOR AGENCY (DELHI) LTD. 6.59% 5. CUPRUM BAGRODIA LTD. 17.72% AVERAGE 10.70% THE TPO PROPOSED THE ADJUSTMENT OF RS.3,16,27,488/ - IN TRADING SEGMENT. 7. IN MARKET SUPPORT SERVICE SEGMENT, T HE ASSESSEE SELECTED THREE COMPARABLES HAVING ARITHMETIC MEAN OF 8.88% WHILE THE MARGIN OF THE COMPARABLES SELECTED BY THE ASSESSEE WAS AT 1 2.81% . S O , IT WAS CLAIMED THAT THIS TRANSACTION WAS AT ARM S LENGTH PRICE. THE TPO, HOWEVER, SELECTED 15 COMPARABLES WHICH INCLUDED TWO COMPARABLES SELECTED BY THE ASSESSEE AND ONE OF THE COMPARABLE, NAMELY, M/S ENTERTAINMENT NETWORK (INDIA) LTD. WAS REJEC TED. THE TPO WORKED OUT THE AVERAGE MARGIN AT 23.24% AND PROPOSED THE ADJUSTMENT OF RS.11,30,190/ - 8. I N TECHNICAL SUPPORT S EGMENT , T HE ASSESSEE SELECTED SEVEN COMPARABLES WITH AVERAGE OP/TC RATIO AT 17.57%. THE TPO IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 5 ACCEPTED FIVE COMPARABLES SELECTED BY THE ASSESSEE AND REJECTED TWO COMPARABLES, NAMELY, M/S NICCO PARKS & RESORTS LTD. AND M/S TELECOMMUNICATIONS CONSULTANTS INDIA LTD. THE TPO ALSO INTRODUCED 13 NEW COMPARABLES AND WORKED OUT AVERAGE MARGIN AT 32.67% IN THE FOLLOWING MANNER: COMPANY NAME OP/ OC (%) ASHOK LEYLAND PROJECT SERVICES LTD. 24.70% BENGAL S R E I INFRASTRUCTURE DEVP. LTD. 42.14% CERTIFICATION ENGINEERS INTERNATIONAL LTD. 78.45% GLOBAL PROCUREMENT CONSULTANTS LTD. 30.86% H S C C (INDIA) LTD. 21.04% INDUS TECHNICAL & FINANCIAL CON SULTANTS LTD. 14.78% KITCO LTD. 27.48% MAHINDRA CONSULTING ENGINEERS LTD. 30.92% MITCON CONSULTANCY & ENGG. SERVICES LTD. 40.19% PALLAVAN TRANSPORT CONSULTANCY SERVICES LTD. 25.59% R E C POWER DISTRIBUTION CO. LTD. 39.44% T C E CONSULTING ENGINEERS L TD. 29.29% USHA HYDRO DYNAMICS LTD. 29.45% GUJARAT INDUSTRIAL & TECHNICAL CONSULTANCY ORG LTD. 7.89% IBI CHEMATUR (ENGINEERING & CONSULTANCY) LTD. 25.96% RITES LTD. 58.27% NTPC ELECTRIC SUPPLY COMPANY LTD. 18.01% WAPCOS LTD. 43.68% AVERAGE 32.67% ACCORDINGLY, THE TPO WORKED OUT THE ADJUSTMENT OF RS.14,54,754/ - IN THE FOLLOWING MANNER: IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 6 S. NO. PARTICULARS AMOUNT 1. OPERATING REVENUE OF THE ASSESSEE(A) 96,34,132 2. ARM S LENGTH MARGIN (OP/SALES) (B=A*32.67%) 31,47,471 3. OPERATING MARGIN OF THE A SSESSEE (C=A*17.57%) 16,92,717 4. ADJUSTMENT (B - C) 14,54,754 9 . ACCORDINGLY, TOTAL ADJUSTMENT OF RS.3,42,12,432/ - WAS PROPOSED AS PER THE FOLLOWING DETAILS: S. NO. PARTICULARS AMOUNT 1. TRADING SEGMENT 3,16,27,488 2. MARKET SUPPORT SERVICE 11,30,190 3. TECHNICAL SUPPORT SERVICE 14,54,754 TOTAL 3,42,12,432 10 . ON THE BASIS OF THE PROPOSAL MADE BY THE TPO, THE AO PASSED THE DRAFT ASSESSMENT ORDER DATED 16.02.2015 AND PROPOSED THE ADDITION OF RS.3,42,12,432/ - ON ACCOUNT OF ARM S LENGTH PRICE ADJUSTME NT. AGAINST THE DRAFT ASSESSMENT ORDER PASSED BY THE AO, THE ASSESSEE FILED OBJECTION BEFORE THE DISPUTE RESOLUTION PANEL - 1 (DRP). THE ADJUDICATION OF THE LD. DRP AND THE OBJECTIONS OF THE ASSESSEE IN M ARKETING SUPPORT SERVICES AND TECHNICAL S EGMENT S WERE AS UNDER: COMPANY NAME TAXPAYERS OBJECTIONS DRPS ADJUDICATION APAR CHEMATEK LUBRICANTS LTD. - ENTIRE TURNOVER FROM ADVERTISING & PUBLICITY - ENGAGED IN INDENTING SERVICES FOR SALE OF LUBRICANTS ENGAGED IN MARKETING OF LUBRICANTS FUNCTIONALLY SIMILAR TURNO VER OBJECTIONS ADDRESSED AT APPROVAL OF FILTER SUPRA INCLUDING JURISDICTIONAL HC DECISIONS IN CHRYSCAPITAL. DRP APPROVES ITS INCLUSION AS COMPARABLE. IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 7 INFO EDGE (INDIA) LTD. DEVELOPER AND OWNER OF VARIOUS INTERNET PLATFORMS/WEBSITES WHICH IN TURN PROVIDE VARIOUS ONLINE SERVICES OPERATES IN THE E - COMMERCE INDUSTRY GIVEN FUNCTIONAL PROFILE OF TAXPAYER OF PROVIDING MARKETING SUPPORT FOR KYOCERAS MARKETING SUPPORT SERVICES TO KAP FOR DISTRIBUTION OF ITS PRODUCTS IN INDIA, AND PROVIDING TECHNICAL SUPPORT SERVIC ES TO KYOCERA CORPORATION JAPAN TO FACILITATE THE SALE OF GROUPS PRODUCTS TO NOKIA AND OTHER COMPANIES IN INDIA INCLUDING GETTING ACCREDITATION OF KC PRODUCTS FROM NOKIA INDIA, THIS COMPANY DOES NOT SEEM TO BE FUNCTIONALLY SIMILAR, AND HAS A DIFFERENT BUSI NESS MODEL PERTAINING TO ELECTRONIC MEDIA/ E - COMMERCE SEGMENT, AND HENCE A DIFFERENT FAR. DRP DIRECTS ITS EXCLUSION AS COMPARABLE. MTV LTD OPERATES IN MEDIA INDUSTRY NET FIXED ASSETS TO SOLES RATIO IS 127% SIGNIFICANT MANUFACTURING SERVICE COST 34.36% OF OC GIVEN FUNCTIONAL PROFILE OF TAXPAYER OF PROVIDING MARKETING SUPPORT FOR KYOCERAS MARKETING SUPPORT SERVICES TO KAP FOR DISTRIBUTION OF ITS PRODUCTS IN INDIA, AND PROVIDING TECHNICAL SUPPORT SERVICES TO KYOCERA CORPORATION JAPAN TO FACILITATE THE SALE OF GROUPS PRODUCTS TO NOKIA AND OTHER COMPANIES IN INDIA INCLUDING GETTING ACCREDITATION OF KC PRODUCTS FROM NOKIA INDIA, THIS COMPANY DOES NOT SEEM TO BE FUNCTIONALLY SIMILAR, AND HAS A DIFFERENT BUSINESS MODEL, AND HENCE A DIFFERENT FAR. DRP DIRECTS ITS EX CLUSION AS COMPARABLE. MEDIA RESEARCH USERS COUNCIL NPO WHICH WORKS AS AN ETHICAL BODY FOR THE WELFARE OF ITS MEMBERS, I.E. MEDIA PLAYERS NOT ENGAGED IN PROVIDING MARKETING SUPPORT SERVICES NOT FOR PROFIT BODY FOR WELFARE OF MEMBERS - FUNCTIONALLY DIFFEREN T. TPO IS DIRECTED TO EXCLUDE COMPARABLE IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 8 POWER SYSTEM OPERATION CORPN. LTD OPERATES IN POWER GENERATION SECTOR - WHOLLY OWNED SUBSIDIARY OF POWER GRID CORPORATION OF INDIA LIMITED, - TARGETS OF THE COMPANY INCLUDE IMPLEMENTATION OF WEB - BASED SCHEDULI NG SOFTWARE, UPDATING OF OPERATING PROCEDURES, RESTORATION AND BLACK START PROCEDURES. SIGNIFICANT INVESTMENT IN FIXED ASSETS (INR 51.14 CRORES) FUNCTIONALLY DIFFERENT. SUBSIDIARY OF PGCIL SCHEDULING AND DISTRIBUTION ELECTRICITY OVER ITS GRID. TPO IS DIRE CTED TO EXCLUDE COMPARABLE APITCO LTD - ENGAGED IN RENDERING TECHNICAL CONSULTANCY AND NOT MARKETING SUPPORT SERVICES ENGAGED IN TECHNICAL CONSULTANCY. FUNCTIONALLY BROADLY SIMILAR TURNOVER OBJECTIONS ADDRESSED AT APPROVAL OF FILTER SUPRA INCLUDING J URISDICTIONAL HC DECISIONS IN CHRYSCAPITAL. DRP APPROVES ITS INCLUSION AS COMPARABLE. GLOBAL PROCUREMENT CONSULTANTS LTD ENGAGED IN PROVIDING PROCUREMENT RELATED SERVICES GIVEN FUNCTIONAL PROFILE OF TAXPAYER OF PROVIDING MARKETING SUPPORT FOR KYOCERAS MAR KETING SUPPORT SERVICES TO KAP FOR DISTRIBUTION OF ITS PRODUCTS IN INDIA, AND PROVIDING TECHNICAL SUPPORT SERVICES TO KYOCERA CORPORATION JAPAN TO FACILITATE THE SALE OF GROUPS PRODUCTS TO NOKIA AND OTHER COMPANIES IN INDIA INCLUDING GETTING ACCREDITATION OF KC PRODUCTS FROM NOKIA INDIA, THIS COMPANY DOES NOT SEEM TO BE FUNCTIONALLY SIMILAR, AND HAS A DIFFERENT BUSINESS MODEL, AND HENCE A DIFFERENT FAR. DRP DIRECTS EXCLUSION OF COMPARABLE TSR DARASHAW LIMITED LEADING REGISTRAR & TRANSFER AGENTS REGISTERED WITH SEBI. INCOME DERIVED FROM THE TRADITIONAL REGISTRY SERVICES, RECORD MANAGEMENT BUSINESS AND PAYROLL BUSINESS INCOME DERIVED FROM THE TRADITIONAL REGISTRY SERVICES, RECORD MANAGEMENT BUSINESS - FUNCTIONALLY DIFFERENT. DRP DIRECTS ITS EXCLUSION AS COMPA RABLE IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 9 ICRA MANAGEMENT CONSULTING LTD. - ENGAGED IN OFFERING CONSULTING SERVICES IN THE AREAS OF STRATEGY, PROCESS CONSULTING AND CORPORATE FINANCE. ENGAGED IN TECHNICAL MANAGEMENT CONSULTANCY. FUNCTIONALLY BROADLY SIMILAR TURNOVER OBJECTIONS ADDRESSED AT APPROVAL OF FILTER SUPRA INCLUDING JURISDICTIONAL HC DECISIONS IN CHRYSCAPITAL. DRP APPROVES ITS INCLUSION AS COMPARABLE. ASHOK LEYLAND PROJECTS SERVICES LTD ENGAGED IN PROJECT MANAGEMENT SERVICES. EXTRAORDINARY EVENTS AS TO WIND DIVISION SOLD ON A SLUM P SALE DURING THE YEAR AFFECTING ITS PROFITS. FUNCTIONALLY DIFFERENT - DIFFERENT BUSINESS MODEL. PROVIDES SPECIALISED SERVICES DESIGNATED TO DELIVER PROJECT OPPORTUNITIES FROM CONCEPT TO COMMISSIONING FROM PRE - INVESTMENT INFRASTRUCTURE PROJECT DEVELOPMENT SUCH AS FEASIBILITY STUDIES AND APPRAISALS TO DEVELOPMENT OF JOINT VENTURES AND COMPANY FORMATION - PROVIDES NEGOTIATED EQUITY. SOLD WIND DIVISION ON SLUMP SALE DURING FY 2010 - 11 FOR 705 LAKHS WHICH HAS IMPACT ON MARGIN. DRP DIRECTS EXCLUSION OF COMPARABLE . BENGAL SREI INFRASTRUCTURE DEVP. LTD. ENGAGED IN PROVIDING INFRASTRUCTURE DEVELOPMENT SERVICES PROVIDES CONSULTANCY OF INDUSTRIAL PARKS, TOURISM AND WATER SUPPLY PROJECTS. TPO EXCLUDED NICCO PARKS & RESORTS LTD AS COMPARABLE TO ITS TECHNICAL SUPPORT SER VICE SEGMENT, BY STATING - THIS COMPANY IS FUNCTIONALLY DIFFERENT AND ON PERUSAL OF ITS ANNUAL REPORT IT IS EVIDENT THAT THIS COMPANY DOESN T PROVIDES TECHNICAL SERVICES RATHER THE ANNUAL REPORT OF THE COMPANY CLEARLY BRINGS OUT THE FACT THAT IT IS ENGAGED IN PROVIDING WATER AND FUN RIDES, BASICALLY AN AMUSEMENT PARK. AND DRP APPROVED ITS EXCLUSION. DRP THUS HAS NO HESITATION IN HOLDING THIS AS FUNCTIONALLY DIFFERENT AND DIRECTING ITS EXCLUSION. CERTIFICATION ENGINEERS INTERNATIONAL LTD. ENGAGED IN CERTIFIC ATION, RE - CERTIFICATION, SAFETY AUDIT AND HSE MANAGEMENT SYSTEMS FOR OFFSHORE AND ONSHORE OIL & GAS FACILITIES. ENGAGED IN TECHNICAL MANAGEMENT CONSULTANCY, FUNCTIONALLY BROADLY SIMILAR TURNOVER OBJECTIONS ADDRESSED AT APPROVAL OF FILTER SUPRA INCLUDING JU RISDICTIONAL HC DECISIONS IN CHRYSCAPITAL. DRP APPROVES ITS INCLUSION AS COMPARABLE IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 10 GLOBAL PROCUREMENT ENGAGED IN PROCUREMENT RELATED ACTIVITIES IN DIVERSE AREAS OF HEALTH, GIVEN FUNCTIONAL PROFILE OF TAXPAYER OF PROVIDING MARKETING SUPPORT FOR KYOCERAS CONSULTANTS LTD. EDUCATION, AGRICULTURE, MINING, TRANSPORTATION, COMMUNICATION, ENERGY, WATER RESOURCES AND OTHER KEY SECTORS MARKETING SUPPORT SERVICES TO KAP FOR DISTRIBUTION OF ITS PRODUCTS IN INDIA, AND PROVIDING TECHNICAL SUPPORT SERVICES TO KYOCERA CORPORATION JAPAN TO FACILITATE THE SALE OF GROUPS PRODUCTS TO NOKIA AND OTHER COMPANIES IN INDIA INCLUDING GETTING ACCREDITATION OF KC PRODUCTS FROM NOKIA INDIA, THIS COMPANY DOES NOT SEEM TO BE FUNCTIONALLY SIMILAR, AND HAS A DIFFERENT BUSINESS MODEL, AN D HENCE A DIFFERENT FAR. DRP DIRECTS EXCLUSION OF COMPARABLE. MITCON CONSULTANCY & ENGG. SERVICES LTD. ENGAGED IN VARIED SERVICES LIKE POWER DIVISION, ENERGY AND CARBON SERVICES, ENVIRONMENT MANAGEMENT AND ENGINEERING, AGRO INFRA AND FOOD PROCESSING SERV ICE - FOILS SERVICE FILTER - CONSULTANCY INCOME AS A PROPORTION OF TOTAL OPERATING INCOME IS 61% I.E. < 75% ENGAGED IN TECHNICAL MANAGEMENT CONSULTANCY. FUNCTIONALLY BROADLY SIMILAR TURNOVER OBJECTIONS ADDRESSED AT APPROVAL OF FILTER SUPRA INCLUDING JURISD ICTIONAL HC DECISIONS IN CHRYSCAPITAL. DRP APPROVES ITS INCLUSION AS COMPARABLE TAXPAYER ALLEGES IT FAILS SERVICE INCOME FILTER TPO TO VERIFY. IF THIS IS CORRECT THEN DRP DIRECTS TO EXCLUDE FROM COMPARABLES. NTPC ELECTRIC SUPPLY COMPANY LTD. ENGAGED IN BUSINESS OF DISTRIBUTION AND SUPPLY OF ELECTRICAL ENERGY DURING FY 2010 - 11, THE COMPANY FORMED A JOINT VENTURE FOR THE PURPOSE OF RETAIL DISTRIBUTION OF POWER THE OPERATING REVENUES ARE 338 TIMES THAT OF KAPI FUNCTIONALLY DIFFERENT ENGAGED IN BUSINESS OF D ISTRIBUTION AND SUPPLY OF ELECTRICAL ENERGY DRP DIRECTS TPO TO EXCLUDE AS COMPARABLE REC POWER DISTRIBUTION CO. LTD. INVOLVED IN PROVIDING THIRD PARTY INSPECTION, FEEDER RENOVATION PROGRAMS, MATERIAL INSPECTION AND PREPARATION OF DETAILED REVIEW PROJECTS ENGAGED IN TECHNICAL MANAGEMENT CONSULTANCY. FUNCTIONALLY BROADLY SIMILAR DRP APPROVES ITS INCLUSION AS COMPARABLE RITES LTD. ENGAGED IN PROVIDING COMMISSIONING CONSULTANCY, DESIGN, ENGINEERING AND TURNKEY SOLUTIONS IN THE FIELD OF TRANSPORT, TRANSPORTATI ON INFRASTRUCTURE AND RELATED ENGAGED IN TECHNICAL AND MANAGEMENT CONSULTANCY. FUNCTIONALLY BROADLY SIMILAR TURNOVER OBJECTIONS ADDRESSED AT APPROVAL OF FILTER SUPRA INCLUDING JURISDICTIONAL HC DECISIONS IN IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 11 11 . T HE AO PASSED THE I MPUGNED ORDER AND FINALLY MADE THE ADJUSTMENT OF RS.8,96,937/ - IN THE TECHNICAL SUPPORT S ERVICE ON THE BASIS OF THE TPO S ORDER DATED 28.12.2015 PASSED IN PURSUANT TO THE DIRECTION OF THE LD. DRP. 1 2 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FOLLOWING THREE COMPARABLES SELECTED BY THE TPO DESERVE TO BE EXCLUDED: 1. CERTIFICATION ENGINEERS INTERNATIONAL LTD. 2. REC POWER DISTRIBUTION CO. LTD. 3. USHA HYDRO DYNAMICS LTD. TECHNOLOGIES FAILS SERVICE FILTERS AS THE CONSULTANCY INCOME AS A PROPORTION OF TOTAL OPERATING INCOME IS MERELY 63.69% I.E. 75% OPERATING REVENUE IS 4125 TIMES THE REVENUE OF KAPI CARRIES SIGNIFICANT INVENTORIES UNLIKE A SER VICE COMPANY CHRYSCAPITAL. DRP APPROVES ITS INCLUSION AS COMPARABLE BUT IF IT F AILS SERVICE INCOME FILTER THEN TPO TO EXCLUDE AFTER VERIFICATION. TCE CONSULTING ENGINEERS LTD. TIMES THE REVENUE ENGAGED IN PROVIDING DESIGN AND ENGINEERING CONSULTANCY PROJECT MANAGEMENT CONSULTANCY, PROCUREMENT MANAGEMENT SERVICES, CONSTRUCTION MAN AGEMENT CONSULTANCY AND ADVANCED TECHNOLOGY AND SIMULATION OPERATING REVENUE OF THE COMPANY IS 2457 OF KAPI GIVEN FUNCTIONAL PROFILE OF TAXPAYER OF PROVIDING MARKETING SUPPORT FOR KYOCERAS MARKETING SUPPORT SERVICES TO KAP FOR DISTRIBUTION OF ITS PRODUCTS IN INDIA, AND PROVIDING TECHNICAL SUPPORT SERVICES TO KYOCERA CORPORATION JAPAN TO FACILITATE THE SALE OF GROUPS PRODUCTS TO NOKIA AND OTHER COMPANIES IN INDIA INCLUDING GETTING ACCREDITATION OF KC PRODUCTS FROM NOKIA INDIA, THIS COMPANY DOES NOT SEEM TO B E FUNCTIONALLY SIMILAR BUSINESS MODEL, AND HENCE A DIFFERENT FAR. DRP DIRECTS EXCLUSION OF COMPARABLE. USHA HYDRO DYNAMICS LTD. ENGAGED IN PROVIDING SERVICES IN THE FIELD OF DESCALING OF EQUIPMENTS & VESSELS THROUGH HYDROJETTING & RETUBING OF CONDENSES & HEAT EXCHANGES (MANUFACTURING ACTIVITIES). ENGAGED IN TECHNICAL MANAGEMENT CONSULTANCY. FUNCTIONALLY BROADLY SIMILAR TURNOVER OBJECTIONS ADDRESSED AT APPROVAL OF FILTER SUPRA INCLUDING JURISDICTIONAL HC DECISIONS IN CHRYSCAPITAL. IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 12 13 . IT WAS STATED THAT THE AFORESAID THREE COMPA RABLES WERE FUNCTIONALLY DIFFERENT AND THAT THE ITAT DELHI BENCH I , NEW DELHI VIDE ORDER DATED 14.10.2015 FOR THE ASSESSMENT YEAR 2009 - 10 IN THE CASE OF M/S BECHTEL INDIA (P) LTD. VS DCIT, CIRCLE - 2(1), NEW DELHI (2015) 64 TAXMANN.COM 180 DIRECTED TO EXCL UDE M/S CERTIFICATION ENGINEERS INTERNATIONAL LTD., A REFERENCE WAS MADE TO PARAS 28 TO 32 OF THE SAID ORDER (COPY OF WHICH IS PLACED ON THE RECORD). 13. IN HIS RIVAL SUBMISSIONS, THE LD. CIT DR SUPPORTED THE ORDER OF THE TPO. 14. AFTER CONSIDERING THE S UBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL ON RECORD, IT IS NOTICED THAT THE SAID COMPARABLE M/S CERTIFICATION ENGINEERS INTERNATIONAL LTD. HAS BEEN DIRECTED TO BE EXCLUDED BY THE CO - ORDINATE BENCH IN THE AFORESAID REFERRED TO ORDER DATED 14.10.2015 I N THE CASE OF BECHTEL INDIA (P) LTD. VS DCIT, CIRCLE - 2(1), NEW DELHI (SUPRA) AND THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 28 TO 32 WHICH READ AS UNDER: 28. THE NEXT ISSUE FOR OUR CONSIDERATION IS THE FUNCTIONAL COMPARABILITY OF THE ASSESSEE BECHTEL INDIA WITH CIEL. WE HAVE ALREADY NOTED THE FUNCTIONAL PROFILE OF THE TAXPAYER ASSESSEE IN PARA 16 AS STATED ABOVE. THAT THE FUNCTIONAL PROFILE OF CIEL HAS BEEN SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE WHICH EXPLAINS THE DETAILS OF SERVICES OFFERED BY C IEL, AREA OF CERTIFICATION EXPERTISE AND ANOTHER IMPORTANT AREA OF ENERGY EFFICIENCY AUDIT FUNCTIONS BY THE ASSESSEE CIEL. THE RELEVANT OPERATIVE PART READS AS UNDER: '4. SERVICES OFFERED BY CEIL: IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 13 CEIL IS INDIA'S LEADING CERTIFICATION AND INSPECTION AGE NCY FOR OFFSHORE OIL & GAS PROCESS & WELL PLATFORMS, PETRO - CHEMICAL REFINERIES, SUBMARINE AND CROSS COUNTRY PIPELINES ETC. CEIL PROVIDES SERVICES DESIGNED TO SUIT PROJECT REQUIREMENTS THROUGHOUT THE LIFE SPAN OF A PLANT/FACILITY FROM CONCEPT TO COMMISSIONI NG, REVAMPING AND HEALTH CHECK. IT PROMOTES SAFETY, QUALITY AND RELIABILITY THROUGHOUT THE DESIGN AND OPERATING LIFE OF ALL TYPES OF EQUIPMENT, STRUCTURES, PRESSURE VESSELS, PIPELINES AND ROTATING MACHINERY. THE SERVICES COVER ALL TYPES OF CAPITAL GOODS AN D EQUIPMENT DURING MANUFACTURE AND ERECTION STAGES FOR OIL & GAS AND GENERAL ENGINEERING SECTORS, ENCOMPASSING; - REVIEW OF DETAILED ENGINEERING - INDEPENDENT ANALYSIS AND REVIEW OF DESIGNS/DRAWINGS - CONFORMANCE OF MATERIALS & EQUIPMENTS TO NATIONAL/INTE RNATIONAL CODES - - REVIEW AND APPROVAL OF INSPECTION TEST PLANS - REVIEW OF INSTALLATION, PRE - COMMISSIONING AND COMMISSIONING PROCEDURES - THIRD PARTY INSPECTION SERVICES/PRE - SHIPMENT INSPECTION - SUPERVISION OF SITE CONSTRUCTION FOR CROSS COUNTRY WATER/G AS PIPELINES - PMC SERVICES FOR INFRA STRUCTURE PROJECTS OF MUNICIPALITIES - HAZOP STUDIES/QUANTITATIVE RISK ANALYSIS - MITIGATION MEASURES REPORT WITH RECOMMENDATIONS TO REDUCE THE RISK FACTOR IS ISSUED AFTER STUDYING THE ABOVE. 5.7 ENERGY EFFICIENCY AU DIT IN ADDITION TO CERTIFICATION SERVICES, CEIL ALSO CARRIES OUT ENERGY AUDIT, BASE LINE VERIFICATION OF ENERGY INTENSIVE FACILITIES E.G. PUMPING STATIONS, MUNICIPAL LIGHTING, AND COMMERCIAL BUILDINGS AS PER CLIENT'S REQUIREMENTS. CEIL IS ALSO PREPARED TO PROVIDE ENERGY SERVICE CONTRACTING SERVICES (ESCO) FOR IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 14 REHABILITATION/REPLACEMENT OF ENERGY INEFFICIENT EQUIPMENTS/APPLIANCES AND TO BE PAID BACK FROM AFFECTED SAVINGS IN ENERGY CONSUMPTION. 6. AREAS OF CERTIFICATION EXPERTISE: CEIL AVAILS A TOTAL SYNER GETIC SUPPORT OF ITS PARENT COMPANY EIL WHICH HAS SKILLED AND EXPERIENCED PROFESSIONALS LOCATED AT HEAD OFFICE AND SPREAD ACROSS INDIA AND ABROAD WHO ARE FULLY CONVERSANT WITH NATIONAL AND INTERNATIONAL CODES BACKED BY OVER 4 MILLION MAN HOURS OF EXPERIENC E. IT HAS ON ITS ROLL ENGINEERS QUALIFIED BY VARIOUS RECOGNIZED NDT BODIES LIKE ASNT, ISNT AND QMS. CEIL'S EXPERTISE COVERS DESIGN VERIFICATION, QUALITY SERVICES AND COMMISSIONING ASSISTANCE ON: - HIGH PRESSURE REACTORS, PRESSURE VESSELS, COLUMNS, HEAT E XCHANGERS, REFORMERS OF CARBON STEEL, STAINLESS STEEL, ALLOY STEELS & NON FERROUS MATERIALS - CLAD COLUMNS, STORAGE TANKS, HORTON SPHERES, MOUNDED TANKS - EQUIPMENT FOR COMBUSTIBLE/EXPLOSIVE CLASSIFICATIONS, OCCUPATIONAL SAFETY AND HAZARDOUS AREA CLASSIFI CATIONS - INSTRUMENT AIR/PLANT AIR SYSTEMS, AIR DRYING PLANTS, GAS DEHYDRATION UNITS - HEATING, VENTILATION AND AIR CONDITIONING (HVAC) SYSTEMS - LINE PIPES, PIPE COATING AND PIPING APPURTENANCES' 29. IN VIEW OF ABOVE, THE ASSESSEE TAXPAYER BECHTEL INDIA WHICH IS RENDERING ENGINEERING SUPPORT SERVICES INCLUDING RELATED DESIGN AND DRAWING AS PER SPECIFICATION OF ITS FOREIGN AE BECHTEL CORPORATION USA CANNOT BE COMPARED WITH A COMPANY WHICH IS ENGAGED IN THE FUNCTIONS OF THIRD PARTY INSPECTIONS (TPI), CERTIF ICATION OF EQUIPMENT SUPPLIED BY VENDORS & INSTALLATION OF WORK OF CONTRACTORS OF ONGC AND OTHER GOVERNMENT DEPARTMENTS AND PRIVATE IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 15 SECTOR UNDERTAKINGS. THE CIEL HAVING DOMESTIC CONSUMERS, GOVERNMENT COMPANIES AND PUBLIC SECTOR UNDERTAKING HAVING INSIGNIFI CANT EXPORT SURPLUS CANNOT BE COMPARED WITH THE ASSESSEE BECHTEL INDIA WHICH IS 100% EXPORTER OF SERVICES TO ITS AE BECHTEL CORPORATION, USA. 30. WE MAY POINT OUT THAT FUNCTIONS OF A COMPANY SHOULD BE DETERMINED HAVING REGARD TO ITS DATA MENTIONED IN THE FINANCIAL RESULTS FILED ALONG WITH RETURN OF INCOME AND ANNUAL REPORT WHICH IS A PRIMARY RESOURCE AND GENERAL INFORMATION IN THE ANNUAL REPORT IS MORE ACCURATE AND THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD. CIT DR. FROM THE FUNCTIONAL PROFILE OF ASSESS EE BECHTEL INDIA AND FUNCTIONAL PROFILE OF CIEL AS REPRODUCED HEREINABOVE, IT IS AMPLY CLEAR THAT THE CIEL CARRIES ON BUSINESS OF CERTIFICATION AND THIRD PARTY INSPECTION OF EQUIPMENTS PROVIDED BY A CONTRACTOR AND OBVIOUSLY CERTIFICATION AND TPI FUNCTIONS ARE DISSIMILAR FORM THE BUSINESS OF RENDERING ENGINEERING SUPPORT SERVICES INCLUDING RELATED DESIGN AND DRAWING AS PER SPECIFICATIONS OF FOREIGN AE AND BY USING INTANGIBLES/IPR OF PARENT COMPANY. 31. LD. DR COULD NOT DEMOLISH THIS FACTUM THAT THE CERTIFIC ATION/TPI INVOLVES TESTING/ASSESSING AND AUDITING OF THE WORK DONE BY THE HIGH - END TECHNOCRATS WHICH CONFORMS TO SPECIFICATIONS PRESCRIBED IN THE CONTRACT; MEETS QUALITY STANDARD OF WORK AND MATERIAL; MEETS SAFETY STANDARDS; MEETS ENVIRONMENTAL STANDARDS A ND SATISFACTORY WORKS, PLANT COMMISSIONING AND INSTALLATION OF VARIOUS WORKS AND PROJECTS FOR THE EMPLOYER LIKE ONGC. THE CIEL CERTIFIES THE WORK OF THE CONTRACTOR THAT THE EMPLOYER ACCEPTS THE WORK UNDERTAKEN AS PER SPECIFICATIONS OF THE CONTRACT AND THEN MAKES THE PAYMENT. PER CONTRA, THE BUSINESS FUNCTIONAL PROFILE OF ASSESSEE COMPANY IS TO PERFORM THE WORK OF PREPARING AND SUPPLYING DESIGN AND DRAWINGS GIVEN BY ITS PARENT BECHTEL CORPORATION USA. IN THIS MODUS OPERANDI THIS WORK IS OUTSOURCED BY THE NON - RESIDENT AE TO THE ASSESSEE BECHTEL INDIA WHICH CARRY OUT THE WORK AS PER SPECIFICATIONS GIVEN BY THE OUTSOURCING COMPANY AE. WE MAY ALSO POINT OUT THAT THE REVENUE OF CIEL FORM EXPORT OF SURPLUS IS 3% WHICH IS INSIGNIFICANT AND THE INCOME FROM EXPORT OF IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 16 SERVICES BY THE ASSESSEE BECHTEL INDIA IS 100% OF OPERATING INCOME AS THERE IS NO DOMESTIC CLIENT, THUS, AS PER RULE 10B(2)(D) OF THE RULES, THE COMPARABILITY TEST ALSO FAILS ON THIS COUNT. 32. ON THE BASIS OF FOREGOING DISCUSSION, WE HAVE NO HESITATION TO HOLD THAT THE FUNCTIONS OF ASSESSEE BECHTEL INDIA ARE QUITE DISSIMILAR WITH CIEL WHICH WAS WRONGLY TAKEN BY THE TPO AS A SUITABLE COMPARABLE FOR BENCHMARKING OF IMPUGNED INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE DURING THE RELEVANT FINANCIAL PERIOD. THE FUNCTIONAL DISSIMILARITY AS WELL AS DISTINCTION IN THE GEOGRAPHICAL MARKET IN THE LIGHT OF FOREIGN EXCHANGE FLUCTUATION RISK OF THE ASSESSEE COMPANY COUPLED WITH BELOW 25% RPT UNDERTAKEN BY THE CIEL, WE, THEREFORE, DECLINE TO AGREE WITH THE CON CLUSION OF THE AO/DRP/TPO THAT THE CIEL IS A SUITABLE COMPARABLE FOR THE PURPOSE OF PROPOSED TP ADJUSTMENT MADE BY THE AUTHORITIES BELOW. FUNCTIONAL DISSIMILARITY AND OTHER ASPECTS CANNOT BE IGNORED AND THESE FACTORS CLEARLY DEMONSTRATE THAT CIEL SHOULD NO T HAVE BEEN INCLUDED IN THE FINAL SET OF COMPARABLES FOR MAKING TRANSFER PRICING ADJUSTMENT PERTAINING TO THE IMPUGNED INTERNATIONAL TRANSACTIONS OF THE ASSESSEE COMPANY AND WE ORDER TO EXCLUDE THE SAME FROM THE FINAL SET OF COMPARABLES. IT IS ORDERED ACCO RDINGLY. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, THIS COMPAR ABLE IS DIRECTED TO BE EXCLUDED, S INCE, IT IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE. 15. AS REGARDS TO THE COMPARABLE M/S REC POWER DISTRIBUTION CO. LTD., THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT IT WAS INVOLVED IN PROVIDING THIRD PARTY INSPECTION, FEEDER RENOVATION PROGRAMS, MATERIAL INSPECTION AND PREPARATION OF DETAILED REVIEW PROJECTS. THE SAID FUNCTIONS WERE DIFFERENT FROM THE FUNCTIONS PERFORMED BY THE ASSESS EE WHO WAS ENGAGED INTO MARKETING AND SALES AND CUTTING TOOLS AND OTHER COMPONENTS. IT WAS FURTHER SUBMITTED THAT THE SAID IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 17 COMPANY WAS PRIMARILY ENGAGED IN PROVIDING THIRD PARTY INSPECTION, DETAILED PROJECT REPORT FOR GOVERNMENT POWER PROJECT. A REFERENCE WAS MADE TO PAGE NOS. 2680 & 2681 OF THE ASSESSEE S PAPER BOOK VOLUME (V ) WHICH IS THE COPY OF DIRECTOR REPORT AND INCLUDED REVIEW OF OPERATION. IT WA S ALSO STATED THAT THE SAID COMPANY HA D TAKEN NEW INITIATIVES , INITIATED THE TPI WORKS OF HIGH VOLTAGE DIS TRIBUTION SYSTEM , COMPLETED FIELD INSPECTIONS OF 17 FEEDERS AND IT ALSO CONDUCTED ENERGY AUDIT AT IIM, LUCKNOW, NOIDA CAMPUS AND NIPFP, NEW DELHI. IT HAD ALSO TAKEN UP THE WORK OF ENERGY ACCOUNTING AND ENERGY AUDIT IN DISTRIBUTION NETWORK, IT WAS APPOINTED TO ACT AS LENGER S ENGINEER FOR VARIOUS RENEWABLE ENERGY PROJECTS INCLUDING SOLAR POWER PROJECT UNDER JAWAHARLA L NEHRU NATIONAL SOLAR MISSION S CHEME LAUNCHED BY MINISTRY OF NEW AND RENEWABLE ENERGY. IT WAS POINTED OUT THAT THE SA ID COMPANY HAD ENTERED INT O A M O U WITH M/S NORTH DELHI POWER LIMITED TO UNDERTAKE THE BUSINESS OF DISTRIBUTION OF ELECTRICITY JOINTLY BY RECPDCL AND NDPL AND HAD ALSO TAKEN NEW INITIATIVE TO PROMOTE AND IMPLEMENT AS A DEVELOPER , ONE OF THE KEY PROGRAM OF THE MINISTRY OF POWER VIZ . DECENTRALIZED DISTRUIBUTION SYSTEM UNDER RAJIV GANDHI GRAMEEN VIDYUTIKARAN YOJANA, A SCHEME OF RURAL ELECTRICITY INFRASTRUCTURE AND HOUSEHOLD ELECTRIFICATION OF REMOTE VILLAGES, THEREFORE, THE COMPARABLE M/S REC POWER DISTRIBUTION CO. LTD. IS HAVING ALL TOGETHER DIFFERENT FUNCTIONS FROM THE ASSESSEE , AS SUCH IT IS NOT A COMPARABLE. 16. IN HIS RIVAL SUBMISSIONS, THE LD. CIT DR SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 18 17. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL ON RECO RD, IT APPEARS THAT THE SAID COMPARABLE M/S REC POWER DISTRIBUTION CO. LTD. WAS HAVING DIFFERENT FUNCTIONS THAN THE ASSESSEE WHO WAS MAINLY ENGAGED IN MARKETING AND SALE OF C UTTING TOO LS AND OTHER COMPONENTS MANUFACTURED BY PARENT COMPANY KYOCERA GROUP WHI LE THE COMPARABLE COMPANY WAS ENGAGED IN THIRD PARTY INSPECTION OF HVDS FEEDERS , ENERGY AUDIT , MAKING THE DETAILED PROJECT FOR GOVERNMENT POWER PROJECT , AND ALSO HAD UNDERTAKEN NEW INITIATIVE TO PROMOTE AND IMPLEMENT AS A DEVELOPER , ONE OF THE KEY PROGRA ME OF THE MINISTRY OF POWER. THEREFORE, IT WAS NOT FUNCTIONALLY COMPARABLE WITH THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO/TPO TO EXCLUDE M/S REC POWER DISTRIBUTION CO. LTD. FROM THE LIST OF THE COMPARABLE WHILE WORKING OUT THE ARM S LENGTH PRICE. 18. AS REGARDS TO THE COMPANY M/S USHA HYDRO DYNAMICS LTD., THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS COMPANY WAS IN ALL TOGETHER DIFFERENT KIND OF BUSINESS AS IT WAS DOING BUSINESS OF CLEANING OF VARIOUS MACHINES EQUIPMENTS ETC. FOR VARIOUS INDUSTRIE S AND ALSO DOING TRADING BUSINESS. A REFERENCE WAS MADE TO PAGE NO. 2795 OF THE ASSESSEE S PAPER BOOK VOLUME (V ). IT WAS ALSO STATED THAT THE SAID COMPANY WAS NOT EARNING ANY FOREIGN EXCHANGE WHEREAS THE ASSESSEE WAS EARNING FOREIGN EXCHANGE. IT WAS ACCORD INGLY SUBMITTED THAT THIS COMPANY HAVING DIFFERENT FUNCTION WAS TO BE EXC LUDED ON ACCOUNT OF FUNCTIONAL DISSIMILARITY. IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 19 19. IN HIS RIVAL SUBMISSIONS, THE LD. CIT DR REITERATED THE OBSERVATIONS OF THE LD. DRP AND STRONGLY SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELOW. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD, IT APPEARS THAT THE COMPANY M/S USHA HYDRO DYNAMICS LTD. WAS ENGAGED IN INDUSTRIAL CLEANING ACTIVITY BY HIGH PR ESSURE WATER JET TECHNOLOGY WHILE THE ASSESSEE WAS NOT ENGAGED IN SUCH ACTIVITY. THEREFORE, IT WAS TO BE EXCLUDED ON ACCOUNT OF FUNCTIONAL DISSIMILARITY. MOREOVER, THE SAID COMPANY WAS NOT HAVING ANY EARNING IN FOREIGN EXCHANGE WHILE THE ASSESSEE WAS HAVIN G FOREIGN EXCHANGE EARNINGS AND THAT THE SAID COMPANY WAS NOT HAVING MARKET SUPPORT FUNCTIONS WHILE THE PROFILE OF THE ASSESSEE CLEARLY SHOWS THAT IT WAS HAVING MARKET SUPPORT FUNCTIONS. IT IS ALSO EVIDENT FROM PARA 3 OF THE TPO S ORDER THAT THE ASSESSEE E NTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE FOR RS.1,22,24,024/ - FOR MARKETING SUPPORT FEE. THE TPO IN PARA 4.2 CLEARLY MENTIONED THAT THE PRIMARY FUNCTION PERFORMED BY THE ASSESSEE WAS MARKETING SUPPORT SERVICE AND THAT THE ASSESSEE WAS PROVIDING I NFORMATION ON MARKET TRENDS , PRODUCT S AND STRATEGIES OF COMPETITORS , FUTURE CUSTOMERS NEEDS ETC., ACTING AS CHANNEL OF COMMUNICATION BETWEEN PARENT COMPANY KYOCERA ASIA PACIFIC INDIA PVT. LTD. AND ITS BUYERS/PROSPECTIVE BUYERS THEREBY LICENSING WITH THE BU YERS TO UNDERSTAND THEIR NEEDS AND ACTING AS THE WINDOW FOR ANY CLAIM OR ENQUIRY FROM THE CUSTOMERS WHICH CLEARLY SHOWS THAT THE ASSESSEE IT A NO . 829/DEL/2016 KYOCERA ASIA PACIFI C INDIA PVT. LTD. 20 WAS ENGAGED IN MARKETING SUPPORT SERVICE WHILE M/S USHA HYDRO DYNAMICS LTD. WAS NOT ENGAGED IN SUCH TYPE OF SERVICE. IN VIEW OF THE ABOVE, WE DIRECT THE AO/TPO TO EXCLUDE THIS COMPANY I.E. M/S USHA HYDRO DYNAMICS LTD. FROM THE LIST OF THE COMPARABLE. NO OTHER GROUND WAS ARGUED BEFORE US. 22 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . (ORDER PRON OUNC ED IN THE COURT O N 26 /11 /2018) SD/ - SD/ - ( KULDIP SINGH ) (N. K. SAINI) JUDICIAL MEMBER VICE PRESIDENT DATED: 26 /11 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPO NDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR