M/S VSIBRANT ACADEMY (I) PRIVATE LIMITED, KOTA V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, KOTA

ITTPA 02/JPR/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6008 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 29-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 18-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A.S. NEHRA ACIT
• Assessee Lawyers: ARUN GAUTAM
• Keywords: Transfer pricing; International transaction
• Section: 92C; 92; 92D; 92E; 144C; 13; 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA- @ IT(T.P) A NO. 02/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2015-16 M/S VIBRANT ACADEMY (I) PRIVATE LIMITED, 4 - 14(A) ROAD NO. 1 INDRAPRASTHA INDUSTRIAL AREA, KOTA CUKE VS. DCIT CIRCLE-01, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCV9783C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. MANISH AGARWAL (FCA) & SH. ARUN G AUTAM (CA) JKTLO DH VKSJ LS @ REVENUE BY : SH. A. S. NEHRA (ACIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 18/11/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 29/01/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF ASSESSING OFFICER DATED 14.08.2019 PASSED UNDER SECTION 143(3 ) READ WITH SECTION 144C OF THE INCOME-TAX ACT 1961 WHEREIN ASSESSEE HAS TAK EN THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. AO AS WELL AS THE HONBLE DISPUTE RESOLUTION PANEL (IN SH ORT DRP) HAS GROSSLY ERRED IN CONSIDERING THE ARMS LENGTH PRICE (ALP) D ETERMINED BY THE LD. TPO, FOR SALARY PAYMENTS MADE TO ASSOCIATE ENTERPRI SES (FACULTIES, BEING DIRECTORS WIVES) AT RS. 31,12,178/- AS AGAINST THE ACTUAL SALARY PAID AT RS. 48,76,200/- BY THE ASSESSEE AND CONSEQUENTLY MA KING ADDITION OF RS. 17,63,722/- TO THE TOTAL INCOME DECLARED, WITHOUT APPRECIATING THE IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 2 SUBMISSIONS AND EVIDENCES ADDUCED, IN THE CORRECT P ERSPECTIVE. THUS IN THE CIRCUMSTANCES THE ADDITION OF RS. 17,63,722/- D ESERVES TO BE DELETED. 1.1 THAT THE LD. AO AS WELL AS HONBLE DRP ERRED IN MAKING TP ADJUSTMENTS, WITHOUT APPRECIATING THE CONTENTION OF ASSESSEE THAT NOT ONLY THE EDUCATIONAL QUALIFICATION BUT ALSO THE LEN GTH OF SERVICE AS WELL AS DEDICATION AND RELATIONSHIP WITH THE ORGANIZATION D ESERVES TO BE CONSIDERED WHILE ASCERTAINING THE ARMS LENGTH PRIC E IN RESPECT OF SALARIES PAID TO AES. APPELLANT PRAYS THAT ADDITION MADE WIT HOUT APPRECIATING SUCH IMPORTANT ASPECTS, BEING UNJUSTIFIED, DESERVES TO BE DELETED. 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE LD. AO HAS GROSSLY ERRED IN DISALLOWING RS. 16,100/- OUT OF DIRECTORS TRAVE LLING EXPENSES ARBITRARILY WITHOUT CONSIDERING THE SUBMISSIONS MAD E. ASSESSEE PRAYS SUCH ADDITION BEING UNWARRANTED DESERVE TO BE DELET ED. 2. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT APPELLANT IS A PRIVATE LIMITED COMPANY INCORPORATED IN 2009 AND IS RUNNING AN INSTITUTE OFFERING COACHING FOR PREPARATION OF JEE (MAIN & AD VANCED) EDUCATION IN KOTA, RAJASTHAN. OVER A PERIOD OF TIME, INSTITUTE HAS EVO LVED AS ONE THE RENOWNED AND INCREDIBLE INSTITUTE. THE INSTITUTE WAS SET UP WITH THE OBJECTIVE TO NURTURE QUALITY EDUCATION TO JEE ASPIRANTS. 3. IT WAS SUBMITTED THAT RETURN OF INCOME FOR THE Y EAR UNDER APPEAL WAS FILED ON 29.09.2015 DECLARING TOTAL INCOME OF RS. 34,06,88,210/-, WHICH WAS REVISED ON 30.05.2016 AT RS.34,51,67,610/-. CASE W AS SELECTED FOR LIMITED SCRUTINY BY ISSUING NOTICE/S 143(2), WHICH WAS LATE R CONVERTED INTO COMPLETE SCRUTINY ON THE OBSERVATION THAT ASSESSEE HAD ENTER ED INTO CERTAIN SPECIFIED DOMESTIC TRANSACTIONS. ACCORDINGLY, CASE OF ASSESS EE WAS REFERRED TO TRANSFER IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 3 PRICING OFFICER (TPO) U/S 92C FOR DETERMINATION OF ARMS LENGTH PRICE OF SUCH TRANSACTIONS. LD. TPO, VIDE ORDER DATED 23.03.2018 PASSED U/S 92CA(3), PROPOSED ADJUSTMENT OF RS.17,63,272/- FOR THE CAPTI ONED ASSESSMENT YEAR AND DRAFT ASSESSMENT ORDER DATED 17.12.18 WAS PASSED BY LD. AO IN THE CASE OF ASSESSEE. ASSESSEE OBJECTED TO SUCH DRAFT ASSESSMEN T ORDER BEFORE DISPUTE RESOLUTION PANEL (DRP) IN TERMS OF SECTION 144C, WH ICH WAS REJECTED AND VIDE ORDER DATED 18.07.2019, LD.AO WAS DIRECTED TO INCOR PORATE THE VARIATION PROPOSED BY LD. TPO IN FINAL ASSESSMENT ORDER. ACCO RDINGLY, LD.AO PASSED THE FINAL ASSESSMENT ORDER ON 14.08.2019, AFTER MAKING ADDITION OF RS. 17,63,272/- BEING TRANSFER PRICING ADJUSTMENT AND DISALLOWANCE OF RS.16,100/- OF TRAVELLING EXPENSES, WHICH HAS BEEN CHALLENGED IN THE PRESENT APPEAL. 4. IT WAS SUBMITTED IN GROUND NOS. 1 & 1.1., THE A SSESSEE HAS CHALLENGED THE ACTION OF LD. AO IN RE-COMPUTING THE ARMS LENG TH PRICE (ALP) OF SALARY PAYMENTS MADE TO RELATED PARTIES AT RS.31,12,178/- AS AGAINST RS.48,76,200/- AND CONSEQUENTLY MAKING ADDITION OF RS.17,63,722/- TO THE TOTAL INCOME OF ASSESSE AND ALSO ACTION OF LD. DRP IN ISSUING DIREC TIONS CONFIRMING ORDER OF TPO. 5. IN THIS REGARD, AT THE OUTSET, IT WAS SUBMITTED THAT RECOMPUTATION OF ALP IN THE CASE OF ASSESSEE HAS BEEN DONE IN ACCORDANCE WITH SECTION 92C IN RESPECT OF SPECIFIED DOMESTIC TRANSACTIONS AS DEFIN ED UNDER CLAUSE (I) OF SECTION 92BA, WHICH READS AS UNDER:- 92BA. FOR THE PURPOSES OF THIS SECTION AND SECTIONS 92 , 92C , 92D AND 92E , SPECIFIED DOMESTIC TRANSACTION IN CASE OF AN ASSE SSEE MEANS ANY OF THE FOLLOWING TRANSACTIONS, NOT BEING AN INTERNATIONAL TRANSACTION, NAMELY: (I) ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEE N MADE OR IS TO BE MADE TO A PERSON REFERRED TO IN CLAUSE (B) OF SUB-SECTION (2) OF SECTION 40A IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 4 6. COMING TO THE FACTS OF THE CASE, IT WAS SUBMITTE D THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS PAID SALARY/REMUN ERATION TO CERTAIN RELATED PARTIES (WIVES OF DIRECTORS OF ASSESSE COMPANY), WH ICH INTER ALIA INCLUDED: SL NO. NAME OF AE NATURE OF PAYMENT AMOUNT RETURN OF INCOME AT APB 1. SHUBHA GUPTA SALARY 6,96,600/ - 67 - 69 2. SONEESHA JAIN SALARY 6,96,600/ - 70 - 74 3. MEENAKANWAR SALARY 6,96,600/ - 75 - 78 4. ANJA LI JAISWAL SALARY 6,96,600/ - 79 - 82 5. RACHNASETHIA SALARY 6,96,600/ - 83 - 86 6. PRITIAWASTHI SALARY 6,96,600/ - 87 - 90 7. SHIKHA SHARMA SALARY 6,96,600/ - 91 - 94 48,76,200/ - 7. IN ORDER TO DETERMINE ARMS LENGTH PRICE, SHOW C AUSE NOTICE WAS ISSUED BY TPO TO ASSESSEE TO FURNISH COMPARABLE CASES TO B ENCHMARK THE SALARY PAID BY ASSESSE TO ABOVE RELATED PARTIES. IT WAS SUBMITT ED THAT THE ASSESSEE HAS APPLIED COMPARABLE UNCONTROLLED PRICE (CUP) METHOD FOR BENCHMARKING SALARY PAID TO THESE RELATED PARTIES. HOWEVER, LD. TPO BRU SHED ASIDE SUBMISSION MADE BY ASSESSE AND RE COMPUTED ARMS LENGTH PRICE ON TH E BASIS OF SALARIES OF OTHER EMPLOYEES WORKING IN THE ORGANIZATION. AT THIS JUNC TURE, EDUCATION QUALIFICATION, WORK HANDLED AND JOB DURATION OF SUCH EMPLOYEES AND AES IS TABULATED AS UNDER: NAME OF EMPLOYEE EDUCATION QUALIFICATION SALARY JOB DESCRIPTION DURATION OF SERVICE TILL 01.04.2014 GAURAV JAIN MBA RS.2,14,942/ - - HANDLING MARKETING IN DISTANCE LEARNING PROGRAMME, -MAINTAINING AND MONITORING FEES RECORDS 7 MONTHS NEERAJ MBA RS.2,54,916/ - SAME AS ABOVE 1 YEAR 6 IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 5 SHARMA MONTHS NIKHIL BAJPAI B.E. COMP/PGDBM RS.4,04,363/ - - FLOATING THE POLICIES FROM THE BOARD OF DIRECTORS TO THE EXECUTIVE STAFF AND MAINTAINING PROPER COORDINATION BETWEEN THE STAFF AND THE MANAGERS. 1 YEAR PRASHANT VARMA POST GRADUATE RS.7,08,000/ - - COORDINATING WITH THE FACULTIES AND ARRANGING THE -ARRANGING THE CLASSES IN TIME FOR STUDENTS -MANAGING THE REQUIREMENTS ARRIVED IN CLASSES DURING THE DAY. 4 YEARS SATYA PRAKASH GUPTA BSC., MBA R S.5,56,500/ - - PLANNING THE BUSINESS PROMOTION FOR DLP AND OTHER BUSINESS PLANNING ACTIVITIES FOR THE COMPANY ALSO, MR. GAURAV JAIN AND MR. NEERAJ SHARMA ARE ASSISTING HIM. 1 YEAR 9 MONTHS YASHWANT SHARMA BSC. IT/MCA RS.5,29,500/ - - MANAGING THE RECORDS OF STUDENTS. HE ALSO HELPS THEM IN ADMISSION PROCESS INCLUDING ISSUING ID CARDS, ARRANGING BOOKS, STUDY MATERIAL AND BAGS ETC. 5 YEARS NAME OF AES EDUCATION QUALIFICATION SALARY JOB DESCRIPTION DURATION OF SERVICE TILL 01.04.2014 PRITI AVASTHI M.A., MATH S (RAJ. UNIVERSITY) 6,96,600/- - MANAGING MATHS DEPARTMENT AFFAIRS AND - MANAGING ADMINISTRATION WORK 3 YEARS ANJALI JAISWAL PH.D DRAWING & PAINTING 6,96,600/- -ADMINISTRATION ACTIVITIES 3 YEARS IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 6 SONEESHA JAIN LLB, BSC.(DELHI UNIV.) 6,96,600/- -HANDLING LEGAL MATTERS 3 YEARS SHIKHA SHARMA LLB, M.A. PHILOSOPHY 6,96,600/- -HANDLING LEGAL MATTERS AND -ADMINISTRATION ACTIVITIES 3 YEARS RACHNA SETHIA M.COM 6,96,600/- - HANDLING ADMINISTRATION ACTIVITIES & ACCOUNTS, AUDIT, TAX MATTERS 3 YEARS MEENA KANWAR B.A. (POLITICAL SCIENCE, SOCIOLOGY) 6,96,600/- COUNSELLING STUDENTS; - FOR APPEARING IN COMPETITIVE EXAMS - IN STREAM SELECTION - IN STRESS MANAGEMENT COUNSELING GUARDIANS TO PROVIDE ENVIRONMENT FOR BETTER LEARNING ACCORDING TO THE INTEREST OF THEIR WARDS AND SHARING PERFORMANCE EVALUATION -ENSURING MOTIVATED STAFF AND UNIFORMITY IN OBJECTIVES 3 YEARS SHUBHA GUPTA BSC., DIPLOMA IN COMPUTER APPLICATIONS 6,96,600/- SUPERVISING COMPUTER RELATED MATTERS 3 YEARS 8. IT IS PERTINENT TO NOTE HERE THAT LD. TPO HAS TE RMED SUCH EMPLOYEES AS COMPARABLES AVAILABLE WITHIN THE ORGANIZATION BY GROSSLY IGNORING THE FACT THAT SUCH EMPLOYEES WERE:- - HOLDING DIFFERENT EDUCATION QUALIFICATION THAN TH AT OF AES / RELATED PARTIES: - HAVING DIFFERENT JOB PROFILES, - EMPLOYED WITH ASSESSEE COMPANY FOR SHORTER DURAT ION COMPARATIVELY, IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 7 9. AND LAST BUT NOT THE LEAST RELATED PARTIES BEING WIVES OF DIRECTORS HAD OBJECTIVES BEYOND MONETARY REWARDS, WHICH ENSURES H IGHER PRODUCTIVITY. ALSO, BY VIRTUE OF EXPERIENCE AND QUALIFICATION, ALL THE RELATED PARTIES ARE NOT ONLY DISCHARGING THEIR RESPECTIVE RESPONSIBILITIES IN A VERY EFFICIENT AND ECONOMIC MANNER BUT ALSO ALWAYS READY TO SHOULDER AND IN FAC T SHOULDERING ADDITIONAL RESPONSIBILITIES, THEREBY ENABLING THE INSTITUTE TO ACHIEVE GREATER AND GREATER HEIGHTS BESIDES FULFILLING THE OBJECTS FOR WHICH IT WAS CREATED. MOREOVER, THEY USUALLY DEVOTE THEIR ALMOST FULL TIME TOWARDS THE B ETTERMENT OF THE INSTITUTE. THUS, SALARY PAID TO THEM IS QUITE JUSTIFIED AND NO T IN ANY WAY EXCESSIVE AND MOREOVER SAME CANNOT BE COMPARED WITH THE STAFF / E XECUTIVES CITED BY LD. TPO, AS THESE ARE NOT COMPARABLE. 10. FURTHER, LD. TPO HAS ALLEGED THAT UNRELATED PER SONS WERE HAVING BETTER EDUCATION QUALIFICATIONS THAN THAT OF RELATED PARTI ES. IN THIS REGARD IT IS SUBMITTED THAT NEITHER THESE RELATED PARTIES UNDER CONSIDERATION NOR UNRELATED PARTIES AS ABOVE WERE TEACHING FACULTIES. BOTH WERE HANDLING MOSTLY DIFFERENT TYPES OF ADMINISTRATIVE ACTIVITIES, WHICH REQUIRES MORE OF LEADERSHIP/INTERPERSONAL SKILLS THAN EDUCATION QUAL IFICATION. IT IS THUS SUBMITTED THAT ALP COMPUTED BY LD. TPO IS NOT CORRECT. YOUR H ONOURS WOULD APPRECIATE THAT KOTA IS A COACHING HUB AND LOOKING AT THE NUMB ER OF INSTITUTES PROVIDING BEST OF FACULTIES AND ATMOSPHERE, TO SURVIVE, THERE IS CONSTANT NEED TO KNOW EXPECTATIONS OF STUDENTS/THEIR PARENTS AND PUT EFFO RTS IN THAT DIRECTION. IN SUCH COMPETITIVE SCENARIO, MANAGEMENT ITSELF HAS TO BE I NVOLVED TO ATTRACT THE STUDENTS AND THEN TO RETAIN THEM, BESIDES PROVIDING THEM BEST EDUCATION. AS DIRECTORS ARE TEACHING FACULTIES, THEY ARE ALREADY BURDENED WITH SO MANY RESPONSIBILITIES THAT THEY CANNOT GIVE ENOUGH TIME TO ADMINISTRATIVE, LEGAL, COUNSELING MATTERS, THEREFORE THEIR WIVES, WHO ARE HOLDING EDUCATIONAL QUALIFICATIONS IN RESPECTIVE FIELDS, HAVE BEEN APPO INTED TO TAKE CARE OF SUCH IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 8 ISSUES. IT IS FURTHER SUBMITTED THAT NEITHER TPO NO R DRP HAS DOUBTED THE FACT ABOUT SUCH RELATED PARTIES ACTIVELY PROVIDING THEIR SERVICES RATHER SALARIES HAVE BEEN HELD EXCESSIVE SOLELY BY COMPARING THE SAME WI TH OTHER EMPLOYEES, WHEN THE SERVICES PROVIDED BY THEM ARE DIFFERENT. IT IS SUBMITTED THAT WORK ASSIGNED TO THESE UNRELATED EMPLOYEES EXCEPT PRASHANT VERMA, IS OF ROUTINE IN NATURE AND LIMITED TO VERY SPECIFIC OR LIMITED FIELD. FOR EXAMPLE MR. GAURAV JAIN AND MR. NEERAJ SHARMA WERE ASSISTING SHRI SATYA PRAKASH GUPTA AND ARE VERY JUNIOR EXECUTIVE OR STAFF. SIMILARLY MR. NIKHIL VAJPAI WAS COORDINATING BETWEEN STAFF AND MANAGERS AND THUS HE WAS SENIOR STAFF MEMBER, T HOUGH THESE WERE LOOSELY REFERRED AS MANAGER. WHEREAS RELATED PARTIE S WERE ASSIGNED THE SUPERVISORY AND / OR MANAGERIAL POSITIONS AND WERE LOOKING AFTER WIDER CANVAS ACTIVITIES OF THE INSTITUTE. 11. FURTHER, SO FAR AS OBSERVATION OF DRP THAT DETA ILS OF DURATION/EXPERIENCE/ INCREASE IN SALARY OF PRASHANT VARMA FURNISHED BEFO RE DRP WERE NOT IN CONSONANCE WITH TP STUDY REPORT (PAGE 4 PARA 2.4.5 DRP ORDER) IT IS SUBMITTED THAT DETAILS WERE NOT PART OF TP STUDY REPORT , RATHER WERE PART OF STAFF SALARY DETAILS FURNISHED BEFORE DRP. KIND ATTENTION OF YOU R GOODSELF IS INVITED WHICH SHOWS STAFF SALARY DETAILS, IT IS APPARENT THAT ALL THE DETAILS OF SALARY PAID TO SHRI PRASHANT VARMA IN DIFFERENT YEARS ARE EXACTLY SAME AS MENTIONED IN WRITTEN SUBMISSION FILED BEFORE DRP. THERE WAS MERELY A MIS TAKE IN PERCENTAGE CALCULATION OF INCREASE IN SALARY OVER PRECEDING YE ARS, WHICH WAS A HUMAN ERROR OCCURRED WHILE CALCULATING THE PERCENTAGE IN OUR CA SE, AND NOT AT ALL ANY DELIBERATE ATTEMPT TO GIVE INCORRECT DATA. IT IS TH EREFORE PRAYED THAT ADVERSE INFERENCE DRAWN BY DRP FOR THIS REASON IS CONTRARY TO THE FACTS OF THE CASE. 12. IT IS FURTHER SUBMITTED THAT THE PAYMENT OF SAL ARY TO RELATED PARTIES IS MADE IN ACCORDANCE TO THE LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE AND EFFORTS PUT IN BY THEM AND IT IS WELL SETTLED LAW T HAT B E NEFIT DERIVED OR ACCRUED IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 9 TO THE ASSESSEE FROM THE GOODS, SERVICES OR FACILIT IES ARE TO BE JUDGED FROM THE VIEW POINT OF A BUSINESSMAN AND NOT THAT OF TAX OFFICER. MOREOVER, ALL THE RELATED PARTIES ARE TAXPAYERS AND SALARY RECEIVED B Y THEM IS DULY DECLARED BY THEM IN THEIR RESPECTIVE RETURNS OF INCOME, THUS TH ERE NO LOSS TO REVENUE IN ANY CASE. COPIES OF THEIR ITR AND COMPUTATION OF IN COME ARE PLACED ON RECORD. 13. IN VIEW OF ABOVE, IT IS SUBMITTED THAT SALARY P AID TO RELATED PARTIES IS COMMENSURATE WITH THE EFFORTS MADE BY THEM AND DISA LLOWANCE OF PART SALARY OF RS. 17,63,272/- MADE BY LD. AO DESERVES TO BE DE LETED. 14. PER CONTRA, THE LD DR TAKEN US THROUGH THE FIN DINGS OF THE DRP WHICH READ AS UNDER: 2.4.1 THE OBJECTIONS IN GROUND NOS. 1 TO 4 ARE PER TAIN TO THE TRANSFER PRICING ADJUSTMENT OF RS. 17,62,272/-. THE ASSESSEE HAS APP LIED CUP METHOD, AS PER TP STUDY REPORT, FOR BENCHMARKING THE SALARY PAID T O THESE PERSON. BUT WHILE BENCHMARKING THE ASSESSEE FAILED TO FURNISH ANY COM PARABLE CASE TO JUSTIFY PAYMENTS TO THESE PERSONS. THE TPO OBSERVED THAT TH E ASSESSEE PAID SALARIES TO THE FOLLOWING RELATED PERSONS WHOSE QUALIFICATIO N DID NOT JUSTIFY PAYMENT OF HIGHER SALARIES AS COMPARED TO UNRELATED PERSONS HA VING BETTER AND HIGHER QUALIFICATION. THE SUMMARY OF FACTS ARE AS UNDER:- RELATED PERSONS QUALIFICATION SALARY AMOUNT (IN RS.) PRITI AVASTHI M.A. MATHEMATICS 6,96,600/- ANJALI JAISWAL PH.D IN DRAWING AND PAINTING M. A. (DRAWING & PAINTING) 6,96,600/ SOMEESHA JAIN DETAILS NOT GIVEN 6,96,600/ SHIKHA SHARMA M. A IN PHILOSOPHY 6,96,600/ RACHNA SETHIA DETAILS NOT GIVEN 6,96,600/ IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 10 MEENA KANWAR B. A. (HISTORY, POLITICAL SCIENCE, SOCIOLOGY) 6,96,600/ SHIBHA GUPTA DETAILS NOT GIVEN 6,96,600/- TOTAL 48,76,200/- NAME POST EDUCATIONAL QUALIFICATION SALARY PAID (IN RS.) GAURAV JAIN MANAGER MBA 2,14,942/- NEERAJ SHARMA MANAGER MBA 2,54,916/- NIKHIL BAJPAI MANAGER B.E. COMP/PGDBM 4,04,363/- PRASHANT VARMA MANAGER POST GRADUATE 7,08,000/- SATYA PRAKASH GUPTA MANAGER B. SC. MBA 5,56,500/- YASHWANT S HARMA MANAGER BSC IT/MCA 5,29,500/- TOTAL 26,68,221/- AVERAGE SALARY PAID 4,44,704/- 2.4.2 ACCORDINGLY, APPLYING INTERNAL CUP THE TPO HE LD THAT ALP OF SALARY PAID TO RELATIVES SHALL BE TAKEN AT RS. 4,44,704/- PER P ERSON AND PROPOSED ADJUSTMENT OF RS. 17,63,272/-. 2.4.3 THE ASSESSEE HAS SUBMITTED THAT THE ALL THE R ELATED PERSONS (DIRECTORS WIVES) OF THE DIRECTORS HAVE 3 YEARS OF SERVICE TIL L 1 ST OF APRIL, 2014, WHEREAS SOME OF THE EMPLOYEES CONSIDERED BY THE TPO HAVE LE SSER DURATION OF SERVICE. THE COMPARATIVE DATA OF DURATION OF SERVICE OF THE SIX PERSON GIVEN BY THE ASSESSEE IS AS UNDER:- EMPLOYEES NAME DURATION OF SERVICE TILL 1 ST APRIL DIRECTORS WIVES NAME DURATION OF SERVICE TILL 1 ST APRIL IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 11 2014 2014 MR GAURAV JAIN 7 MONTHS MRS PRITI AVASTHI 3 YEARS MR NEERAJ SHARMA 1.5 YEARS MRS ANJALI JAISWAL 3 YEARS MR NIKHIL BAJPAI 1 YEAR MRS SONEESHA JAIN 3 YEARS MR PRASHANT VARMA 4 YEARS MRS SHIKHA SHARMA 3 YEARS MR SATYA PRAKASH GUPTA 1.75 YEARS MRS RACHNA SETHIA 3 YEARS MR YASHWANT SHARMA 5 YEARS MRS MEENA KANWAR 3 YEARS HOWEVER, AS PER TRANSFER PRICING STUDY FILED BY THE ASSESSEE ALONG WITH ITS SUBMISSIONS DATED 09.02.2018, DURING THE PROCEEDING S BEFORE THE TPO, THE DATA ABOUT SERVICE DURATION OF THE ABOVE MENTIONED EMPLOYEES IS AS UNDER:- NAME DURATION OF SERVICE TILL 1 ST APRIL, 2014 MR GAURAV JAIN 19 MR NEERAJ SHARMA 7 MR NIKHIL BAJPAI 8 MR PRASHANT VARMA 5 MR SATYA PRAKASH GUPTA 7 MR YASHWANT SHARMA 5 MR GAURAV JAIN 2.4.4 THE ASSESSEE HAS FURTHER SUBMITTED THAT THE RE HAS BEEN GRADUAL INCREASE IN SALARIES PAID TO ALL THE RELATED PERSON S (DIRECTORSS WIVES). THE ASSESSEE HAS STATED THAT THE ANNUAL INCREASE IN SAL ARY GIVEN TO UNRELATED PERSON/EMPLOYEE IS MORE THAN THOSE OF RELATED PERSO NS. IN THIS REGARD, IT HAS IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 12 RELIED UPON THE CASE OF ONE OF THE EMPLOYEE MR. PRA SHANT VERMA AND SUBMITTED HIS SALARY DATA, WHICH IS REPRODUCED AS UNDER:- NAME 2011-12 2012-13 2013-14 2014-15 PER MONTH & PER RELATED PERSON 30,000/- 37,000/- 47,000/- 57,000/- PERCENTAGE INCREASE YEAR TO YEAR 23% 27% 21% NAME 2011-12 2012-13 2013-14 2014-15 PER MONTH SALARY MR PRASHANT VERMA 34,000/- 42,000/- 50,500/- 59,000/- PERCENTAGE INCREASE YEAR TO YEAR 24% 25% 25% HOWEVER, AS PER TRANSFER PRICING STUDY FILED BY THE ASSESSEE ALONG WITH ITS SUBMISSIONS DATED 09.02.2018, DURING THE PROCEEDING S BEFORE THE TPO, THE DATA ABOUT SERVICE DURATION OF THE ABOVE MENTIONED EMPLOYEE- MR. PRASHANT VERMA IS AS UNDER:- F.Y 2011-12 2012-13 2013-14 2014-15 ANNUAL SALARY GIVEN 4,08,500/- 5,04,000/- 6,06,000/- 7,08,000/- PERCENTAGE INCREASE YEAR TO YEAR 23 20 17 2.4.5 A PERUSAL OF THE ABOVE SHOWS THAT THE ASSES SEE HAS DELIBERATELY FILED FALSE DATA REGARDING THE SERVICE DURATION/EXPERIENC E OF THE ABOVE EMPLOYEES AND THE ANNUAL INCREASE IN SALARY OF MR. PRASHANT V ERMA BEFORE US. ALL THE ABOVE MENTIONED EMPLOYEES HAVE MORE SERVICE DURATIO N/EXPERIENCE AS IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 13 COMPARED TO THE ALL THE RELATED PERSONS (DIRECTORS WIVES) OF THE DIRECTORS, EACH HAVING 3 YEARS OF SERVICE TILL 01.04.2014. FURTHER, THIS ARGUMENT WAS NEVER RAISED BEFORE THE TPO. THE ONLY ARGUMENT TAKEN BY T HE ASSESSEE BEFORE THE TPO WAS THAT THE EDUCATIONAL QUALIFICATION OF THE C OMPARABLE EMPLOYEES WERE DIFFERENT THAN THOSE OF THE RELATED PERSONS. BESIDE S, MR. PRASHANT VERMA HAD LESSER AVERAGE INCREASE (20%) IN HIS ANNUAL SALARY AS COMPARED TO THE ALL THE RELATED PERSONS (DIRECTORS WIVES) OF THE DIRECTORS , EACH HAVING MORE AVERAGE INCREASE (23.66%). THEREFORE, THE ABOVE GROUND OF O BJECTION IS REJECTED. 2.4.6 FURTHERMORE, THE TPO IN HIS ORDER HAS CLEARL Y GIVEN FINDING THAT THE UNRELATED PERSONS WERE HAVING BETTER EDUCATIONAL QU ALIFICATIONS AND THEIR EDUCATIONAL QUALIFICATION WAS RELEVANT TO THE BUSIN ESS OF THE ASSESSEE, BUT THE QUALIFICATION OF THE RELATED PERSONS IN DRAWING & P AINTING, PHILOSOPHY, HISTORY WAS NOT ALL THE RELEVANT TO THE BUSINESS OF ASSESSE E FOR WHICH HIGHER SALARY WAS PAID TO THEM. THE TPO/AO HAS CLEARLY GIVEN COGENT R EASONS FOR HIS FINDINGS REGARDING HIS NON-ACCEPTANCE OF HIGHER SALARY PAID TO THE RELATED PERSONS AND NECESSITY OF APPLICATION OF INTERNAL CUP METHOD FOR BENCHMARKING SALARY PAID TO THE RELATED PERSONS (WIVES OF THE DIRECTORS). 2.4.7 IN VIEW OF THE ABOVE OBSERVATIONS, WE ARE NOT INCLINED TO INTERFERE WITH THE PROPOSED TP ADJUSTMENT. THE ACTION OF THE AO/TP O IS UPHELD. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LIMITED ISSUE UNDER CONSIDERATION RE LATES TO COMPARABLE CASES SELECTED BY THE TPO FOR THE PURPOSES OF DETERMINING THE ARMS LENGTH PRICE OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPA NY IN TERMS OF PAYMENT OF REMUNERATION TO THE RELATED PERSONS WHILE APPLYING THE CUP METHOD. WE FIND THAT BOTH THE RELATED PERSONS AS WELL AS COMPARABLE CASES SELECTED BY THE TPO ARE HOLDING NON-TEACHING FACULTY ROLE, AND ARE HOLD ING AND DISCHARGING IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 14 ADMINISTRATIVE FUNCTIONS IN TERMS OF SUPERVISING AN D MANAGERIAL ROLE IN THEIR RESPECTIVE ADMINISTRATIVE FIELDS. THEREFORE, BESIDE S THE REQUISITE EDUCATIONAL QUALIFICATION WHICH EACH OF THEM POSSESSES, WHAT IS MORE RELEVANT IS THE EXPERIENCE AND PERIOD OF SERVICE OF SUCH PERSONNEL DISCHARGING THEIR RESPECTIVE FUNCTIONS WHICH WOULD PROVIDE A BETTER AND RATIONAL E BASIS FOR BENCHMARKING ANALYSIS. IN THE INSTANT CASE, WE FIND THAT EACH O F THE RELATED PERSONS HAVE RENDERED SERVICES OF THREE YEARS AS ON 1.04.2014 AN D THUS CARRY THE DESIRED EXPERIENCE AND SKILL SET DEVELOPED OVER SUCH PERIOD OF THREE YEARS WITH THE ASSESSEE COMPANY OF SUPERVISING AND MANAGERIAL ACTI VITIES IN THEIR RESPECTIVE ADMINISTRATIVE FIELDS WHEREAS IN CASES OF COMPARABL E CASES SELECTED BY THE TPO, WE FIND THAT IN THESE CASES, THE EMPLOYEES HAV E RENDERED SERVICE RANGING FROM SEVEN MONTHS TO FIVE YEARS WHICH PROVIDE A WID E VARIANCE AND THUS, FOR COMPARABILITY PURPOSES, IT WOULD BE APPROPRIATE TO CONSIDER COMPARABLE CASES WHO HAVE RENDERED SERVICES FOR MINIMUM THREE YEARS AND EXCLUDE OTHER CASES WHO HAVE RENDERED SERVICES FOR A LESSER PERIOD. TH EREFORE, THE CASE OF SHRI PRASHANT VARMA WHO HAS RENDERED SERVICE OF 4 YEARS AND THAT OF SHRI YASHWANT SHARMA WHO HAS RENDERED SERVICE OF 5 YEARS WOULD BE TAKEN AS COMPARABLE CASES AND REST ALL CASES SHALL BE EXCLUDED FOR THE PURPOSES OF COMPARABILITY ANALYSIS. THE AVERAGE SALARY OF THESE TWO COMPARAB LE CASES COMES TO RS 618,500/- WHICH SHALL BE TAKEN AS ALP OF SALARY PAID TO RELATED PERSONS AS AGAINST CURRENT SALARY OF RS 696,600/- RESULTING IN TRANSFER PRICING ADJUSTMENT OF RS 546,700/- IN HANDS OF THE ASSESSEE COMPANY. T HE AO/TPO IS ACCORDINGLY DIRECTED TO RESTRICT THE TP ADJUSTMENT TO RS 546,70 0/- AND THE GROUND OF APPEAL IS THUS PARTLY ALLOWED. 16. GROUND NO. 2 WAS NOT PRESSED DURING THE COURSE OF HEARING. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. IT(TP) A NO. 02/JP/2019 M/S VIBRANT ACADEMY (I) PRIVATE LTD, KOTA VS. DCIT, CIRCLE-01, KOTA 15 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2021. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SING H YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29/01/2021 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S VIBRANT ACADEMY (I) PRIVATE LIMI TED, KOTA 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCEL-01, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {IT(TP) A NO. 02/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR