Capstone Securities Analysis Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 90/PUN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8714 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 22-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 12; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 90 /P U N/201 6 / ASSESSMENT YEAR : 20 1 1 - 1 2 CAPSTONE SECURITIES ANALYSIS PVT. LTD., COMMERZONE, BUILDING NO.1, GROUND FLOOR, SAMRAT ASHOK PATH, OFF AIRPORT ROAD, YERWADA, PUNE 4110 06 . / APPELLANT PAN: AA BCV956 9K VS. THE DY . COMMISSIONER OF INCOME TAX , CIRCLE 1(1) , PUNE . / RESPONDENT ASSESSEE BY : S HRI KISHORE PHADKE REVENUE BY : MS NANDITA KANCHAN / DATE OF HEARING : 13 . 0 2 . 201 9 / DATE OF PRONOUNC EMENT: 05 . 0 4 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF D CIT , CIRCLE 1(1) , PUNE , DATED 2 9 . 12 .201 5 RELATING TO ASSESSMENT YEAR 20 1 1 - 1 2 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME - TA X ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS FILED MODIFIED GROUNDS OF APPEAL , WHICH READ AS UNDER : - 1. THE LEARNED AO/TPO/DRP (HEREINAFTER REFERRED TO AS I - T AUTHORITIES); ERRED IN LAW AND ON FACTS IN ENHANCING PRICE OF THE INTERNATIONAL TRANSAC TION OF PROVISION OF ITES SERVICES BY RS.1,81 , 42,166/ - AND ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 2 ASSESSING TOTAL INCOME OF THE APPELLANT TO THE TUNE OF RS.1,65,32,084/ - INSTEAD OF RETURNED INCOME OF (RS.16,10,082/ - ) 2. THE LEARNED AO AND LEARNED DRP ERRED IN LAW AND ON FACTS IN NOT APPRECIATI NG THAT, NO ANY OPINION, AS SO ENVISAGED IN SECTION 92C(3), AS REGARDS PROFIT PASSING, ETC. WAS REACHED BY THE AO, BEFORE MAKING A REFERENCE TO THE TPO FOR BENCHMARKING OF THE INTERNATIONAL TRANSACTIONS OF THE APPELLANT. 3. THE LEARNED AO / TPO / DRP ERRE D IN COMPUTING PLI OF APPELLANT IN AN ERRONEOUS MANNER BY A . INCLUDING ITEMS OF REVENUE AND ITEMS OF EXPENSES RELATING TO DTA ACTIVITY WHICH WERE EXCLUDED WHILE ALLOWING 10A DEDUCTION B . NOT INCLUDING SERVICE TAX REFUND, DESPITE THE SAME BEING AN OPERATING INC OME AND DESPITE THE DIRECTION OF THE LEARNED DRP 4. ALTERNATIVELY & WITHOUT PREJUDICE TO GROUND NO.3, THE LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FACTS IN NOT TREATING COMPENSATION FOR FACILITIES AS OPERATING INCOME ELIGIBLE FOR COMPUTATION OF PROFIT LEVEL INDICATOR OF THE APPELLANT COMPANY. 5. THE LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FACTS IN PROPOSING THAT PLI OF APPELLANT IS 4.07 % BY CONSIDERING THE PAYOUT COST AS OPERATING COST FOR COMPUTING PLI. THE LEARNED I - T AUTHORITIES OUGHT TO HAVE AP PRECIATED THE UNIQUE BUSINESS MODEL OF APPELLANT AND THAT, THE PAYOUT COST IS NOTHING BUT PASS THROUGH COST FOR THE APPELLANT, AND NOT ANY OPERATING COST. 6. ALTERNATELY AND WITHOUT PREJUDICE TO GROUND NO.5, LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FAC TS IN NOT GRANTING ANY ADJUSTMENT ON ACCOUNT OF HIGHER MAN - POWER COST INCURRED BY THE APPELLANT DUE TO PECULIAR BUSINESS MODEL OF THE APPELLANT. 7. THE LEARNED AO ERRED IN LAW AND ON FACTS IN NOT ADHERING TO THE DIRECTIONS OF LEARNED DRP WITH RESPECT TO T REATMENT OF INCOME LIKE INTEREST, DIVIDEND AND RENT AS NON - OPERATING INCOME WHILE COMPUTING PLI OF FOLLOWING COMPA RABLE COMPANIES. - INFORMED TECHNOLOGIES INDIA LIMITED - JINDAL INTELLICOM LIMITED THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT DRP, VIDE PARA 9.3 OF THE ORDER, HAS GIVEN SPECIFIC DIRECTIONS FOR EXCLUSION NON - OPERATING INCOME. 8. THE LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FACTS IN SELECTING ACCENTIA TECHNOLOGIES LIMITED AS COMPARABLE COMPANY WHILE DETERMINING THE ALP WITHOUT CONSIDERING THA T, THE SAID COMPANY IS NOT FUNCTIONALLY COMPARABLE TO THE APPELLANT. 9. THE LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FACTS IN REJECTING FOLLOWING COMPARABLE COMPANIES AS SELECTED BY THE APPELLANT FOR DETERMINATION OF ALP - I C R A ONLINE LTD. - SUNDARAM BUSINESS SERVICES LIMITED - ESSAR INFORMATION TECHNOLOGY LIMITED ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 3 10. THE LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FACTS IN NOT GRANTING ADEQUATE RISK ADJUSTMENT & WORKING CAPITAL ADJUSTMENT TO THE APPELLANT BEING WORKING AS A CAPTIVE UNIT TO ITS PARENT C OMPANY. 3. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS OF APPEAL WHICH READ AS UNDER: - 25. THE LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FACTS IN NOT TREATING COMPENSATION FOR FACILITIES AS OPERATIVE INCOME ELIGIBLE FOR COMPUTATION OF PROFIT LEVEL I NDICATOR OR THE APPELLANT COMPANY. 26. THE LEARNED I - T AUTHORITIES ERRED IN LAW AND ON FACTS IN REJECTING FOLLOWING COMPARABLE COMPANIES AS SELECTED BY THE APPELLANT FOR DETERMINATION OF ALP. - I C R A ONLINE LTD. - SUNDARAM BUSINESS SERVICES LIMITED - ESSAR I NFORMATION TECHNOLOGY LIMITED 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS DOMESTIC COMPANY AND WAS ENGAGED IN PROVIDING INFORMATION TECHNOLOGY ENABLED SERVICES (ITES) IN THE NATURE OF ANALYSIS AND RESEARCH OF PRICE MOVEMENT AND RECOMMENDATIONS OF TRENDS IN FUTURE PRICE MOVEMENT OF SECURITIES LISTED ON NEW YORK STOCK EXCHANGE AND NASDAQ, BOTH SITUATED IN USA. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL LOSS OF 16,10,082/ - . THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES AGGREGATING 19,71,22,387/ - . THE ASSESSING OFFICER MADE REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (TPO) TO DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. THE ASSESSEE IN TP STUDY REPORT AT THE TIME OF FILING THE RETURN OF INCOME HAD ADOPTED TNMM METHOD FOR BENCHMARKING THE TRANSACTIONS PERTAINING TO RENDERING OF SERVICES TO ITS ASSOCIATED ENTERPRISES. THE ASSESSEE HAD TAKEN 9 COMPARABLE COMPANIES FROM ITES SEGMENT EXTRACTED FROM PROWESS DATA LINE BASIS TO BENCHMARK THE TRANSACTIONS, AFTER APPLYING PERMISSIBLE FILTERS UNDER TNMM METHOD. DURING TRANSFER PRICING PROCEEDINGS, THE ASSESSEE FILED REVISED TR ANSFER PRICING AUDIT REPORT AND TO ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 4 EXPLAIN THE ARM'S LENGTH PRICE OF ALL INTERNATIONAL TRANSACTIONS UNDER COMPARABLE UNCONTROLLED METHOD (CUP) , TNMM METHOD AND ALSO PROFITS SPLIT METHOD BUT FINALLY RELIED ON CUP METHOD FOR JUSTIFICATION OF ITS ARM'S LENGTH PRICE. THE REASON FOR REVISING THE BASIS FROM TNMM TO CUP WAS REJECTION DURING TP PROCEEDINGS OF ASSESSEE RELATING TO ASSESSMENT YEAR 2010 - 11. THE ASSESSEE HAD TAKEN 6 COMPARABLE COMPANIES FROM ITES SEGMENT TO BENCHMARK ITS TRANSACTIONS IN TP STUDY REPO RT AFTER APPLYING PERMISSIBLE F ILTERS UNDER CUP METHOD. THE TPO CALLED FOR UPDATED SINGLE YEAR MARGINS OF ABOVE COMPARABLE COMPANIES AND RELYING ON THE MARGINS OF COMPARABLES REPORTED UNDER THE REVISED TRANSFER PRICING STUDY REPORT, THE ASSESSEE FURNISHED INFORMATION IN RESPECT OF 9 COMPARABLES. THE ARITHMETIC MEAN MARGINS OF COMPARABLES WERE 5.01% AS AGAINST MARGINS OF 14.37% EARNED BY ASSESSEE, WITHOUT ANY ADJUSTMENT OF SALARY COSTS. FURTHER , TO EXPLAIN ARM'S LENGTH PRICE UNDER TNMM METHOD IN VIEW OF A DJUSTMENT OF SALARY COSTS, THE ASSESSEE SELECTED COMPANIES WHICH WERE ACCEPTED BY THE TPO AND ALSO BY THE DISPUTE RESOLUTION PANEL (DRP) IN THE PRECEDING YEAR AND THE ARITHMETIC MEAN OF ITS COMPARABLES WAS 24.74% AS AGAINST ASSESSEES MARGINS OF 33.78% I.E . AFTER ADJUSTMENT OF SALARY COSTS. THE ASSESSEE ADMITTEDLY, HAD CONSIDERED DIFFERENT COMPANIES UNDER CUP AND TNMM METHOD BUT HAS PLEADED THAT UNDER BOTH THE METHODS, ITS MARGINS WERE BETTER THAN THE MARGINS DECLARED BY THE COMPANIES SELECTED; THE TPO APP LIED REVISED FILTERS AND ALSO APPLIED THE DATA OF CONTEMPORANEOUS PERIOD AND SHOW CAUSED THE ASSESSEE AS TO WHY 7 COMPANIES FINALLY SELECTED SHOULD NOT BE ADOPTED FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS. THE ASSESSEE SUBMITTED ITS COMMENTS WHICH W ERE COUNTERED BY THE TPO AS NOTED AT PAGE 12 OF THE TPOS ORDER AND IN THE FINAL ANALYSIS FINALLY SELECTED 7 COMPANIES AS COMPARABLES WHOSE WEIGHTED AVERAGE MARGINS WORKED OUT TO 15.16%. THE PLI OF ASSESSEE WAS COMPUTED FROM THE ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 5 FINANCIALS WAS AT 4.07%. THE TPO WORKED OUT AN UPWARD ADJUSTMENT OF 2,10,02,258/ - . THE SAID ADJUSTMENT WAS CONFRONTED TO THE ASSESSEE BY THE ASSESSING OFFICER IN DRAFT ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP, WHICH ISSUED CERTAIN DIRECTIONS VIDE ITS ORDER DATED 23.11.2015. THE ASSESSING OFFICER REFERRED THE SAID DIRECTIONS TO THE TPO, WHO IN TURN, FINALIZED THE SET OF COMPARABLES TO 6 WHOSE ARITHMETIC MEAN WORKED OUT TO 13.65% AND THE REVISED ADJUSTMENT MADE IN THE HANDS OF ASSESSEE WAS 1,81,42,166/ - . 5. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF ASSESSING OFFICER. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRING TO MODIFIED GROUNDS OF APPEAL POINTED OUT THAT NOT ALL THE GROUNDS ARE PRESSED. HE THEN POINTED OUT T HAT THE PRIMARY ISSUE WAS AGAINST INCLUSION OF ONE CONCERN I.E. ACCENTIA TECHNOLOGIES LTD. AND THE SECOND ISSUE WAS RAISED VIDE GROUNDS OF APPEAL NO.3 AND 4 I.E. COMPUTATION OF PLI. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OU T THAT THE DRP HAD GIVEN DIRECTIONS TO THE ASSESSING OFFICER TO RE - COMPUTE PLI OF INFORMED TECHNOLOGIES LTD. AND JINDAL INTELLICOM LTD. HOWEVER, THE SAID DIRECTIONS HAVE NOT BEEN FOLLOWED AND HENCE, THE ASSESSING OFFICER/TPO NEEDS TO BE DIRECTED IN THIS R EGARD. THIS IS THE ISSUE RAISED VIDE GROUND OF APPEAL NO.7. VIDE GROUND OF APPEAL NO.8, THE ISSUE IS AGAINST EXCLUSION OF ACCENTIA TECHNOLOGIES LTD., WHEREIN THE PLEA OF ASSESSEE WAS THAT IT WA S FUNCTIONALLY NOT COMPARABLE. THE ASSESSEE WAS ENGAGED IN I TES SERVICES, WHEREAS ACCENTIA TECHNOLOGIES LTD. WAS ENGAGED IN HEALTHCARE AND OTHER ACTIVITIES OF KPO SERVICES. OUR ATTENTION WAS DRAWN TO THE RATIO LAID DOWN BY PUNE BENCH OF TRIBUNAL IN APTARA TECHNOLOGIES PVT. LTD. VS. DCIT IN ITA NO.291/PUN/2016, REL ATING TO ASSESSMENT YEAR 2011 - 12, ORDER DATED 05.06.2018 AND BY THE HONBLE BOMBAY ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 6 HIGH COURT IN PR.CIT VS. BNY MELLON INTERNATIONAL OPERATIONS (INDIA) (P) LTD. (2018) 255 TAXMAN 397 (BOM) ON THIS ISSUE. VIDE GROUND OF APPEAL NO.10, THE ASSESSEE HAS RAISE D THE ISSUE OF WORKING CAPITAL ADJUSTMENT TO BE ALLOWED, WHEREIN THE ASSESSEE WAS WORKING IN AN ENVIRONMENT OF RECEIVING ADVANCES FROM ITS ASSOCIATED ENTERPRISES AND THERE WERE NO DEBTORS , WHEREAS THE COMPARABLE HAD DEBTORS . 7. THE LEARNED DEPARTMENTAL RE PRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON WRITTEN SUBMISSIONS I.E. COMMENTS OF ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST TRANSFER PRICING ADJUSTMENT MADE IN THE HANDS OF ASSESSEE. THE ASSESSEE WAS ENGAGED IN PROVIDING ITES SERVICES IN THE NATURE OF ANALYSIS AND RESEARCH OF PRICE MOVEMENT AND RECOMMENDATIONS OF TRENDS IN FUTURE PRICE MOVEMENT OF SECURITIES LISTED ON NEW YORK STOCK EXCHANGE A ND NASDAQ, BOTH SITUATED IN USA . FOR BENCHMARKING THE SAID INTERNATIONAL TRANSACTIONS, THE TPO HAD FINALLY SELECTED 6 COMPANIES AS COMPARABLES I.E. AFTER DIRECTIONS OF THE DRP. THE ASSESSING OFFICER IN THE FINAL ASSESSMENT ORDER REFERS TO THE SAME UNDER PARA 8 AND THE ARITHMETIC MEAN OF THE SAID CONCERN WORKS OUT TO 13.65%. THE ASSESSEE IS AGGRIEVED BY INCLUSION OF ACCENTIA TECHNOLOGIES LTD. ON THE GROUND THAT THE SAID CONCERN WAS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AS IT WAS ENGAGED IN KPO SERVI CES. 9. WE FIND THAT THE SAID ISSUE NOW STANDS COVERED BY THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN PR.CIT VS. BNY MELLON INTERNATIONAL OPERATIONS (INDIA) (P) LTD. (SUPRA), WHEREIN WHILE DECIDING THE TRANSFER PRICING ADJUSTMENT IN ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 7 THE HANDS OF ASSESSE E ENGAGED IN THE BUSINESS PROCESS OUTSOURCING I.E. BPO SERVICES, IT HAS HELD THAT ACCENTIA TECHNOLOGIES LTD. IS TO BE EXCLUDED BEING KPO COMPANY. 10. THE PUNE BENCH OF TRIBUNAL IN APTARA TECHNOLOGIES PVT. LTD. VS. DCIT (SUPRA) VIDE PARA 14 HAD ALSO DIRECT ED ITS EXCLUSION. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT ACCENTIA TECHNOLOGIES LTD. IS TO BE EXCLUDED FROM FINAL SET OF COMPARABLES WHILE BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF ASSESSEE. THE GROUND OF APPEAL NO.8 RAISED BY ASSESSEE IS THUS, ALLOWED. 11. NOW, COMING TO GROUNDS OF APPEAL NO.3 AND 4, WHICH IS WITH REGARD TO COMPUTATION OF PLI IN THE HANDS OF ASSESSEE. 12. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE PLI WORKING PLACED AT PAGE 304 OF PAPER BOOK AND HAS POINTED OUT THAT WORKING DONE BY ASSESSING OFFICER SUFFERS FROM INFIRMITY. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD OWNED DTA UNIT AND EXPENSES RELATING TO DTA UNIT I.E. 36,70,199/ - HAVE BEEN INCLUDED FOR WORKING OUT THE PLI OF ASSESSEE. HE FIRST PROPOSED THAT THE SAID EXPENSES OF DTA UNIT SHOULD NOT BE CONSIDERED AS OPERATING COST OF THE ASSESSEE AND SHOULD BE EXCLUDED. IN THE ALTERNATE, HE POINTED OUT THAT IN CASE THE SAID EXPENSES ARE INC LUDED, THEN INCOME RELATING TO DTA UNIT OF 9,4 1 ,905/ - SHOULD ALSO BE CONSIDERED AS PART OF REVENUE ITEMS. THE SECOND PLEA RAISED BY ASSESSEE WAS THAT SERVICE TAX REFUND NEEDS TO BE ADDED AS REVENUE ITEM IN THE HANDS OF ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THEN REFERR ED TO WRITTEN NOTE FILED BY REVENUE AND POINTED OUT THAT THE ISSUE RAISED IN GROUND OF APPEAL NO.3 (B) HAS BEEN ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 8 ACCEPTED BY REVENUE. HE THEN REFERRED TO GROUND OF APPEAL NO.4 RAISED BY ASSESSEE I.E. ALTERNATE GROUND OF APPEAL NO.4 AND POINTED OUT THAT BOTH INCOME AND EXPENSES OF DTA UNIT SHOULD BE CONSIDERED FOR COMPUTING PLI AND IN THAT REGARD, PLI OF ASSESSEE WOULD WORK OUT TO 5.20%. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON WRITTEN NOTE ON THIS ISSUE. 14. WE HAVE HE ARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES VIDE MODIFIED GROUND OF APPEAL NO.3 IS AGAINST COMPUTATION OF PLI OF ASSESSEE. THE FIRST GRIEVANCE OF ASSESSEE IS THAT TPO/ASSESSING OFFICER/DRP HAVE INCLUDED ITEMS OF REVENUE RELAT ING TO DTA ACTIVITY WHICH WERE EXCLUDED WHILE ALLOWING 10A DEDUCTION. THE SECOND PLEA RAISED IN THIS REGARD IS IN NOT INCLUDING SERVICE TAX REFUND AS PART OF REVENUE ITEM, DESPITE SAME BEING OPERATING INCOME AND ALSO DESPITE DIRECTIONS OF DRP. FROM THE D ETAILED WORKING FILED BY ASSESSEE, ANOTHER LINK ED ISSUE WHICH HAS BEEN RAISED IS INCLUSION OF PAYOUT INCOME, WHICH AS PER THE ASSESSEE HAD NO EFFECT AS PAYOUT COST WAS ALSO DEBITED AGAINST THE SAME. FROM THE PLI WORKING OF TPO/ASSESSING OFFICER, IT TRANSP IRES THAT THE TPO HAD RECOGNIZED THE SALES AND SERVICE AND PAYOUT INCOME AS REVENUE ITEMS, AGAINST WHICH IT HAD DEBITED EXPENSE ITEMS OF PERSONNEL EXPENSES, PAYOUT COST, ADMINISTRATIVE EXPENSES, EXPENSES RELATING TO DTA, FOREX LOSS, ASSET WRITTEN OFF AND D EPRECIATION. ONE OF THE GRIEVANCES OF ASSESSEE IS INCLUSION OF PAYOUT INCOME BUT FROM THE PERUSAL OF WORKING OF TPO, IT TRANSPIRES THAT HE HAD DEBITED PAYOUT COST OF THE SAME VALUE AS INCLUDED ON ACCOUNT OF PAYOUT INCOME AND HENCE, IT HAS NO EFFECT ON THE PLI INCOME. THUS, WE FIND NO MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD . ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 9 15. NOW, COMING TO THE NEXT ITEM OF EXPENSES RELATING TO DTA UNIT OF 36,70,199/ - WHICH HAVE BEEN INCLUDED BY THE TPO AS PART OF EXPENSES ITEM. IN THIS REGARD, WE FIND MERIT IN THE PLEA OF ASSESSEE THAT IN CASE EXPENSES ARE SO INCLUDED AS OPERATING COST, THEN THE INCOME ARISING FROM THE SAME HEAD SHOULD BE INCLUDED IN OPE RATING REVENUE. ACCORDINGLY, WE DIRECT THE TPO/ASSESSING OFFICER TO INCLUDE INCOME OF DTA UNIT AT 9,41,905/ - AS PART OF REVENUE ITEM. 16. NOW, COMING TO LAST GRIEVANCE OF ASSESSEE I.E. INCLUSION OF SERVICE TAX REFUND AS OPERATING REVENUE. THE DRP IN T HIS REGARD HAS DIRECTED THE TPO/ASSESSING OFFICER TO INCLUDE SERVICE TAX REFUND. ACCORDINGLY, WE DIRECT THE TPO/ASSESSING OFFICER TO GIVE EFFECT TO THE ORDER OF DRP AND INCLUDE THE SAME AS PART OF OPERATING REVENUE. ACCORDINGLY, THE TPO IS DIRECTED TO RE - COMPUTE THE PLI OF ASSESSEE, WHICH AS PER THE CALCULATION OF ASSESSEE WORKS OUT TO 5.20% AND COMPARE THE SAME WITH MEAN MARGINS OF COMPARABLE COMPANIES AFTER GIVING EFFECT TO OUR DIRECTIONS IN RESPECT OF COMPARABLES AND DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS, IF ANY, IN THE HANDS OF ASSESSEE. THE GROUNDS OF APPEAL NO.3 AND 4 ARE THUS, ALLOWED. 1 7 . THE GROUND OF APPEAL NO.7 RAISED BY ASSESSEE IS AGAINST RE - COMPUTATION OF PLI OF INFORMED TECHNOLOGIES LTD. AND JINDAL INTELLICOM LTD. THE DRP HAS ALREADY DIRECTED THE ASSESSING OFFICER / TPO TO CARRY OUT RE - WORKING WHICH HAS NOT BEEN CARRIED OUT BY THE ASSESSING OFFICER/TPO. HENCE, DIRECTION IS ISSUED TO RE - COMPUTE THE PLI OF INFORMED TECHNOLOGIES LTD. AND JINDAL INTELLICOM LTD. AS PER DIRECTIONS OF DRP. ITA NO. 90 /P U N/20 1 6 CAPSTONE SECURITIES ANALYSIS PVT. LTD. 10 1 8 . NOW, THE LAST ISSUE VIDE GROUND OF APPEAL NO.10 AGAINST ALLOWANCE OF WORKING CAPITAL ADJUSTMENT. THE ASSESSEE CLAIMS THAT IT WA S IN BETTER FINANCIAL POSITION AS IT HA D RECEIVED ADVANCES FROM ASSOCIATED ENTERPRISES AND HAD NO DEBTO RS. WE FIND MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD AND ACCORDINGLY, DIRECT THE ASSESSING OFFICER / TPO TO ALLOW WORKING CAPITAL ADJUSTMENT AND RE - WORK THE MARGINS OF COMPARABLES. THE ASSESSING OFFICER IS THUS, DIRECTED TO WORK OUT ARM'S LENGTH PRIC E OF INTERNATIONAL TRANSACTIONS, AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, PARTLY ALLOWED. 1 9 . IN THE RESULT, THE APPE AL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 5 TH DAY OF APRIL , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 5 TH APRIL , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DRP - 3 (WZ) , MUMBAI ; 4. THE CONCERNED CIT, PUNE ; 5. THE DR B , ITAT, PUNE; 6. GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE