Corning Technologies India Pvt. Ltd., Gurugram V. DCIT, Gurugram

ITA 886/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5853 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Transfer pricing; International transaction
• Section: 92C; 143(3); 10B; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SH. KUL BHARAT, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 886/DEL/2017 : ASSTT. YEAR : 2012-13 CORNING TECHNOLOGIES INDIA PVT. LTD., 2 ND FLOOR, DLF BUILDING 9B, DLF CYBER CITY, PHASE-III, GURUGRAM, HARYANA-122002 VS DCIT, CIRCLE-1(1), GURGAON (APPELLANT) (RESPONDENT) PAN NO. A ADCC6645D ASSESSEE BY : SH. M. P. LOHIA, CA REVENUE BY : SH. SURENDERPAL, CIT DR DATE OF HEAR ING: 06 . 0 7 .20 2 1 DATE OF PRONOUNCEMENT: 17 .0 9 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.01.2017 PASSED BY THE AO U/S 143 (3)/144C OF THE INCOME TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THAT THE ASSESSING OFFICER (AO) ERRED ON FACT S AND IN LAW IN COMPLETING THE ASSESSMENT UNDER SECTION 144C READ WITH SECTION 143(3) OF THE INCOME-TAX ACT , 1961 (THE ACT) AT A LOSS OF RS. 3,29,43,540 AS AGAINST THE LOSS OF RS. 6,79,40,379 RETURNED BY THE APPELLANT. 2. THAT THE AO ERRED ON FACTS AND IN LAW IN MAKING AN ADJUSTMENT OF RS.3,49,96,839 ALLEGEDLY ON ACCOUNT O F THE DIFFERENCE IN THE ARMS LENGTH PRICE OF THE ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 2 INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE APPELL ANT ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TRANSFER PRICING OFFICER (TPO). 3. THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN MAKING ADJUSTMENT OF RS. 34,67,344 TO THE INCOME OF THE APPELLANT ON ACCOUNT OF DIFFERENCE IN THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PROVISION OF MARKET SUPPORT SERVICES TO THE ASSOCIA TED ENTERPRISE. 3.1 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN CONSIDERING JUST DIAL LTD. AS COMPARABLE NOT APPRECIATING THAT THE AUDITED FINANCIAL STATEMENT O F THE COMPANY FOR THE FINANCIAL YEAR 2011-12 IS NOT AVAILABLE IN PUBLIC DOMAIN AND ALSO DO NOT SATISFY THE COMPARABILITY CRITERIA LAID DOWN IN RULE 10B(2) OF THE INCOME TAX RULES, 1962 (THE RULES). 3.2 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN REJECTING THE FOLLOWING COMPARABLE COMPANIES CONSIDERED BY THE APPELLANT IN THE TRANSFER PRICING DOCUMENTATION NOT APPRECIATING THAT THESE COMPANIES ARE FUNCTIONALLY COMPARABLE TO THE APPELLANT: S. NO. NAME OF THE COMPANY 1. INDIAN TOURISM DEVELOPMENT CORPORATION LTD. 2. CYBER MEDIA RESEARCH LTD. (FORMERLY IDC (INDIA) LTD.) 3. EDCIL (INDIA) LTD. (SEGMENTAL) 4. IN HOUSE PRODUCTIONS LTD 3.3 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN REJECTING COMPARABILITY ADJUSTMENT ON ACCOUNT OF WORKING CAPITAL EMPLOYED BY THE APPELLANT VIS-A-VIS COMPARABLE COMPANIES. 3.4 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN N OT ALLOWING APPROPRIATE RISK ADJUSTMENT TO ESTABLISH COMPARABILITY ON ACCOUNT OF THE APPELLANT BEING A L OW- RISK-BEARING CAPTIVE SERVICE PROVIDER AS OPPOSED TO ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 3 THE COMPARABLE COMPANIES WHO WERE INDEPENDENT COMPARABLE COMPANIES. 3.5 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE AO/TPO ERRED IN REJECTING THE CONTENTION OF THE APPELLANT REGARDING RISK ADJUSTME NT, ALLEGEDLY HOLDING THAT NO EVIDENCE HAS BEEN PROVIDE D BY THE APPELLANT TO PROVE THAT RISK HAS ACTUALLY BE EN UNDERTAKEN BY THE COMPARABLE COMPANIES. 4. THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN MAKING AN ADJUSTMENT OF RS. 3,15,29,495 ON ACCOUNT OF ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACT ION OF RECEIPT OF ADMINISTRATION SUPPORT SERVICES ON TH E BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT BY THE TPO. 4.1 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATI ONAL TRANSACTION OF PAYMENT OF ADMINISTRATION SUPPORT SERVICES FEES AT NIL ALLEGEDLY CONCLUDING THAT NO S UCH SERVICE/ BENEFIT HAS BEEN RECEIVED BY THE APPELLANT AND THEREFORE, THERE IS NO RATIONALE FOR PAYING THI S SUPPORT SERVICES FEES TO THE ASSOCIATED ENTERPRISE. 4.2 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN ALLEGEDLY HOLDING THAT THE APPELLANT FAILED TO PLAC E ON RECORD ANY DOCUMENTARY EVIDENCE SUBSTANTIATING RECEIPT OF ADMINISTRATIVE SUPPORT SERVICES FROM THE ASSOCIATED ENTERPRISES. 4.3 THAT THE AO/TPO ERRED ON FACTS AND IN LAW IN COMPUTING ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTION OF PAYMENT OF ADMINISTRATION SUPPORT SERVICE FEE WITHOUT REASONABLY APPLYING ANY PRESCRI BED METHODS, THEREBY, VIOLATING THE BASIC PRINCIPLES OF TP REGULATIONS. ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 4 3. CORNING TECHNOLOGIES INDIA PVT. LTD. (CTIPL) WAS INCORPORATED ON 02.06.2009. THE COMPANY IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF OPHTHALMIC GLASS P RODUCTS, OPHTHALMIC PLASTIC LENSES AND LIFE SCIENCE PRODUCTS IN THE INDIAN MARKET AND RENDERING MARKETING SERVICES AND SUPPORT SERVICES TO ITS GROUP COMPANIES. CTIPL HAS TAKEN OVER THE EN TIRE BUSINESS OF CORNING INDIA, ON A SLUMP SALE BASIS W. E.F. 01.02.2012, PURSUANT TO THE APPROVAL OF THE RESERVE BANK OF INDIA FOR A PURCHASE CONSIDERATION OF RS.19,44,70,4 82/-. 4. IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92C R.W. RULE 10B & 10C, THE ASSESSEE HAS CHOOSEN TNMM AS THE MOS T APPROPRIATE METHOD VIDE ORDER U/S 92CA(3) DATED 29. 01.2016. THE TPO DETERMINED ALP OF THE TRANSACTIONS AND PROP OSED AN ADJUSTMENT OF RS.3,49,96,839/- VIDE ORDER DATED 11. 03.2016. THE AO PURSUANT TO THE DIRECTIONS OF THE LD. DRP MA DE ADJUSTMENTS OF RS.3,15,29,495/- ON ACCOUNT OF INTRA GROUP SERVICES AND RS.34,67,344/- ON ACCOUNT OF MARKET SU PPORT SERVICES. 5. THE ASSESSEE MAINLY INVOLVED IN THREE DIFFERENT ACTIVITIES NAMELY OPHTHALMIC SUPPORT, MARKETING SUPPORT AND PR OVISION OF INTRA GROUP SERVICES. 6. WITH REFERENCE TO THE MARKETING RESEARCH, THE AS SESSEE APPRAISES THE AE OF CURRENT MARKET TRENDS AND DEVEL OPMENTS IN INDIA BY MONITORING THE INDUSTRY, CAPITAL PRICES, P OLITICAL FACTORS, SUPPLY AND DEMAND OF THE RELEVANT INDIAN M ARKET IN ADDITION TO IDENTIFYING THE POTENTIAL CUSTOMERS IN INDIA. IT IS ALSO INVOLVED IN PROVIDING SUPPORT AND LIASON BETWE EN THE CUSTOMERS AND CORNING FRANCE (AE). ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 5 COMPARABLES: 7. WITH REGARD TO THE COMPARABLES SELECTED BY THE A O IN HIS TP STUDY, THE ASSESSEE OBJECTED TO THE INCLUSION OF JUST DIAL LTD. THE TPO HELD THAT IT IS FUNCTIONALLY COMPARAB LE TO THE ASSESSEE, AS THE COMPARABLE ALSO PROVIDES INFORMATI ON TO THE USERS AND CONNECTS THE BUYERS TO THE SELLERS, THE S AME WAY JUST DIAL OPERATES. THE LD. DRP CONFIRMED THE INC LUSION HOLDING THAT SINCE THE COMPARABLE IS EFFECTIVELY IN VOLVED IN MARKETING THE INFORMATION PERTAINING TO DIFFERENT C ATEGORIES OF SMES ACROSS MULTIPLE PLATFORMS AND IS FACILITATING TRADE TRANSACTIONS. 8. BEFORE US, IT WAS ARGUED BY THE LD. AR THAT JUS T DIAL IS HAVING A WEBSITE AND THE SEARCH SERVICE IS AVAILABL E TO USERS ACROSS MULTIPLE PLATFORMS SUCH AS INTERNET, MOBILE, VOICE AND TEXT. IT WAS ARGUED THAT THE ASSESSEE IS A CAPTIVE SERVICE PROVIDER PROVIDING SERVICES ONLY TO ITS AE, AND IS DEVOID OF ANY EXCESS REMUNERATION ATTRIBUTABLE TO BRAND OWNERSHI P. 9. THE LD. DR ARGUED THAT WHAT NEEDS TO BE SEEN IS THE FUNCTIONAL COMMONALITY BUT NOT ANY OTHER ISSUES OR FUNCTIONAL DISSIMILARITIES. IT WAS ARGUED THAT BOTH THE ASSESS EE AND THE COMPARABLE IN QUESTION (JUST DIAL) ARE INVOLVED IN GETTING NEW CLIENTS, CUSTOMERS TO THE PRINCIPLE. IT IS THE COMM ON FUNCTIONALITY THAT BOTH ENTITIES ARE INVOLVED IN CL IENT PROCUREMENT AND LIASON WORK. 10. HAVING GONE THROUGH THE FACTS ON RECORD AND THE FAR ANALYSIS, WE FIND THAT WHILE JUST DIAL IS A SEARC H ENGINE FOR MULTIFARIOUS ACTIVITIES AND IS A SEARCH ENGINE USIN G DIFFERENT ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 6 PLATFORMS, DEALING WITH MULTIPLE PRODUCTS WHEREAS T HE ASSESSEE IS A CAPTIVE LIASON AND MARKETING SERVICE PROVIDER FOR ITS AE. HENCE, WE HOLD THAT JUST DIAL CANNOT HELD TO BE A RIGHT COMPARABLE. WORKING CAPITAL ADJUSTMENT: 11. WITH REGARD TO CAPITAL ADJUSTMENT, WE FIND THAT THE LD. DRP ALLOWED THE WORKING CAPITAL ADJUSTMENT, HOWEVER THE AO FAILED TO TAKE THE COGNIZANCE OF THE SAME WHILE GIVING EFF ECT TO THE LD. DRP DIRECTIONS. HENCE, THE AO IS DIRECTED TO RECTIF Y THE ORDERTO THAT EXTENT. RISK ADJUSTMENT: 12. WITH REGARD TO THE RISK ADJUSTMENT, THE TPO DEN IED RISK ADJUSTMENT ON THE GROUNDS THAT THE ASSESSEE HAS NOT CLEARLY SHOWN THAT THE COMPARABLES HAD ACTUALLY UNDERTAKEN RISKS. 13. THE LD. DRP HELD THAT IN CROSS BORDER TRANSACTI ONS, THE TESTED PARTY WILL TYPICALLY ALWAYS BE A CAPTIVE WHI LE COMPARABLES WILL ALWAYS BE ENTREPRENEURS FOR ALP DETERMINATION. IT HELD THAT RISKS CAN BE ADJUSTED O NLY IF THERE IS COMPLETE AND RELIABLE DATA AVAILABLE OTHERWISE THE ENTIRE EXERCISE WILL BE TAINTED BY THE INACCURACIES. 14. HENCE, THE QUESTION BEFORE US WOULD BE WHETHER THE RISK OF HAVING A SINGLE CUSTOMER IS EQUIVALENT TO THE MARKE TING AND TECHNICAL RISKS ATTACHED TO THE COMPARABLE. A SINGL E CUSTOMER RISK IS AN ANTICIPATED RISK AB INITIO. THE ANTICIPATED RISK MAY HAPPEN OR IT MAY NOT HAPPEN. WHEREAS THE RISK ATTRI BUTED TO THE COMPARABLES IS AN EXISTING RISK. AT THE SAME TIME, WE FIND THAT ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 7 THE ASSESSEE IS NOT EXPOSED TO ANY OF THE RISKS SUC H AS MARKET RISK OR SERVICE LIABILITY RISK, COLLECTION RISK, CA PACITY UTILIZATION RISK FOR THE AE BEING THE SOLE CUSTOMER. THE QUESTI ON BEFORE US IS AS TO WHETHER THE RISK OF HAVING A SINGLE CUSTOM ER IS EQUIVALENT TO THE MARKETING AND TECHNICAL RISK ATTA CHED TO THE COMPARABLES. ACCORDING TO THE TPO, THE ASSESSEE HAS THE SINGLE CUSTOMER RISK' MEANING, IF THE SINGLE CUSTOMER REFU SES TO HAVE ANY DEALINGS WITH THE ASSESSEE, THE ASSESSEE WOULD LOSE ALL OF ITS BUSINESS AND THERE WOULD BE NO PROFIT AT ALL. B UT, AS WE SEE IT, THE RISK OF HAVING A SINGLE CUSTOMER IS ANTICIP ATED RISK WHICH MAY OR MAY NOT HAPPEN. WHAT WE HAVE TO SEE IS THE P OSITION IN THE RELEVANT PERIOD WHETHER THE APPELLANT HAD ENCOU NTERED SUCH A RISK DURING THE RELEVANT PERIOD OR NOT . 15. IN THE INSTANT CASE, IT CAN BE SEEN THAT THE AS SESSEE HAS NOT ENCOUNTERED THE RISK OF HAVING A SINGLE CUSTOME R, WHEREAS THE SAME CANNOT BE SAID AS REGARDS THE COMPARABLES. THE COMPARABLES WERE DEALING IN OPEN MARKET AND THEREFO RE, THEY WERE PRONE TO THE MARKETING AND TECHNICAL RISKS. TH EY WOULD INVARIABLY INCUR CERTAIN EXPENDITURE ON MARKETING S ERVICES AND ALSO TO SAFEGUARD THE TECHNICAL INPUTS USED BY THEM . IN SUCH A CASE, THE RISK ENCOUNTERED BY THE ASSESSEE CANNOT B E SAID TO BE THE EQUIVALENT RISKS ATTACHED TO THE COMPARABLES. T HE RISK ATTRIBUTED TO THE ASSESSEE BY THE TPO IS AN ANTICIP ATED RISK WHEREAS THE RISK ATTRIBUTED BY THE ASSESSEE TO THE COMPARABLES IS AN EXISTING RISK. IN SUCH SITUATION, WE DIRECT T HAT THE RISK ADJUSTMENT BE ACCORDED TO THE NET MARGIN OF THE CO MPARABLES FOR BRINGING THEM ON PAR WITH THE ASSESSEE COMPANY. ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 8 ADMINISTRATIVE SUPPORT SERVICES: 16. DURING THE FINANCIAL YEAR 2011-12, THE ASSESSEE RECEIVED ADMINISTRATIVE SUPPORT SERVICES FROM ITS ASSOCIAT ED ENTERPRISES FOR ASSISTING IT IN CARRYING ITS BUSINE SS OPERATIONS IN INDIA. FOR THE AFORESAID SERVICES, THE ASSESSEE PAI D ADMINISTRATIVE AND SUPPORT SERVICE FEES AMOUNTING T O RS.3,15,29,495/- TO THE FOLLOWING ASSOCIATED ENTERP RISES: NAME OF THE AES NATURE OF SERVICE AMOUNT (INR) CORNING INC., UNITED STATES IT SUPPORT 29,242,674 CORNING CHINA(SHANGHAI) REGIONAL HEADQUARTER (CORNING SHANGHAI) ACCOUNTING SERVICES INCLUDING PROCESSING OF ACCOUNTS 2,286,821 TOTAL 31,529,495 17. IN THE TRANSFER PRICING DOCUMENTATION, FOR THE PURPOSE OF BENCHMARKING, THE ASSESSEE APPLIED TNMM AS THE MOST APPROPRIATE METHOD CONSIDERING ITSELF TO BE THE TES TED PARTY. THE ASSESSEE CONDUCTED TWO SEPARATE SEARCHES ON ONE SOURCE DATABASE FOR DETERMINATION OF THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN WITH CORNING INC. AND CORNING CHINA. THE RESULTS OF THE BENCHMARKING ANAL YSIS IS SUMMARIZED AS UNDER: NAME OF THE AES MARGIN EARNED BY THE ASSESSEE AVERAGE OP/OC OF THE COMPARABLE COMPANIES CORNING INC., UNITED STATES 5.00% 9.40% CORNING CHINA (SHANGHAI) REGIONAL HEADQUARTER (CORNING SHANGHAI) 5.00% 14.30% ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 9 18. IT WAS SUBMITTED THAT SINCE THE MARK UP EARNED BY CORNING CHINA AND CORNING INC. AT 5% FOR RENDERING OF SUPPO RT SERVICES TO THE ASSESSEE IS LOWER THAN THE AVERAGE OPERATING PROFIT MARGIN OF THE COMPARABLE COMPANIES, THEREFORE, THE INTERNATIONAL TRANSACTION OF RECEIPT OF ADMINISTRAT IVE SUPPORT SERVICES CAN BE CONSIDERED TO BE AT ARMS LENGTH. 19. THE TPO DETERMINED THE VALUE OF SUCH EXPENDITU RE AT NIL HOLDING THAT: A. NO SERVICES WERE ACTUALLY RECEIVED BY THE ASSESSEE B. NO BENEFIT WAS DERIVED BY THE ASSESSEE BY MAKING PAYMENT FOR ADMINISTRATIVE SUPPORT SERVICES C. NO EVIDENCE WAS FURNISHED SUBSTANTIATING THE RECEIP T OF ADMINISTRATIVE SERVICES D. THE SERVICES WERE NOT ACTUALLY NEEDED BY THE ASSESS EE 20. THE LD. AR ARGUED THAT DURING THE RELEVANT FINA NCIAL YEAR, THE ASSESSEE PAID ADMINISTRATIVE AND SUPPORT FEES O F RS.3,15,29,495/- TO THE ASSOCIATED ENTERPRISES WHIC H ARE REMUNERATED AT A COST PLUS 5 PERCENT MARKUP, WHEREI N, COST INCLUDES ALL DIRECT AND INDIRECT COST INCURRED IN T HE PROVISION OF AFORESAID SERVICES. THIS ENTAILS PAYMENT OF ALL FIX ED COSTS, RECOGNIZED ON THE BASIS OF TIME SPENT BY THE SERVIC E PROVIDER, AND THE SAME IS ALLOCATED TO THE SERVICE RECIPIENT ON THE BASIS OF THE VOLUME OF USAGE, PLUS A MARK-UP OF 5 PERCENT . 21. FOR PROVISION OF ADMINISTRATIVE SUPPORT SERVICE S, THE ASSESSEE ENTERED INTO THE FOLLOWING AGREEMENTS WITH ITS ASSOCIATED ENTERPRISE NAMELY CORNING CHINA (SHANGHA I) REGIONAL HEADQUARTER FOR THE PURPOSE OF ACCOUNTING SERVICES ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 10 AND WITH CORNING INC., UNITED STATES FOR THE PURPOSE OF IT SUPPORT. 22. COST ALLOCATION KEYS APPLIED BY RESPECTIVE ASSO CIATED ENTERPRISES FOR THE PURPOSE OF ALLOCATING EXPENSES TO GROUP ENTITIES ALONGWITH THE INVOICES RAISED BY THE ASSOC IATED ENTERPRISES ARE AS UNDER: NAME OF THE AES NATURE OF SERVICE AMOUNT ALLOCATION KEYS INVOICES RAISED/ CORRESPONDENCE BETWEEN THE ASSESSEE AND AES CORNING INC., UNITED STATES IT SUPPORT 29,242,674 COSTS ARE ALLOCATED ON THE BASIS OF NUMBER OF USERS OF SERVER AND RELATED FACILITIES ON LAPTOP, HANDHELD DEVICES. ENCLOSED AS ANNEXURE 3, 4 & 5TO REPLY DATED 20.01.2016 CORNING CHINA(SHANGHAI) REGIONAL HEADQUARTER ACCOUNTING 'SERVICES INCLUDING PROCESSING OF ACCOUNTS 2,286,821 THE BASIS OF ALLOCATION FOR THESE ADMINISTRATIVE SUPPORT SERVICES IS VOLUME OF ACTIVITY/TRANSACTIONS OR FULL TIME EQUIVALENT (FTE) DEDICATED TO SERVICE THE PARTICULAR S ERVICE AVAILING ENTITY. THE PAYMENT TERMS AS AGREED BETWEEN THE ASSESSEE AND THE ASSOCIATEDENTERPRISES IS PROVIDED IN CLAUSE 4, ANNUAL SERVICE COSTS OF THE SHARED SERVICE AGREEMENT. ENCLOSED AS ANNEXURE 3, 4 & 5 TO REPLY DATED 20.01.2016 23. SIMILARLY, ACCOUNTING SERVICES PROVIDED BY CORN ING SHANGHAI IN THE NATURE OF PROCESSING OF ACCOUNTING VOUCHERS, SANCTIONING OF PAYMENTS, UNDERTAKING MONTHLY CLOSIN GS, AND VARIOUS OTHER ACCOUNTING PROCESSES TO OTHER GROUP E NTITIES, RATHER THAN EACH ENTITY MAINTAINING ITS OWN DEPARTM ENT TO UNDERTAKE SUCH FUNCTIONS, AND INCURRING COSTS IN TH IS REGARD. ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 11 24. IT WAS ARGUED THAT THE SHARED SERVICE CENTERS O FFER THE ADVANTAGE OF ECONOMICAL, SPECIALIZED SERVICES, EXPE RTISE IN TERMS OF KNOWLEDGE OF CORNING PRODUCTS, ADHERENCE T O CORNING CULTURE, CORNING RULES AND PROCEDURES AND MOST IMPO RTANTLY CONFIDENTIALITY. APART FROM THAT, THE SHARED SERVIC E CENTERS CATER TO ALL CORNING ENTITIES BASED OUT OF ASIA AND THE VOLUMES OF TRANSACTIONS OF THE ASSESSEE ARE VERY LESS COMPA RED TO THE VOLUME OF OTHER CORNING ASIAN ENTITIES. 25. IT WAS ARGUED THAT OUTSOURCING THE SAME, WORK T O THIRD PARTY VENDORS WOULD NOT ONLY INVOLVE TRAINING THEM IN CORNING GROUPS PROCEDURES AND INFRASTRUCTURE BUT ALSO INVO LVE A COMPROMISE ON DATA CONFIDENTIALITY AS WELL AS ON TH E STABILITY OF THE SERVICES. FURTHER, IF EACH GROUP ENTITY IS EXPE CTED TO CONTRACT WITH LOCAL VENDORS THEMSELVES, THE GROUPS OPERATIONS AS A WHOLE WILL NOT ONLY BECOME FAR MORE EXPENSIVE BUT ALSO INEFFICIENT SINCE EACH GROUP ENTITY WILL BE REPLICA TING THE SAME WORK AND MULTIPLE THIRD PARTY VENDORS SHALL BE INVO LVED IN PROCESSING THE SAME TRANSACTIONS. ARGUING THUS, THE LD. AR CANVASSED THAT THE MARK-UP OF 5% ON THE SERVICES IS TO BE ALLOWED. 26. THE ENTIRE GROUNDS CONSISTS OF TWO ISSUES, WHET HER IN FACT THE SERVICES WERE RENDERED AND AVAILED BY THE ASSES SE AND IF SO, WHETHER THE MARK-UP OF 5% CAN BE CONSIDERED AS COMPARABLE WITH THE MARKET AVERAGES. CULLING FROM T HE DETAILS FILED AND ARGUMENTS OF BOTH THE PARTIES, WE FIND TH AT THERE IS NO DISPUTE ABOUT AVAILING OF THE SERVICES. THE EVIDENC ES INCLUDE THE E-MAILS, INVOICES, AGREEMENTS SUBMITTED AT PAGE NOS. 294 TO 397 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO PRO VIDED ITA NO.886/DEL/2017 CORNING TECHNOLOGIES INDIA PVT. LTD. 12 DETAILS OF COST ALLOCATION AT PAGE NOS. 285 TO 288 OF THE PAPER BOOK. HENCE, IT CANNOT BE SAID THAT THE SERVICES HA VE NOT BEEN PROVIDED TO THE ASSESSEE. WITH REGARD TO THE MARK-U P OF 5% PAID BY THE ASSESSEE, WE FIND THAT THE ECONOMICAL A NALYSIS SUBMITTED BY THE ASSESSEE AT PAGE NOS. 121 TO 128 O F THE PAPER BOOK IS ACCEPTABLE AT THE SAME TIME, THE COMPARABLE NAMELY, PAY CHEQUES.INC. SHOWING THE OP/OC OF 56.12% IS BEI NG EXCLUDED OWING TO THE EXTRAORDINARY PROFITS. TAKING INTO CONSIDERATION, THE REMAINING COMPARABLES, WE FIND T HAT THE ARITHMETIC MEAN IS MORE THAN THE 5% MARK-UP CHARGED FROM THE COMPANY. HENCE, WE HOLD THAT NO ADJUSTMENT IS CALLE D FOR WHILE DETERMINING THE ALP ON ACCOUNT OF PAYMENT FOR INTRA GROUP SERVICES. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/09/2021. SD/- SD/- (KUL BHARAT) (DR. B. R. R. KUMAR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 17/09/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR