Eads India Private Limited, Bangalore V. Asst.C.I.T., Bangalore

ITA 95/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9435 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 29-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

ITA NO. 95/B/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER IT(TP)A NO. 95/B/2016 (ASSESSMENT YEAR 2011 12) THE ACIT, CIRCLE 1(1) (1), BANGALORE VS M/S EADS INDIA PRIVATE LIMITED, NOW KNOWN AS AIRBUS GROUP INDIA PRIVATE LIMITED, 4 TH FLOOR, XYLEM PLOT NO. 4 & 4A, DYAVASANDRA, INDUSTRIAL AREA, MAHADEVPURA POST, WHITE FIELD ROAD, BANGALORE 560048. PAN AABCE6092J (RESPONDENT) (APPELLANT) SHRI HIMANSHU SHEKAR SINHA, ADVOCATE ASSESSEE BY MS NEERA MALHOTRA , CIT DR REVENUE BY 26/07/2016 DATE OF HEARING 26/08/2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, AM. THIS IS AN ASSESSEES APPEAL FOR THE ASSESSMENT YE AR 2011 12 DIRECTED AGAINST THE ASSESSMENT ORDER DATED 23.12.2015 U/S 143 (3) R.W.S . 144C AS PER THE DIRECTIONS OF DRP. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE ONLY ISSUE TO BE DECIDED BY US IS IN RESPECT OF T. P. ADJUSTMENT FOR TWO SEGMENTS I.E . TECHNICAL SUPPORT SERVICES (TSS) AND MARKETING SUPPORT SERVICES (MSS). ALTHOUGH THE ASS ESSEE HAS RAISED GROUND 5 IN RESPECT OF THIRD SEGMENT I.E. CUSTOMER SUPPORT SERVICES (CSS) ALSO BUT THE SAME IS OF ACADEMIC INTEREST ONLY BECAUSE AS PER THE ORDER OF DRP, AS A GAINST TESTED PARTY MARGIN OF 7% FOR THIS SEGMENT, THE ARMS LENGTH MARGIN IS 2.08% ONLY AND THEREFORE, NO TP ADJUSTMENT CAN BE MADE FOR THIS SEGMENT. ITA NO. 95/B/2016 2 3. WE DECIDE THIS APPEAL IN RESPECT OF REMAINING TW O SEGMENTS. FIRST WE CONSIDER TSS. FOR THIS SEGMENT, THE ASSESSEE SELECTED 6 COMP ARABLES OUT OF WHICH, THE TPO ADOPTED 3 AND REJECTED 3 AND DRP APPROVED THE ORDER OF TPO. T HE ASSESSEE HAS FILED THE PRESENT APPEAL FOR REQUESTING INCLUSION OF THOSE 3 COMPARABLES WHI CH WERE REJECTED BY TPO AND DRP. THE LEARNED AR OF THE ASSESSEE HAS FURNISHED A CHART OF HIS ARGUMENTS AND SUBMITTED THAT THE APPEAL MAY BE DECIDED BY CONSIDERING THE ARGUMENTS IN THE CHART. HE ALSO POINTED OUT THAT AS PER THE CHART, THE ASSESSEE IS NOT PRESSING FOR INC LUSION OF ONE COMPARABLE OF THIS SEGMENT I.E. KIRLOSKAR CONSULTANTS LIMITED AND HENCE, FOR THIS S EGMENT, THE CLAIM OF THE ASSESSEE IS CONFINED TO INCLUSION OF 2 COMPARABLES I.E. 1) YASM UN ENGINEERS LIMITED (YEL) AND 2) UNITED VAN DER HORST LTD.(UVDHL). REGARDING YEL, TH E SUBMISSION IN THE CHART IS THIS THAT THE OBJECTION OF TPO FOR THIS COMPANY IS THIS THAT THIS COMPANY FAILS SERVICE INCOME FILTER BECAUSE ITS INCOME COMPRISES RECEIPT FROM LABOUR CH ARGES AND THE EXPLANATION OF THE ASSESSEE IN THIS REGARD IS THIS THAT THE INCOME OF THIS COMP ANY ON ACCOUNT OF LABOUR CHARGES IS FROM PROVISION OF SERVICES. WE FIND THAT THE DETAILS OF INCOME OF THAT COMPANY IN ITS ANNUAL REPORT ON PAGE 1361 OF PAPER BOOK IS REPRODUCED IN THE CHART AND AS PER THE SAME, SERVICE INCOME OF THAT COMPANY INCLUDES RS. 837.10 LACS ON ACCOUNT OF LABOUR CHARGES AND RS. 321.59 LACS ON ACCOUNT OF WORKS CONTACT OUT OF TOTA L STATED SERVICE INCOME OF RS. 1158.69 LACS. THE PERCENTAGE OF LABOUR CHARGES INCOME TO TO TAL STATED SERVICE INCOME IS 72.25%. IN OUR CONSIDERED OPINION, PROVIDING TECHNICAL SUPPORT SERVICES CANNOT BE EQUATED WITH SUPPLY OF LABOURS AND EARNING LABOUR CHARGES AND THERE FORE, THIS COMPANY CANNOT BE CONSIDERED AS A COMPARABLE IN THE PRESENT CASE. 4. NOW WE CONSIDER AND EXAMINE THE SECOND COMPANY I N DISPUTE FOR THIS SEGMENT I.E. UVDHL. FOR THIS COMPANY, THE OBJECTION OF TPO IS THIS THAT THIS COMPANY IS FUNCTIONALLY DIFFERENT BECAUSE THIS COMPANY IS ENGAGED IN MANUFA CTURING AND JOB WORK. IN THE CHART FILED BEFORE US, THIS IS CONTENDED THAT DESCRIPTION OF TH E BUSINESS OF THIS COMPANY PROVIDED AT PAGE 1304 OF THE PAPER BOOK SHOULD BE CONSIDERED AS PER WHICH, THIS COMPANY OPERATES IN THE REFURBISHING, RESTANDARDISING & RECONDITIONING INDU STRY. IN THE LIGHT OF THIS, WE EXAMINE THE PROFIT & LOSS ACCOUNT OF THAT COMPANY AVAILABLE ON PAGE 1319 OF THE PAPER BOOK AND AS PER THE SAME, TOTAL REVENUE IS RS. 1028.50 LACS AFT ER DEDUCTING DECREASE IN INVENTORS OF RS. ITA NO. 95/B/2016 3 37.25 LACS AND IT INCLUDES RECEIPTS ON ACCOUNT OF M ANUFACTURING & JOB WORK RS. 1061.71 LACS, TRADING RS. 3.14 LACS AND OTHER INCOME OF RS. 0.90 LACS. THE EXPENDITURE INCLUDES MATERIALS & STORES CONSUMED RS. 298.43 LACS AND POW ER & FUEL RS. 50.68 LACS. IN CASE OF MANUFACTURING AND TRADING OPERATION, THE REVENUE IN CLUDES RECOVERY ON ACCOUNT OF MATERIAL, STORES AND POWER & FUEL COST IN ADDITION TO VALUE A DDITION BY EMPLOYEES WHEREAS IN CASE OF PURE SERVICE PROVIDER AS THE PRESENT ASSESSEE, THE RECOVERY IS MAINLY ON ACCOUNT OF EXPENSES ON MAN POWER AND VALUE ADDITION DONE BY THE MAN POW ER AND THEREFORE, THE PERCENTAGE OF INCOME TO TOTAL REVENUE IS BOUND TO BE MUCH LESS IN CASE OF MANUFACTURING AND TRADING COMPANY AS COMPARED TO ONLY SERVICE PROVIDER. THERE FORE, SUCH MANUFACTURING AND TRADING COMPANY CANNOT BE CONSIDERED AS A COMPARABLE IN CAS E OF A SERVICE PROVIDER COMPANY AS IN THE PRESENT CASE. ACCORDINGLY, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE FOR INCLUSION OF BOTH THESE COMPANIES IN THIS SEGMENT I.E. TSS. 5. NOW, WE CONSIDER, EXAMINE AND DECIDE THE ISSUE I N RESPECT OF THE SECOND SEGMENT I.E. MSS. IN THIS SEGMENT, THE ASSESSEE CONSIDERED 4 COM PARABLES OUT OF WHICH, THE TPO REJECTED ONE AND ADDED 2 MAKING IT TOTAL 5 COMPARABLES. DRP UPHELD THE REJECTION OF ONE COMPARABLE I.E. MARKETING CONSULTANTS & AGENCIES LTD. (MCAL) A ND ALSO REJECTED TWO NEW COMPARABLES ADDED BY THE TPO. THE ASSESSEE ALSO MADE REQUEST FO R INCLUSION OF ONE MORE COMPARABLE I.E. GOLDMINE ADVERTISING LTD. (GAL) BUT THIS REQUEST WA S NOT ACCEPTED BY DRP. NOW, THE ASSESSEES CASE BEFORE US IS FOR INCLUSION OF THESE TWO COMPARABLES I.E. MCAL & GAL. REGARDING MCAL, IT IS STATED IN THE CHART THAT THE TPO REJECTED THIS COMPANY ON THIS BASIS THAT IT FAILS THE FILTER OF SERVICE INCOME AND THE EXPLANATION OF THE ASSESSEE IN THIS REGARD IS THIS THAT THIS COMPANY IS ENGAGED IN PROVIDING ADVE RTISEMENT AND RELATED SERVICES. OUR ATTENTION IS DRAWN TO PAGES 1200 & 1203 OF THE PAPE R BOOK. WE HAVE EXAMINED THESE PAGES OF THE PAPER BOOK AND FIND THAT EVEN AS PER ADDITIO NAL DETAILS OF INCOME STATEMENT OF THIS COMPANY, OPERATING REVENUE OF THIS COMPANY INCLUDES RS. 4218.20 LACS ON ACCOUNT OF DOMESTIC SALE OF TRADED GOODS AND RS. 8422.96 LACS ON ACCOUNT OF DOMESTIC REVENUE SERVICES TOTAL REVENUE RS. 12641.16 LACS AND EVEN S EGMENTAL DATA OF SERVICE SEGMENT IS NOT ITA NO. 95/B/2016 4 AVAILABLE ON THESE PAGES AND NO REFERENCE IS MADE T O ANY OTHER PAGE OF THE PAPER BOOK IN THIS REGARD. UNDER THESE FACTS, WE HAVE NO HESITATION IN HOLDING THAT THIS COMPANY CANNOT BE CONSIDERED AS A GOOD COMPARABLE IN THE PRESENT CASE . 6. REGARDING SECOND COMPANY OF THIS SEGMENT I.E. GA L, THAT THE TPO REJECTED THIS COMPANY ALSO ON THE SAME BASIS THAT IT FAILS THE FI LTER OF SERVICE INCOME AND THE EXPLANATION OF THE ASSESSEE IN THIS REGARD IS THIS THAT THIS CO MPANY PASSES THIS FILTER IT HAS SALES & SERVICE INCOME OF RS. 6414.63 LACS OUT OF TOTAL INCOME OF R S. 6451.83 LACS THE PERCENTAGE SERVICE INCOME TO TOTAL INCOME IS 99.42%. OUR ATTENTION HAS BEEN DRAWN TO PAGE 1223 OF THE PAPER BOOK. ON THIS PAGE, THE INCOME ON ACCOUNT OF SALES & SERVICES IS RS. 6414.63 LACS AND EXPENSES ON ACCOUNT OF PURCHASES ARE RS. 5459.51 LA CS. PURCHASES CAN BE FOR TRADED GOODS ONLY AND WHEN THE PURCHASE IS ABOUT 85 % OF SALES & SERVICES, IT HAS TO BE ACCEPTED THAT MORE THAN 85% OF THIS REVENUE IS ON ACCOUNT OF SALE S AND HENCE, UNDER THESE FACTS, THIS COMPANY IS PRIMARILY A TRADING COMPANY AND THEREFOR E CANNOT BE CONSIDERED AS A COMPARABLE IN THE PRESENT CASE. ACCORDINGLY, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE FOR INCLUSION OF BOTH THESE COMPANIES IN THIS SEGMENT I.E. MSS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE DATED: 26 /08/2016 AM* COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., BANGALORE ASSTT. REGISTRAR ITA NO. 95/B/2016 5 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .