SYSCOM CORPORATION LTD, MUMBAI v. ASST CIT CIR 3(3), MUMBAI

ITA 327/MUM/2013 | 2008-2009
Pronouncement Date: 12-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 32719914 RSA 2013
Assessee PAN AABCS2000C
Bench Mumbai
Appeal Number ITA 327/MUM/2013
Duration Of Justice 6 month(s) 1 day(s)
Appellant SYSCOM CORPORATION LTD, MUMBAI
Respondent ASST CIT CIR 3(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted K
Tribunal Order Date 12-07-2013
Date Of Final Hearing 20-06-2013
Next Hearing Date 20-06-2013
Assessment Year 2008-2009
Appeal Filed On 10-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL K KK K BENCH BENCH BENCH BENCH MUMBAI MUMBAI MUMBAI MUMBAI . . ! ! ! ! ' ' ' ' . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI P.M. JAGTAP P.M. JAGTAP P.M. JAGTAP P.M. JAGTAP AM AM AM AM & && & SHRI SHRI SHRI SHRI VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM ./ I.T. I.T. I.T. I.T.A. NO A. NO A. NO A. NO. .. .327/M 327/M 327/M 327/MUM UMUM UM/2013 /2013 /2013 /2013 ( $% $% $% $% & & & & / ASSESSMENT YEAR: 2008-09) SYSCOM CORPORATION LTD. 714 RAHEJA CHAMBERS 213 NARIMAN POINT MUMBAI-400021 % % % % / VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCEL 3(3) MUMBAI !' ./ ( ./ PAN/GIR NO. : AABCS2000C ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ') ') ') ') / APPELLANT BY : SHRI SASHI TULSIYAN *+') *+') *+') *+') - -- - /RESPONDENT BY : SHRI AJEET KUMAR JAIN % % % % - -- - / DT. OF HEARING : 20 TH JUNE 2013 ./& ./& ./& ./& - -- - / DT.OFPRONOUNCEMENT: 12 TH JULY 2013 0 / O R D E R PER : ' . . / VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ASSESSMENT ORDER DATED 26.11.2013 PASSED U/S 143(3) R.W.S 144C (13) OF THE INCOME TAX ACT IN PURSUANCE TO THE DIRECTIONS OF DRP U/S 1 44C(5) DATED 27.9.2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. A.O. ERRED IN FRAMING ASSESSMENT UNDER SECTION 143( 3) R.W.S. 144C(13) MAKING ADDITIONS AGGREGATING TO OF RS 8 53 65 512/- WHICH IS COMPLETELY UNJUSTIFIED AND UNWARRANTED IN LAW. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. A.O. ERRED IN MAKING A REFERENCE TO THE TRANSFER PR ICING OFFICER ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 2 (TPO) WITHOUT RECORDING ANY REASONS IN THE ASSESSME NT ORDER AS PROVIDED U/S 92CA(L) BASED ON WHICH HE HAS REACHED A CONCLUSION THAT IT WAS NECESSARY OR EXPEDIENT TO REFER THE MATTER TO THE LD. TPO FOR COMPUTATION OF THE ALP. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) ERRED IN REJECTING THE ECONOMIC ANALYSI S UNDERTAKEN BY THE APPELLANT WHICH WAS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES FOR ESTAB LISHING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANS ACTIONS. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) ERRED IN MAKING AN ADJUSTMENT TO THE AL P BY ENHANCING THE INCOME OF THE APPELLANT BY RS. 8 49 2 9 839/- U/S 92CA(3). (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) ERRED IN REJECTING ONE COMPARABLE SELEC TED BY THE APPELLANT NAMELY M/S PUNJAB COMMUNICATION LTD (PCL) FOR COMPUTING PU IN DETERMINATION OF THE ALP IN THE ANA LYTICAL STUDY INCORPORATED IN THE DOCUMENT IN FORM 3CEB SOL ELY ON THE GROUND THAT IT HAS SUFFERED LOSSES. (6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN CONSIDERING M/S GEMINI COMMUNICATIONS LTD. AS COMPARABLE TO THE APPELLANT FOR COMPUTING PU IN DETERMINING ALP WITHOUT APPRECIATI NG THE FUNCTIONAL PROFILE OF THE COMPANY OBLIVIOUS TO THE FACT THAT THE COMPANY IS EARNING SUPER NORMAL PROFITS. (7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. A.O. HAS ERRED IN NOT CONSIDERING M/S ICOMM TELE LI MITED (PART OF THE ALTERNATE SET OF COMPARABLES COMPANIES SUBMI TTED BY THE APPELLANT) WITHOUT ANY JUSTIFICATION EVEN THOUG H THE SAME WAS FOUND COMPARABLE IN THE ORDER OF THE DRP. (8) WITHOUT PREJUDICE TO THE ABOVE GROUNDS BASED O N FACTS AND CIRCUMSTANCES OF THE CASE THE LD. A.O. BASED ON TH E DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL (DRP) HAS ERR ED IN CONSIDERING THE INCORRECT MARGINS OF THE APPELLANT AND THE COMPARABLE COMPANIES. (9) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN NOT ALLOWING AN ADJUSTMENT FOR ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 3 DIFFERENCES IN WORKING CAPITAL EMPLOYED BY THE APPE LLANT VIS-A- VIS THE COMPARABLE COMPANIES. (10) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN ADOPTING A FLAWED APPROACH BY USING SINGLE YEAR DATA AS AGAINST THE MULTIPLE YEAR DATA USED BY THE APPELLANT TO COMPUTE THE ALP OF THE INTERNATIONAL T RANSACTIONS OF THE APPELLANT USING TNMM METHOD BY HOLDING THAT THE APPELLANT HAS FAILED TO SHOW ANY EVIDENCE THAT THE EARLIER YEAR DATA HAS INFLUENCE ON THE PROFITS AND MARGINS OF TH E APPELLANT IN DETERMINING ALP. (11) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN CONSIDERING DATA NOT AVAIL ABLE TO THE APPELLANT AT THE TIME OF PREPARING THE TRANSFER PRI CING DOCUMENTATION FOR DETERMINING THE ALP OF THE INTER NATIONAL TRANSACTIONS. (12) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN NOT APPLYING THE PROVISO T O SECTION 92C(2) OF THE ACT AND HAS FAILED TO ALLOW THE APPEL LANT THE BENEFIT OF UPWARD VARIATION OF 5 PERCENT IN DETERMI NING ALP. (13) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN NOT RESTRICTING THE ADJUST MENT TO THE INCOME OF THE APPELLANT TO THE QUANTUM OF ITS INTER NATIONAL TRANSACTIONS. (14) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN IGNORING THE FACT THAT THE PARENT COMPANY OF THE APPELLANT HAS BEEN CONSISTENTLY SUFF ERING FROM OPERATIONAL LOSSES. (15) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. A.O. BASED ON THE DIRECTIONS GIVEN BY THE DISPUTE R ESOLUTION PANEL (DRP) HAS ERRED IN MAKING AN ADDITION OF RS. 4 35 673/- ON PROTECTIVE BASIS ON ACCOUNT OF AIR RECONCILIATIO N IGNORING THE FACT THAT THE SAME DOES NOT BELONG TO THE APPELLANT . 3. GROUND NO. 1 IS GENERAL IN NATURE AND NO SPECIFI C FINDING IS REQUIRED AS IT DEPENDENTS UPON THE FINDINGS ON THE OTHER GRO UNDS. ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 4 4. GROUND NO. 2 IS REGARDING THE VALIDITY OF REFERE NCE MADE BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OFFICER. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATER IAL ON RECORD. THE ASSESSEE HAS CHALLENGED THE REFERENCE MADE BY THE A SSESSING OFFICER TO THE TRANSFER PRICING OFFICER ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY REASONS IN THE ASSESSMENT ORDER ON WHICH HE HAS REACHED AT CONCLUSION THAT IT WAS NECESSARY AND EXP EDIENT TO REFER THE MATTER TO THE TPO FOR COMPUTATION OF ARMS LENGTH P RICE. 5. ON THE OTHER HAND THE LD. DR HAS CONTENDED THAT THERE IS NO REQUIREMENT OF WRITING SPECIFIC REASONS FOR MAKING REFERENCE U/S 92CA(1). ONCE THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS THEN FOR DETERMINATION O F THE ARMS LENGTH PRICE REFERENCE U/S 92CA(1) MAY BE MADE TO THE TPO WITH T HE APPROVAL OF THE COMMISSIONER. ONCE THE APPROVAL OF THE COMMISSIONER IS OBTAIN IT IS IMPLIED THAT THE ASSESSING OFFICER CONSIDERED IT NE CESSARY AND EXPEDIENT TO REFER THE COMPUTATION OF ARMS LENGTH PRICE TO T HE TRANSFER PRICING OFFICER. HE HAS FURTHER SUBMITTED THAT THIS ISSUE I S COVERED BY THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN CASE OF AZTEC SOFTWARE & TECH. LTD. V. ASSTT. CIT (BANG.)(SB) 107 ITD 141. 6. HAVING CONSIDERED THE RIVAL SUBMISSION AS WELL A S THE RELEVANT PROVISIONS OF THE ACT WE FIND THAT THIS ISSUE IS C OVERED BY THE DECISION OF THE SPECIAL BENCH IN CASE OF 107 ITD 141 (SB) (SUPR A) WHEREIN THE SPECIAL BENCH HAS HELD AS UNDER. ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 5 26. RIVAL SUBMISSIONS OF THE PARTIES HAVE BEEN CON SIDERED CAREFULLY. AFTER GIVING OUR DEEP THOUGHTS TO THE SU BMISSIONS OF THE PARTIES WE ARE OF THE VIEW THAT THE ASSESSING OFFICER IS NOT REQUIRED TO DEMONSTRATE THE EXISTENCE OF THE CIRCUM STANCES SET OUT IN CLAUSES (A) TO (D) OF SUB-SECTION (3) OF SEC TION 92C OF THE ACT BEFORE REFERRING THE CASE OF THE ASSESSEE TO TH E TPO FOR DETERMINING THE ALP UNDER SECTION 92CA(1) OF THE AC T FOR THE REASONS GIVEN HEREAFTER. 27. A CLOSE READING OF SECTIONS 92C AND 92CA WHICH ALREADY HAVE BEEN REPRODUCED BY US IN THE EARLIER PART OF T HE ORDER IN OUR OPINION REVEALS THAT PROCEEDINGS IN BOTH THE S ECTIONS ARE QUITE INDEPENDENT OF AND DISTINCT FROM EACH OTHER A ND THE PROCEEDINGS UNDER SECTION 92CA(1) OF THE ACT ARE NO T DEPENDENT ON THE PROCEEDINGS UNDER SECTION 92C(3) O F THE ACT. THIS IS DUE TO HISTORICAL REASONS AS TWO PROVISIONS WERE INTRODUCED AT DIFFERENT TIMES AS NOTED ABOVE. THE P ROVISIONS OF SECTION 92C(3) OF THE ACT CONFERS POWERS ON THE ASS ESSING OFFICER TO DETERMINE THE ALP HIMSELF WHERE THE CIRC UMSTANCES MENTIONED IN CLAUSES (A) TO (D) OF THE SUB-SECTION EXIST. THIS IS APPARENT FROM A BARE READING OF THE PROVISION. IN S UCH CASES THE ASSESSING OFFICER IS NOT BOUND TO REFER THE CAS E OF THE ASSESSEE TO THE TPO. ON THE OTHER HAND THE ASSESSI NG OFFICER MAY REFER THE CASE OF THE ASSESSEE TO THE TPO IF HE CONSIDERS IT NECESSARY OR EXPEDIENT TO DO SO. THE EXPRESSION NE CESSARY OR EXPEDIENT IS QUITE DISTINCT FROM AND INDEPENDENT OF THE CIRCUMSTANCES MENTIONED IN SECTION 92C(3). THE ASSE SSING OFFICER MAY CONSIDER IT NECESSARY OR EXPEDIENT TO R EFER THE CASE OF THE ASSESSEE TO THE TPO EVEN WITHOUT CONSIDERING EXISTENCE OF CIRCUMSTANCES MENTIONED IN SECTION 92C OF THE AC T. THE ASSESSING OFFICER HAS ONLY TO BE SATISFIED THAT IT IS NECESSARY OR EXPEDIENT TO MAKE A REFERENCE TO THE T.P.O. NO OTHE R CONDITION IS PRESCRIBED IN THE PROVISION. NOW UNDER WHAT CIRC UMSTANCES ASSESSING OFFICER WOULD CONSIDER IT NECESSARY OR EXPEDIENT WOULD DEPEND UPON FACTS OF EACH CASE. NO DOUBT EVE N IN CASES COVERED BY SECTION 92C(3) OF THE ACT THE ASSESSING OFFICER MAY IN APPROPRIATE CASES CONSIDER IT NECESSARY OR EXPED IENT TO REFER THE CASE OF THE ASSESSEE TO THE TPO FOR DETERMINING THE ALP BUT THAT DOES NOT MEAN THAT POWERS OF THE ASSESSING OFF ICER TO REFER THE CASE TO THE TPO IS RESTRICTED TO THOSE CA SES WHICH ARE COVERED BY SECTION 92C(3) OF THE ACT. HAD THE LEGIS LATURE CONTEMPLATED TO REFER THE CASE OF THE ASSESSEE TO T HE TPO ONLY IN THE CIRCUMSTANCES MENTIONED IN SECTION 92C(3) TH EN THE LEGISLATURE WOULD HAVE TO PROVIDE SUCH CONDITIONS I N PLACE OF WORDS NECESSARY OR EXPEDIENT IN SUB-SECTION (1) OF SECTION 92CA. THE REQUIREMENTS UNDER BOTH THE SECTIONS ARE QUITE DISTINCT AS PROCEDURE TO BE FOLLOWED IN THE SECTION S IS DIFFERENT. IN THE ABOVE SUB-SECTION 92CA(1) THERE IS NO REFERE NCE TO ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 6 SECTION 92C(3). MOREOVER IT IS MANDATORY FOR T.P.O. TO DETERMINE ARMS LENGTH PRICE IN ACCORDANCE WITH SUB -SECTION (3) OF SECTION 92C. IF ABOVE SECTION TO BE APPLIED BY T PO UNDER SECTION 92CA(3) AT THE PRESCRIBED STAGE THERE IS N O QUESTION OF APPLYING THE SAME PROVISION AT THE STAGE OF MAKING REFERENCE. WHAT PURPOSE WOULD BE SERVED BY APPLYING SAME PROVI SION AGAIN AND AGAIN. THEREFORE ON PLAIN AND CLEAR LANG UAGE OF STATUTORY PROVISION WE DO NOT FIND ANY FORCE IN TH E CLAIM OF THE ASSESSEE. IT WOULD BE SUFFICIENT FOR INVOKING PROVI SIONS OF SECTION 92CA(1) IF IT IS SHOWN THAT THERE EXISTED C IRCUMSTANCES WHICH PROMPTED THE ASSESSING OFFICER TO CONSIDER IT NECESSARY OR EXPEDIENT TO REFER THE COMPUTATION OF ALP TO THE TPO. ONCE IT IS SHOWN THAT THERE EXISTED CIRCUMSTANCES ON THE BASIS OF WHICH THE ASSESSING OFFICER COULD CONSIDER IT NECES SARY OR EXPEDIENT THE MATTER ENDS. THE CIT(A) HAS EMPHASIZ ED ON THE WORDS THE SAID INTERNATIONAL TRANSACTION UNDER SEC TION 92C. THESE WORDS IN OUR OPINION ONLY REFERS TO THE TRA NSACTION IN RESPECT OF WHICH REFERENCE CAN BE MADE TO THE TPO B UT THE SAME DOES NOT IN OUR OPINION LEAD TO THE CONCLUSI ON THAT THE REQUIREMENT OF SECTION 92C(3) CAN BE READ INTO SECT ION 92CA(1) OF THE ACT. 28. THE VIEW TAKEN BY US IS ALSO FORTIFIED BY THE D ECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SONY INDIA (P.) LTD. V. CBDT [2006] 288 ITR 521 WHEREIN THE COURT CONSIDER ED THE SIMILAR QUESTION. AT PAGE-66 OF THE REPORT THEIR L ORDSHIPS REFERRED TO THE QUESTION IN PARA-19 AS UNDER : ... WHETHER THE REFERENCE TO THE TRANSFER PRICING OFFICER BY THE ASSESSING OFFICER HAS TO BE MADE BY THE ASSESSING O FFICER ONLY AFTER HE IS SATISFIED BY GOING THROUGH THE STEPS EN LISTED AT SECTION 92C(1) TO (3) AND CONCLUDING THAT THE PRICE DECLARED BY THE ASSESSEE IS NOT TO BE ACCEPTED OR CAN HE MAKE S UCH A REFERENCE AT AN ANTERIOR STAGE ? THE ABOVE QUESTION WAS ANSWERED BY THEIR LORDSHIPS AT THE SAME PAGE BY OBSERVING AS UNDER: THERE IS NOTHING IN SECTION 92CA ITSELF THAT REQUI RES THE ASSESSING OFFICER TO FIRST FORM A CONSIDERED OPINIO N IN THE MANNER INDICATED IN SECTION 92C(3) BEFORE HE CAN MA KE A REFERENCE TO THE TRANSFER PRICING OFFICER. IN OUR V IEW IT IS NOT POSSIBLE TO READ SUCH A REQUIREMENT INTO SECTION 92 CA(1). HOWEVER IT WILL SUFFICE IF THE ASSESSING OFFICER F ORMS A PRIMA FACIE OPINION THAT IT IS NECESSARY AND EXPEDIENT TO MAKE SUCH A REFERENCE. ONE POSSIBLE REASON FOR THE ABSENCE OF S UCH A REQUIREMENT OF FORMATION OF A PRIOR CONSIDERED OPIN ION BY THE ASSESSING OFFICER IS THAT THE TRANSFER PRICING OFFI CER IS EXPECTED TO PERFORM THE SAME EXERCISE AS ENVISAGED UNDER SEC TION ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 7 92C(1) TO (3) WHILE DETERMINING THE ALP UNDER SECTI ON 92CA(3). THE LATTER PART OF SECTION 92CA(3) UNAMBIGUOUSLY ST ATES THAT THE ASSESSING OFFICER SHALL BY ORDER IN WRITING D ETERMINE THE ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION IN ACCORDANCE WITH SUB-SECTION (3) OF THE SECTION 92C . IT WILL BE POINTLESS TO HAVE A DUPLICATION OF THIS EXERCISE AT TWO STAGES ONE AFTER THE OTHER. [EMPHSIS SUPPLIED].. 7. ACCORDINGLY WE DO NOT FIND ANY MERIT IN THE OBJ ECTION OF THE ASSESSEE AGAINST THE REFERENCE MADE TO THE TPO U/S 92CA(1) OF THE INCOME TAX ACT. 8. GROUND NO. 3-6 ARE RELATED TO THE TRANSFER PRICI NG ADJUSTMENT BY REJECTING SOME OF THE COMPARABLES OF THE ASSESSEE A ND INCLUDING THE NEW COMPARABLE BY THE TPO. THE ASSESSEE IS ENGAGED IN T HE MANUFACTURING AND SALE OF SUBSCRIBER IDENTITY MODULE (SIM) CARDS IN INDIA AND PROVIDES SIM RELATED SOLUTIONS TO THE MOBILE TELECOMMUNICATI ONS INDUSTRY IN INDIA AND ABROAD. THE ASSESSEE COMPANY IS 100% SUBSIDIARY OF M/S SMART CHIP LTD. COMPANY INCORPORATED IN INDIA WHICH IN TURN IS HELD 95% BY SAGEM ORGA GMBH GERMANY. SAGEM ORGA IS A GLOBAL LEADER I N THE SMART CARD INDUSTRY. DURING THE YEAR THE ASSESSEE HAD PURCHAS ED AND SOLD GOODS PROVIDED AND RECEIVED SERVICES AND ALSO PAID RENTAL TO ITS ASSOCIATES ENTERPRISES (AE). FOR THE PURPOSE OF MANUFACTURING THE SIM CARD THE ASSESSEE IMPORTED MODULES FROM ITS AE SAGEM ORGA AN D PURCHASED CARD BODY ENTIRELY FROM THIRD PARTY VENDORS. THE ASSESSE E SOLD THE FINISH PRODUCT BACK TO SAGEM ORGA. APART FROM PURCHASE AND SALES OF GOODS THE ASSESSEE HAS ALSO ENTERED INTO VARIOUS OTHER TRANSA CTIONS WITH THE AE DETAILS OF WHICH ARE GIVEN BY THE TPO IN PARA 6 AS UNDER: ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 8 SL. NO. NATURE OF TRANSACTION FY 2007-08 METHOD ADOPTED BY THE ASSESSEE 1. PURCHASE OF GOODS 38 430 507 TRANSAXTION NET MARGIN METHOD (TNMM) 2. SALE OF GOODS 204 322 530 3. PAYMENT OF LEASE RENTAL 8 266 325 4. RECEIPT OF TECHNICAL KNOW- HOW 12 77 000 5. PROVISION OF SERVICES 1 451 445 6. RECEIPT OF BUSINESS SUPPORT SERVICES 23 544 688 7. RECEIPT OF TECHNICAL SUPPORT SERVICES 38 517 513 8. WARRANTY CLAIMS 6 305 188 9. COST RECHARGES TO ASSOCIATED ENTERPRISES 6 118 687 10. COST RECHARGES FROM ASSOCIATED ENTERPRISES 676 626 COMPARABLE UNCONTROLLED PRICE (CUP) TOTAL 340 403 509 9. THE ASSESSEE HAS CLAIMED THAT ITS INTERNATIONAL TRANSACTIONS ARE AT ARMS LENGTH PRICE AS BENCH MARKED BY USING TNMM AS MOST APPROPRIATE METHOD AND PROFIT LEVEL INDICATORS (PLI) AS OP/TC ON THE BASIS OF THREE COMPANIES TAKEN AS COMPARABLES NAMELY PUNJAB COMMUN ICATION LTD. VALIANT COMMUNICATION LTD. AND X L TELECOM AND ENER GY LTD.. IN THE TRANSFER PRICING REPORT THE ASSESSEE REPORTED ITS PROFIT MARGIN AT 8% AS AGAINST THE ARITHMETIC MEAN OF COMPARABLES AT -3%. THE TRANSFER PRICING OFFICER ASKED THE ASSESSEE TO FILE UPDATED PLI OF C OMPARABLES USING THE DATA OF ONLY ASSESSMENT YEAR 2008-09. THE TPO REJEC TED M/S PUNJAB COMMUNICATION LTD. AS COMPARABLE BECAUSE IT WAS A L OSS MAKING COMPANY AND THE LOSS FOR THE YEAR UNDER CONSIDERATI ON HAS BEEN REPORTED AT 66.96% APART FROM THE LOSSES IN THE EARLIER YEAR S. THE TPO PROPOSED TO ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 9 INCLUDE M/S GEMINI COMMUNICATION LTD. AS A COMPARAB LE. THE ASSESSEE HAS RAISED STRONG OBJECTION AGAINST THE EXCLUSION O F PUNJAB COMMUNICATION LTD. AND INCLUSION OF M/S GEMINI COMM UNICATION LTD. AS COMPARABLE. THE TPO REJECTED THE OBJECTION RAISED B Y THE ASSESSEE AND DETERMINATION THE ALP BY TAKING INTO CONSIDERATION THREE COMPARABLES INCLUDING M/S GEMINI COMMUNICATION LTD. AS ADDED BY THE TPO AND ARRIVED AT THE ARITHMETIC MEAN OF THE COMPARABLES A T 17.87% IN COMPARISON TO THE ASSESSEES PROFIT MARGIN AT 8%. A CCORDINGLY THE TPO MADE AN ADJUSTMENT AT ` 13 41 37 029/-. AFTER RECEI VING THE ORDER OF THE TRANSFER PRICING OFFICER THE AO ISSUED A DRAFT ASSE SSMENT ORDER INTER ALIA PROPOSED TO MAKE AN ADDITION OF ` 13 41 37 029/- ON ACCOUNT OF TP ADJUSTMENT. THE ASSESSEE FILED OBJECTIONS BEFORE DR P AGAINST THE DRAFT ASSESSMENT ORDER. THE DRP WHILE PASSING THE DIRECTI ONS DATED 27.9.2012 HAS GRANTED PARTIAL RELIEF TO THE ASSESSEE BY ACCEP TING M- TELECOMMUNICATION INNOVATIONS LTD. AS COMPARABLE AN D THEREBY DIRECTED THE TPO TO RE-COMPUTE THE ALP ON THE BASIS OF THE F OUR COMPARABLES INCLUDING M-TECH INNOVATIONS. HOWEVER THE DRP HAS REJECTED THE OBJECTIONS OF THE ASSESSEE AGAINST THE EXCLUSION OF PUNJAB COMMUNICATION LTD. (PCL) AND INCLUSION OF GEMINI COMMUNICATION LT D. IN THE LIST OF COMPARABLES. THE OTHER OBJECTIONS/GROUNDS RAISED BY THE ASSESSEE REGARDING WORKING CAPITAL ADJUSTMENT SINGLE YEAR D ATA AS AGAINST MULTIPLE YEAR DATA OBJECTION AGAINST CONSIDERING THE DATA B Y THE TPO WHICH WERE NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF PREPAR ING THE TRANSFER PRICING REPORT BENEFIT OF PROVISO TO SECTION 92C(2) NOT R ESTRICTING THE ADJUSTMENT ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 10 TO THE INCOME FROM INTERNATIONAL TRANSACTIONS ONLY AND NOT ACCEPTING THE GROUND OF THE ASSESSEE THAT THE PARENT ENTITY/AE HA S BEEN CONSISTENTLY SUFFERING FROM OPERATION LOSSES WERE REJECTED BY TH E DRP. 10. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE TPO HAS INCLUDED M/S GEMINI COMMUNICATION AS COMPARABLE WHI LE DETERMINING THE ALP DESPITE THE OBJECTION OF THE ASSESSEE THAT THE SAID COMPANY IS IN A DIFFERENT BUSINESS AND THEREFORE DUE TO DIFFERENCE IN THE BUSINESS PROFILE IT CANNOT BE CONSIDERED AS A GOOD COMPARABLE. HE HAS R EFERRED THE AUDIT REPORT OF GEMINI COMMUNICATION AND SUBMITTED THAT T HE SAID COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SOLUTION FOR T ELECOM COMPANIES MANAGING AND MAINTENANCE THEIR NETWORK TO THEIR CUS TOMERS AND THEREFORE THE SAID COMPANY IS IN THE BUSINESS OF PR OVIDING SERVICES AND NOT IN MANUFACTURING ACTIVITY. THE SERVICE PORTFOLI O OF THE SAID COMPANY IS TO DESIGN SERVICES CONSULTANCY INSTALLATION & IMP LEMENTATION OF SERVICE AND TO MAINTAIN IN THE AREA OF SECURITY STORAGE N ETWORK MANAGEMENT AND IT INFRASTRUCTURE ETC. THUS THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT M/S GEMINI COMMUNICATION IS FUNCTIONALLY DIFFE RENT FROM THE ASSESSEE AND THEREFORE CANNOT BE CONSIDERED AS A COMPARABL E FOR THE PURPOSE OF BENCH-MARKING THE INTERNATIONAL TRANSACTION. HE HAS FURTHER SUBMITTED THAT THE SAID COMPANY HAS OTHERWISE EARNED THE PROF IT OF 28.07% WHICH IS SUPER NORMAL IN COMPARISON TO THE ASSESSEES PROFIT . THEREFORE THE SAID COMPANY CANNOT BE INCLUDED IN THE COMPARABLES DUE T O THE SUPER NORMAL PROFIT. HE HAS RELIED UPON THE DECISION OF THE BANG ALORE BENCHES IN THE CASE OF GENISYS INTEGRATING SYSTEMS (INDIA) PVT. LT D. REPORTED IN 15 ITR ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 11 475. HE HAS ALSO RELIED UPON THE DECISION OF THIS T RIBUNAL IN CASE OF TEVE INDIA PVT. LTD. V DCIT REPORTED IN 57 DTR 212 AND S UBMITTED THAT THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE COMPA NIES HAVING SUPER NORMAL PROFIT SHOULD BE EXCLUDED FROM THE COMPARABL ES. 11. THE LD. AR HAS FURTHER SUBMITTED THAT M/S PUNJA B COMMUNICATION LTD. (PCL) HAS BEEN EXCLUDED BY THE TPO FROM THE CO MPARABLES ON THE GROUND THAT THE SAID COMPANY HAS SUFFERED LOSSES. H E HAS CONTENDED THAT NO COMPARABLE CAN BE REJECTED SOLELY ON THE GROUND OF SUFFERING LOSSES. THUS THE REJECTION OF THE PUNJAB COMMUNICATION LTD . ON THE BASIS OF THE FINANCIAL INFORMATION OF A SINGLE YEAR IS NOT JUSTI FIED. THE TPO HAS NOT POINTED OUT ANY SPECIFIC REASON BEING ABNORMAL DUE TO WHICH THE PUNJAB COMMUNICATION LTD. HAS SUFFERED LOSSES AND THEREFOR E CANNOT BE CONSIDERED AS A COMPARABLE. 12. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THA T M/S GEMINI COMMUNICATION IS IN THE BUSINESS OF TELECOM SOLUTIO N AND SERVICES WHICH IS SIMILAR TO THE BUSINESS OF THE ASSESSEE. HE HAS REFERRED THE PROFIT AND LOSSES ACCOUNT OF GEMINI COMMUNICATION AT PAGE NO. 131-132 OF THE PAPER BOOK AND SUBMITTED THAT THE MAJOR EXPENDITURE BOOKED BY THE SAID COMPANY PERTAINS TO THE COST OF MATERIAL WHICH SHOW S THAT THE SAID COMPANY WAS ALSO ENGAGED IN THE ACTIVITY OF PRODUCT ION/MANUFACTURING BECAUSE IN THE BUSINESS OF SERVICE THE COST OF MAT ERIAL DOES NOT CONTRIBUTE TO THE MAJOR PART OF THE EXPENDITURE. HE HAS FURTHER POINTED OUT THAT THE SAID COMPANY HAS THE INCOME DUE TO EXCHANG E RATE DIFFERENCE TO ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 12 THE TUNE OF ` 528.53 LACS DURING THE YEAR UNDER CON SIDERATION WHICH IS ALSO IN THE CASE OF THE ASSESSEE AS THE ASSESSEE HAS AL SO EARNED PROFIT OF FOREIGN EXCHANGE FLUCTUATION TO THE TUNE OF ` 155 L ACS DURING THE YEAR UNDER CONSIDERATION. THUS THE LD. DR HAS SUBMITTED THAT GEMINI COMMUNICATION IS FUNCTIONALLY SIMILAR TO THE ASSESS EE AND THEREFORE IS A GOOD COMPARABLE FOR BENCH MARKING THE INTERNATIONAL TRANSACTION OF THE ASSESSEE. HE HAS FURTHER CONTENDED THAT WHEN THE G EMINI COMMUNICATION IS OTHERWISE FUNCTIONALLY COMPARABLE WITH THE ASSESSEE THEN IT CANNOT BE EXCLUDED ONLY ON THE BASIS OF HIG H PROFIT MARGIN. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DE CISION OF THIS TRIBUNAL DATED 1.3.2013 IN CASE OF WILLIS PROCESSING SERVICE S (I) PVT. LTD. VS DCIT IN ITA NO. 4547 & 4429/M/2012. HE HAS ALSO RELIED UPON THE ORDER OF THE TRANSFER PRICING OFFICER. AS REGARDS THE PUNJAB COM MUNICATION LTD. THE LD. DR HAS POINTED OUT THAT THIS COMPANY IS A PERSISTEN T LOSS MAKING COMPANY AS EVIDENT FROM THE DATA FILED BY THE ASSES SEE AT PAGE NO. 70 OF PAPER BOOK AND BACK SIDE WHERE THE DETAILS OF FINAN CIAL RESULTS FROM THE YEAR 2001-02 TO 2007-08 ARE GIVEN. THE LD. DR HAS S UBMITTED THAT THE COMPANY HAS SHOWN LOSS FOR LAST 4 YEARS. THEREFORE THIS COMPANY IS PERSISTENT LOSS MAKING COMPANY AND CANNOT BE CONSID ERED AS A COMPARABLE FOR THE PURPOSE OF DETERMINING OF ALP. I N SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL DATED 8.5.2013 IN CASE OF ADVANCE POWER DISPLAY SYSTEMS LTD. VS AC IT IN ITA NO. 6732 & 6542/M/2011. ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 13 13. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS THE RELEVANT MATERIAL ON RECORD. DURING THE YEAR UNDER CONSIDERA TION THE ASSESSEE HAS ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS AS MENTIONED IN FOREGOING PARA NO. 5 OF THIS ORDER. THE ASSESSEE HAS BENCH MA RKED ITS INTERNATIONAL TRANSACTIONS BY USING TNMM AS MOST APPROPRIATE METH OD AND TAKING THE PROFIT LEVEL INDICATOR (PLI) AS OPERATING PROFIT/TO TAL COST (OP/TC). THE ASSESSEE SELECTED THREE COMPARABLES AND DETERMINATI ON THE ARITHMETIC MEAN AT -3% BY USING MULTIPLE YEAR DATA AS UNDER: SL. NO. NAME OF COMPARABLE COMPANY PLI AS PER TP REPORT (%) UPDATED PLI FOR FY 2007-08 (%) 1. PUNJAB COMMUNICATION LTD. -23 -66.69 2. VALIANT COMMUNICATIONS LTD. 6 5.98 3. X L TELECOM AND ENERGY LTD. 7 6.12 ARITHMETIC MEAN -3 -18.19 14. THE TPO ASKED THE ASSESSEE TO UPDATE THE DATA F OR A SINGLE CURRENT YEAR AND FURTHER PROPOSED TO EXCLUDE PUNJAB COMMUNI CATION LTD. (PCL) FROM THE COMPARABLE ON THE GROUND THAT IT IS A LOSS MAKING COMPANY AND IN PLACE THE TPO PROPOSE TO INCLUDE GEMINI COMMUNIC ATION AS COMPARABLE. THUS THE TPO HAS COMPUTED THE ARITHMETI C MEAN OF THE OPERATING MARGIN OF THE COMPARABLES AT 17.87% AS UN DER: SL. NO. NAME OF COMPARABLE COMPANY UPDATED PLI FOR FY 2007-08 (%) 1. VALIANT COMMUNICATIONS LTD. 13.01 2. X L TELECOM AND ENERGY LTD. 12.54 3. GEMINI COMMUNICATIONS LTD. 28.07 ARITHMETIC MEAN 17.87 ASSESSEE 8 ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 14 15. THERE IS NO DISPUTE AS REGARDS THE COMPARABLE N AMELY VALIANT COMMUNICATIONS LTD. AND X L TELECOM AND ENERGY LTD. AT SERIAL NO. 1-2 OF THE ABOVE TABLE. THE ASSESSEE IS AGGRIEVED BY THE A CTION OF THE TPO IN REJECTING THE PCL AND INCLUSION OF GEMINI COMMUNICA TION LTD. THE OBJECTION AGAINST THE GEMINI COMMUNICATION LTD. WAS RAISED BY THE ASSESSEE ON THE GROUND THAT THE SAID COMPANY IS HAV ING A SUPER NORMAL PROFIT AT 28.07%. WE DO NOT AGREE WITH THE CONTENTI ON OF THE ASSESSEE THAT THE PROFIT AT 28.07% IS A SUPER NORMAL BECAUSE THE DECISION RELIED UPON BY THE ASSESSEE IN SUPPORT OF ITS CONTENTION A RE BASED ON THE FACT WHERE THE PROFIT OF THE COMPARABLE AS NOTED BY THE TRIBUNAL WAS RANGING FROM 50% TO 100% AND IN THOSE CIRCUMSTANCES THE TRI BUNAL HELD THAT THE CASES WHERE EXCEPTIONAL PROFIT HAS BEEN EARNED AND TERMED AS SUPER NORMAL PROFIT SHOULD BE EXCLUDED FROM THE COMPARABL ES. THEREFORE WHEN THE PROFIT IN CASE OF GEMINI COMMUNICATION DOES NOT FALL IN THE CATEGORY OF SUPER NORMAL THEN MERELY BECAUSE OF HIGH PROFITS MA RGIN CANNOT BE A FACTOR FOR EXCLUSION FROM PROPOSED COMPARABLES UNTI L AND UNLESS THE EXTREME RESULTS OF A CASE ARE AS A RESULT OF EXCEPT IONAL CONDITIONS EXIST. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORD INATE BENCH OF THIS TRIBUNAL IN CASE OF WILLIS PROCESSING SERVICES (I) PVT. LTD. VS DCIT (SUPRA) AND ONE OF US JUDICIAL MEMBER IS THE PARTY TO THE S AID DECISION. IN THE SAID CASE THE TRIBUNAL HAS DECIDED THE ISSUE IN PARA 34. 4-34.8 AS UNDER: 34.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE FACTOR S FOR DETERMINING INCLUSION OR EXCLUSION OF ANY CASE IN T HE LIST OF COMPARABLES ARE SPECIFICALLY PROVIDED UNDER RULE 10 3(2). THEREFORE UNLESS AND UNTIL THERE ARE SPECIFIC REAS ONS AND ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 15 FACTORS AS PROVIDE UNDER THE RULE LOB AN ENTITY CA NNOT BE EXCLUDED OR ELIMINATED FROM THE LIST OF COMPARABLES SOLELY ON THE BASIS OF HIGH PROFIT MAKING UNIT OR LOSS MAKING UNIT BECAUSE NO SUCH FACTOR FINDS PLACE EITHER IN RULE 1OB(2) OR 103 (3) OF IT RULE. 34.5 EVEN AS PER OECD TP GUIDELINES THE EXTREME RE SULTS MIGHT CONSIST OF LOSSES OR UNUSUALLY HIGH PROFITS I TSELF CANNOT BE A FACTOR FOR POTENTIAL COMPARABLES; BUT FURTHER EXA MINATION WOULD BE NEEDED TO UNDERSTAND THE REASONS FOR SUCH EXTREME RESULTS. IF SOME REASONS ARE DETECTED WHICH INDICAT E A DEFECT IN THE COMPARABILITY OR EXCEPTIONAL CONDITIONS FOR SUC H AN EXTREME RESULTS THEN ONLY THE CASE MAY BE EXCLUDED FROM TH E PROPOSED COMPARABLES. THE CONCLUDING REMARKS GIVEN UNDER THE OECD TP GUIDELINES IN PARA 3.65 & 3.66 ARE AS UNDER: 3.65 GENERALLY SPEAKING A LOSS-MAKING UNCONTROLLE D TRANSACTION SHOULD TRIGGER FURTHER INVESTIGATION IN ORDER TO ESTABLISH WHETHER OR NOT IT CAN BE A COMPARABLE. CIRCUMSTANCES IN WHICH LOSS-MAKING TRANSACTIONS! ENTERPRISES SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLES INCLUDE CASES WHERE LOSSES DO NOT REFLE CT NORMAL BUSINESS CONDITIONS AND WHERE THE LOSSES INCURRED BY THIRD PARTIES REFLECT A LEVEL OF RISKS THAT IS NOT COMPARABLE TO THE ONE ASSUMED BY THE TAXPAYER IN IT S CONTROLLED TRANSACTIONS. LOSS-MAKING CORN PARABLES THAT SATISFY THE COMPARABILITY ANALYSIS SHOULD NOT HOWEV ER BE REJECTED ON THE SOLE BASIS THAT THEY SUFFER LOSSES. 3.66 A SIMILAR INVESTIGATION SHOULD BE UNDERTAKEN F OR POTENTIAL CORN PARABLES RETURNING ABNORMALLY LARGE PROFITS RELATIVE TO OTHER POTENTIAL CORN PARABLES. THUS IT IS CLEAR THAT EVEN THE LOSS MAKING OR HIGH PROFIT MAKING COMPARABLES THAT SATISFY COMPARABILITY ANALY SIS SHOULD NOT BE REJECTED ON THE SALE BASIS THAT THEY SUFFERS LOSS OR EARNED HIGH PROFIT. 34.6 IN THE CASE OF EXMXON MOBIL COMPANY INDIA P LT D (SUPRA) THE TRIBUNAL HAS DISCUSSING THE ISSUE IN PARA 31 (( XI) AS UNDER: (XI) NOW COMING TO THE ALTERNATIVE ARGUMENTS OF T HE ASSESSEE THAT ABNORMAL PROFIT MAKING UNIT IS ALSO T O BE ELIMINATED ON THE SAME ANALOGY ON WHICH LOSS MAKING UNITS ARE EXCLUDED WE IN PRINCIPLE DO NOT DISPUT E THIS PROPOSITION. THE VARIOUS CASE LAWS RELIED UPON BY T HE ASSESSEE LAY DOWN THAT A COMPARABLE CANNOT BE ELIMINATED JUST BECAUSE IT IS A LOSS MAKING UNIT. S IMILARLY A HIGHER PROFIT MAKING UNIT CANNOT ALSO BE AUTOMATI CALLY ELIMINATED JUST BECAUSE THE COMPARABLE COMPANY EARN ED ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 16 HIGHER PROFITS THAN THE AVERAGE. THE REASON FOR REJ ECTING THE TWO LOSS MAKING UNITS IS NOT JUST BECAUSE THEY WERE LOSS MAKING UNITS BUT FOR THE REASONS WHICH ARE ALR EADY STATED IN THE PRECEDING PARAGRAPHS. IF SIMILAR REAS ONS EXISTED IN THE HIGHER PROFIT MAKING UNIT THEN IT IS FOR THE ASSESSEE TO BRING OUT THOSE REASONS AND SEEK EXCLUS ION OF THE SAME. A GENERAL ARGUMENT THAT YOU HAVE TO EXCL UDE UNITS WHICH HAVE HIGH PROFIT RANGE IN CASE YOU EXC LUDE UNITS WHICH HAVE MADE LOSS IS A GENERAL SUBMISSION WHICH CANNOT BE ACCEPTED. IN OTHER WORDS AS A GENERAL PRINCIPLE BOTH LOSS MAKING UNIT AND HIGH PROFIT MA KING UNIT CANNOT BE ELIMINATED FROM THE CORN PARABLES UN LESS THERE ARE SPECIFIC REASONS FOR ELIMINATING THE SAME WHICH IS OTHER THAN THE GENERAL REASON THAT A COMPARABLE HAS INCURRED LOSS OR HAS MADE ABNORMAL PROFITS. THUS T HIS GROUND IS DISMISSED. 34/6 SIMILARLY IN THE CASE OF M/S B P INDIA SERVICE S P LTD (SUPRA) THE COORDINATE BENCHES OF THIS TRIBUNAL HAS ADJUDIC ATED THIS ISSUE IN PARA 1.2.6 AS UNDER: 12.6. THUS IT IS EVIDENT THAT THE DECISIVE FACTORS FOR DETERMINING INCLUSION OR EXCLUSION OF ANY CASE IN/F ROM THE LIST OF CAM PARABLES ARE THE SPECIFIC CHARACTERISTI CS OF SERVICES PROVIDED ASSETS EMPLOYED RISKS ASSUMED THE CONTRACTUAL TERMS AND CONDITIONS PREVAILING INCLUDI NG THE GEOGRAPHICAL LOCATION AND SIZE OF THE MARKETS COST S OF LABOUR AND CAPITAL IN THE MARKETS ETC. NOWHERE THE HIGHER OR LOWER PROFIT RATE AS PRESUMED BY THE ID. CIT(A). HAS BEEN PRESCRIBED AS THE DETERMINATIVE FACTOR TO MAKE A CASE INCOMPARABLE RIGHTLY SO BECAUSE PROFIT IS NOT A FACTOR IN ITSELF BUT CONSEQUENCE OF THE EFFECT OF VARIOUS FACTORS. ONLY IF THE HIGHER OR LOWER PROFIT RATE RE SULTS ON ACCOUNT OF THE EFFECT OF FACTORS GIVEN IN RULE 1OB( 2) READ WITH SUB-RULE (3) THAT SUCH CASE SHALL MERIT OMISS ION. IF HOWEVER SUCH EXTREME PROFIT RATE IS ACHIEVED BECAUS E OF FACTORS OTHER THAN THOSE GIVEN IN THE RULE THEN SU CH CASE WOULD CONTINUE TO FIND ITS PLACE IN THE LIST OF COR N PARABLES. 34.7 THE FINDINGS OF THE COORDINATE BENCHES OF THIS TRIBUNAL REFERRED ABOVE ARE CLEAR ON THIS POINT THAT INCLUSI ON AND EXCLUSION OF THE COMPARABLES CANNOT BE DECIDED ON T HE BASIS OF THE FACTORS OTHER THAN THE FACTOR SPECIFIED UNDER R ULE 1OB(2). HENCE IN VIEWS OF THE ABOVE DISCUSSION WE DO NOT A CCEPT THE OBJECTIONS OF THE ASSESSEE THAT BECAUSE OF THE ABNO RMAL PROFIT MARGIN THIS COMPANY SHOULD BE REJECTED AS A COMPARA BLE. ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 17 34.8 SIMILAR VIEW HAS BEEN TAKEN BY THIS TRIBUNAL I N THE CASE OF NET LINX INDIA P LTD (SUPRA) AND STREAM INTERNATION AL SERVICES P LTD (SUPRA) WHEREIN IT WAS HELD THAT COMPARABLES CA NNOT BE DELETED ON THE GROUND OF HIGH MARGIN. 16. WE DO FULLY AGREE WITH THE VIEW TAKEN BY THE CO ORDINATE BENCH IN THE ABOVE CASE AND ACCORDINGLY HOLD THAT A COMPARAB LE CANNOT BE REJECTED MERELY ON THE GROUND OF HIGH MARGIN. 17. THE ANOTHER OBJECTION OF THE ASSESSEE AGAINST T HE INCLUSION OF GEMINI COMMUNICATION AS A COMPARABLE IS FUNCTIONAL NON-COMPARABILITY. THE DRP HAS DEALT WITH THIS OBJECTION OF THE ASSESS EE IN PARA NO. 12 13 AS UNDER: 12. AS REGARDS GEMINI COMMUNICATION LTD. AS COMPA RABLE OF THE ASSESSEE THE TPO HAS MENTIONED IN HIS ORDER TH AT GEMINI COMMUNICATION WAS THROWN UP AMONG THE LIST OF THE COMPARABLES IN THE STUDY CONDUCTED BY THE ASSESSEE . SINCE IT HAS SURVIVED THE ACCEPT/REJECT MATRIX IN THE SEARCH PROCESS CONDUCTED BY THE ASSESSEE IT SHOULD BE ACCEPTED AS COMPARABLE. THE COMPARABLE HAD BEEN REJECTED BY THE ASSESSEE ON QUALITATIVE ANALYSIS. IN HIS VIEW SINC E TNMM IS A STUDY WHERE BROAD SIMILARITY OF FUNCTIONS ARE REQUI RED. GEMINI COMMUNICATION LTD. COULD BE SELECTED AS COMPARABLE SINCE IT IS IN THE BUSINESS OF TELECOMMUNICATION SERVICES LTD. THE ASSESSEE HOWEVER HAS VEHEMENTLY ARGUED THAT GEMIN I COMMUNICATION WAS NOT THROWN UP IN THE ACCEPT/REJEC T MATRIX STUDY CONDUCTED BY THE ASSESSEE. THE OBSERVATION OF THE TPO IS BASICALLY WRONG ON FACTS. IT WAS POINTED OUT BY THE ASSESSEE THAT A LETTER DT. 3.8.2011 HAD BEEN FILED WITH ANNE XURES SHOWING THE ENTIRE LONG LIST OF COMPANIES THROWN UP IN THE SEARCH BY THE ASSESSEE FROM BOTH THE CAPITALINE AND PROWESS DATABASES. 13. EXAMINATION OF THE COPY OF ANNEXURES FILED IN THE PAPER BOOK FILED BY THE ASSESSEE REVEALS THAT THE NAME OF GEMINI COMMUNICATION IS NOT INCLUDED IN BOTH THE LIST. THE ISSUE HOWEVER IS NOT WHETHER IT WAS THROWN UP BY THE ASSE SSEES STUDY BUT WHETHER IT IS COMPARABLE IN FUNCTION AND OTHER VARIABLES OF THE ASSESSEE. ON THIS ISSUE THE ASSESS EE HAS ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 18 QUOTED FROM THE ANNUAL REPORT OF THE COMPANY WHICH STATES THAT THE COMPANY IS ENGAGED INTO NETWORKING SERVICE S SECURITY SOLUTIONS NET WORK MANAGEMENT LAN/WAN NETWORK SE ARCH & STORAGE. GEMINI CONSULTANTS ARE CENTERED ON INFRAST RUCTURE AND MANAGEMENT. BROADLY IT CAN BE SATED THAT GEMINI COMMUNICATION IS A COMPANY IN THE FIELD OF TELECOM SOLUTIONS SIMILAR TO THAT OF THE ASSESSEE FOR THE PURPOSE OF TNMM ANALYSIS. 18. IT IS CLEAR FROM THE FINDINGS OF THE DRP THAT M /S GEMINI COMMUNICATION WAS PART OF THE TP STUDY OF THE ASSES SEE BUT WHILE SELECTING THE COMPARABLES THE ASSESSEE HAS NOT INCL UDED THE SAID COMPANY IN THE LIST OF COMPARABLES WITHOUT GIVING A NY SPECIFIC REASONS FOR NOT INCLUDING IN THE COMPARABLE LIST. THUS THE ASS ESSEE HAS NOT EXPLAINED ANY REASON IN THE TP STUDY FOR NON-INCLUSION OF GEM INI COMMUNICATION IN THE LIST OF COMPARABLES. THOUGH THE ASSESSEE HAS R AISED AN OBJECTION BEFORE THE DRP THAT THE SAID COMPANY IS IN A DIFFER ENT BUSINESS WHICH INCLUDES SERVICES AND SOLUTION OF VARIOUS NATURES T O TELECOM COMPANIES. THE LD. DR ON THE OTHER HAND POINTED OUT THAT THE SAID COMPANY HAS SHOWN COST OF MATERIAL IN THE PROFIT AND LOSS ACCOU NT WHICH HAS BEEN COUNTERED BY THE LD. AR BY REFERRING THE NOTES ON A CCOUNT AND THE ANNUAL REPORT TO SHOW THAT THE COST OF MATERIAL RELATES TO THE VALUE OF IMPARTED MATERIAL CONSUMED IN PROVIDING SERVICES. ALL THESE ASPECTS HAVE NOT BEEN EXAMINED BY THE AUTHORITIES BELOW WHILE DECIDING TH E ISSUE OF COMPARABILITY BECAUSE THE MAIN THRUST OF THE ARGUME NT OF THE ASSESSEE AGAINST THE INCLUSION OF GEMINI COMMUNICATION WAS S UPER NORMAL PROFIT EARNED BY THE SAID COMPANY. THEREFORE NEITHER THE GROUND OF FUNCTIONAL NON-COMPARABILITY WAS SERIOUSLY RAISED BY THE ASSES SEE NOR IT WAS PROPERLY EXAMINED BY THE AUTHORITIES BELOW. ACCORDI NGLY IN THE INTEREST OF ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 19 JUSTICE WE SET ASIDE THIS ISSUE OF FUNCTIONAL COMPA RABILITY OF M/S GEMINI COMMUNICATION TO THE RECORD OF THE TPO FOR PROPER E XAMINATION AND ADJUDICATION. WE MAY CLARIFY THAT IF ONLY A SEGMENT OF THE BUSINESS OF M/S GEMINI COMMUNICATION IS FOUND AS COMPARABLE TO THE ASSESSEE THEN THE SEGMENTAL RESULTS MAY BE CONSIDERED FOR DETERMINATI ON OF ALP. 19. AS REGARDS EXCLUSION OF PUNJAB COMMUNICATION L TD. WE FIND FROM THE RECORD THAT THE SAID COMPANY IS A PERSISTENT LO SS MAKING COMPANY. THE FINANCIAL DETAILS GIVEN AT THE BACK SIDE OF PAG E NO. 70 OF THE PAPER BOOKS SHOW THAT FOR THE LAST FOUR YEARS THIS COMPAN Y HAS BEEN CONSISTENTLY SUFFERING LOSS. THE PERSISTENCE LOSS F ROM YEAR AFTER YEAR ITSELF SHOWS EXISTENCE OF EXCEPTIONAL AND EXTREME CIRCUMST ANCES AND THEREFORE IS A GOOD REASON FOR EXCLUSION OF THE COMPANY FROM COMPARABLES. THERE IS A CONSISTENCE VIEW OF THIS TRIBUNAL ON THIS POINT T HAT A COMPANY SHOWING PERSISTENT LOSSES FROM YEAR AFTER YEAR CANNOT BE CO NSIDERED AS A GOOD COMPARABLE FOR THE PURPOSE OF DETERMINATION OF ALP. IN THE CASE OF ADVANCE POWER DISPLAY VS ACIT (SUPRA) ONE OF US THE JUDICIAL MEMBER IS A PARTY TO THE SAID DECISION HAS TAKEN A SIMILAR VIEW IN PARA 10.2 AS UNDER: 10.2 EVEN OTHERWISE WHEN THE COMPARABILITY OF THE CASE HAS TO BE TESTED INDEPENDENTLY FOR EACH YEAR THEN WITHOUT EXAMINATION OF THE COMPARABILITY NO CASE CAN BE AC CEPTED AS A COMPARABLE SOLELY ON THE BASIS THAT IT HAS BEEN AC CEPTED AS COMPARABLE IN THE SUBSEQUENT YEAR. FROM THE ANNUAL REPORT OF THE COMPANY M/S BCC FUBA INDIA LTD. IT IS CLEAR TH AT THIS COMPANY IS SHOWING PERSISTING LOSS FROM YEAR AFTER YEAR AND THEREFORE IN VIEW OF THE SERIES OF DECISIONS OF TH IS TRIBUNAL ON THE POINT THAT PERSISTING LOSS MAKING COMPANY CANNO T BE CONSIDERED AS A GOOD COMPARABLE FOR THE PURPOSE OF DETERMINATION OF THE ALP. ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 20 20. IN VIEW OF THE ABOVE DISCUSSION AND FACT AND CI RCUMSTANCES OF THE CASE WE HOLD THAT THE PUNJAB COMMUNICATION LTD. WHI CH IS SUFFERING PERSISTENCE LOSS YEAR AFTER YEAR FOR LAST FOUR YEAR S CANNOT BE CONSIDERED AS GOOD COMPARABLE FOR THE PURPOSE OF DETERMINATION OF ALP. 21. GROUND NO. 7 IS REGARDING NOT CONSIDERING M/S I COMM TELE LTD. AS COMPARABLE BY THE DRP. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE SELECTED TWO ALTERN ATIVE COMPARABLE NAMELY ICOMM TELE LTD. AND M-TECH INNOVATIONS LTD. THE DRP WHILE CONSIDERING THE ISSUE HAS ACCEPTED M-TECH INNOVATIO NS LTD. AS COMPARABLE BUT IGNORED M/S ICOMM TELE LTD. WITHOUT GIVING ANY REASON. THUS THE LD. AR HAS SUBMITTED THAT WHEN NO REASON HAS BEEN GIVEN BY THE DRP FOR NON-INCLUSION OF ICOMM TELE LTD. THE SA ME MUST BE CONSIDERED AS A COMPARABLE FOR DETERMINATION OF ALP. 22. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THA T M/S ICOMM TELE LTD. IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE AS THE SAID COMPANY IS IN THE BUSINESS OF VARIOUS DIFFERENT SEGMENTS NAMELY T ELECOM POWER INFRASTRUCTURE FOR POWER & TELECOM WATER & WASTE W ATER AND OIL & GAS. HE HAS FURTHER SUBMITTED THAT EVEN UNDER TELECOM SE GMENTS THE SAID COMPANY IS INVOLVED IN DESIGNING ENGINEERING PROC UREMENT AND ERECTION OF TELECOM TOWERS AND TELECOM SHELTERS. THEREFORE THE BUSINESS PROFILE OF THE SAID COMPANY IS TOTALLY DIFFERENT FROM THE ASSE SSEE. THE LD. DR HAS ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 21 FILED THE DETAILS TAKEN FROM THE WEBSITE OF ICOMM T ELE LTD. IN SUPPORT OF HIS CONTENTION. 23. HAVING CONSIDERED THE RIVAL SUBMISSION AND CARE FULLY GONE THROUGH THE RELEVANT MATERIAL WE FIND THAT THE DRP WHILE D ECIDING THE ISSUE OF INCLUSION OF COMPARABLES PROPOSED BY THE ASSESSEE N AMELY ICOMM TELE LTD. AND M-TECH INNOVATIONS LTD. HAS ACCEPTED M-TEC H INNOVATIONS LTD. AS COMPARABLES. HOWEVER THERE IS NO DISCUSSION IN THE IMPUGNED ORDER OF THE DRP ABOUT THE ICOMM TELE LTD. THEREFORE THE CO MPARABILITY OF ICOMM TELE LTD. HAS TO BE CONSIDERED IN VIEW OF THE RELEV ANT FACTS. AS IT IS EVIDENT FROM THE RECORD PRODUCED BY THE LD. DR THAT THE SAI D COMPANY IS IN THE BUSINESS WHICH IS DIVIDED IN VARIOUS SEGMENTS AND O NE OF WHICH IS TELECOM. THEREFORE THE TELECOM SEGMENT IS ONLY A P ART OF THE BUSINESS AND EVEN IN THE TELECOM SEGMENT M/S ICOMM TELE LTD. IS INVOLVED IN DESIGNING ENGINEERING PROCUREMENT AND ERECTION OF TELECOM TOWERS TELECOM SHELTERS AND RELATED PASSIVE EQUIPMENTS SUC H AS DIESEL GENERATOR SETS SWITCH MODE POWER SUPPLIES BATTERI ES AND AC. IT IS MANIFEST FORM THE BUSINESS PROFILE OF M/S ICOMM TEL E LTD. THAT THE SAID COMPANY IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE WHICH IS IN THE BUSINESS OF MANUFACTURING OF SIM CARDS. ACCORDINGLY WE HOLD THAT M/S ICOMM TELE LTD. CANNOT BE CONSIDERED AS A COMPARABL E OF THE ASSESSEE FOR THE PURPOSE OF DETERMINATION OF ALP. 24. GROUND NO. 8 IS REGARDING INCORRECT MARGINS OF THE ASSESSEE AND COMPARABLE. AT THE TIME OF HEARING THE LD. AR OF T HE ASSESSEE HAS STATED ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 22 THAT THE ASSESSEE DOES NOT PRESS THIS GROUND AND TH E SAME MAY BE DISMISSED AS NOT PRESSED. THE LD. DR HAS NO OBJECTI ON IF THE GROUND NO. 8 IS DISMISSED AS NOT PRESSED. ACCORDINGLY GROUND NO . 8 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. 25. GROUND NO. 9 IS REGARDING ADJUSTMENT FOR DIFFER ENCE IN WORKING CAPITAL. WE HAVE HEARD THE LD. AR AS WELL AS THE LD . DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS F ILED THE DETAILS OF WORKING CAPITAL ADJUSTMENT AT PAGE NO. 150 OF THE P APER BOOK. WE FIND THAT THE TRANSFER PRICING OFFICER HAS NOT EXAMINED THE DETAILS FOR THE PURPOSE OF WORKING CAPITAL ADJUSTMENT IF ANY TO BE MADE IN RESPECT OF THE COMPARABLES. THE CLAIM OF THE ASSESSEE WAS TURNED O UT BY THE TPO ON THE GROUND THAT IN THE TELECOMMUNICATION INDUSTRY THERE IS LONG GESTATION PERIOD AND THE FLOW OF REVENUE ON SALE IS GENERALLY SLOW AND TARDY. SINCE THE ISSUE HAS NOT BEEN PROPERLY EXAMINED BY THE AUT HORITIES BELOW THEREFORE WE REMIT THIS ISSUE TO THE RECORD OF THE TPO TO PROPERLY EXAMINE THE CLAIM OF THE ASSESSEE VIS-A-VIS THE DETAILS FIL ED BY THE ASSESSEE AND THEN DECIDE THE SAME AS PER LAW. 26. GROUND NO. 10 IS REGARDING USING SINGLE YEAR DA TA AS AGAINST MULTI YEAR USED BY THE ASSESSEE. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. IN ORDER TO DETERMINE THE ARMS LENGTH PRICE IN RELATION TO THE INTERNATI ONAL TRANSACTION IT HAS TO BE COMPARED WITH UNCONTROLLED AND UNRELATED TRANSAC TION BY USING THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE IN TERNATIONAL TRANSACTION ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 23 HAS BEEN ENTERED INTO. IT IS STIPULATED UNDER RULE 10B(4) R.W.S RULE 10D(4) THAT CONTEMPORANEOUS INFORMATION AND DOCUMENTS SHOU LD BE CONSIDERED AS FAR AS POSSIBLE FOR THE PURPOSE OF COMPARING UNC ONTROLLED TRANSACTION WITH THE INTERNATIONAL TRANSACTION. THEREFORE THE COMPARABILITY OF AN UNCONTROLLED AND UNRELATED TRANSACTION WITH THE INT ERNATIONAL TRANSACTION HAS TO BE TESTED BY USING CURRENT YEAR DATA. ONLY W HEN THE CURRENT YEAR DATA DOES NOT GIVE A TRUE PICTURE OF THE AFFAIRS AN D RESULTS OF THE COMPARABLES DUE TO EXISTENCE OF SOME ABNORMAL CIRCU MSTANCES THE MULTI YEAR DATA CAN BE CONSIDERED. WHEN THERE IS NO SUCH ABNORMAL OR EXCEPTIONAL CIRCUMSTANCES/FACTS EXIST FOR THE YEAR UNDER CONSIDERATION WHICH COULD HAVE AN INFLUENCE ON THE RESULTS AS WEL L AS ON THE DETERMINATION OF TRANSFER PRICES THAN THE DATA RELA TING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEE N ENTERED INTO SHALL BE USED. ACCORDINGLY WE DO NOT FIND ANY FORCE OR SUBST ANCE IN THIS GROUND OF THE ASSESSEES APPEAL. THE SAME IS DISMISSED. 27. GROUND NO. 11 IS REGARDING CONSIDERING THE DATA NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF PREPARING THE TRANSFER PRIC ING DOCUMENT. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDER ED THE RELEVANT MATERIAL ON RECORD. THE LD. AR HAS CONTENDED THAT T HE CURRENT YEAR DATA USED BY THE TPO WERE NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF THE TP STUDY PREPARED BY THE ASSESSEE. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE DATA WERE AVAILABLE IN THE PUBLI C DOMAIN AND EVEN OTHERWISE WHEN THE TPO HAS DETERMINED THE ARMS LEN GTH PRICE THE DATA WERE VERY MUCH AVAILABLE TO THE ASSESSEE. HE HAS RE LIED UPON THE DECISION ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 24 OF BANGALORE BENCHES OF THIS TRIBUNAL IN CASE OF 24 /7 CUSTOMER COM PVT. LTD. VS DCIT IN ITA NO. 227/BANG/2010 DATED 9.11.20 12. 28. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT RECORD WE FIND THAT AS PER THE PROVISION OF THE SECTION 92C(3) OF THE INCOME TAX ACT THE TRANSFER PRICING OFFICER HAS JURISDICTION/POWER TO COLLECT AND CONSIDER ALL RELEVANT MATERIAL AND INFORMATION APART FROM THE IN FORMATION DOCUMENTS AND DATA PRODUCED BY THE ASSESSEE AS REQUIRED U/S 9 2D(3) TO DETERMINE THE ARMS LENGTH PRICE IN RELATION TO THE INTERNATI ONAL TRANSACTION. IN THE CASE IN HAND THE TPO ASKED THE ASSESSEE TO FURNISH SINGLE YEAR/CURRENT DATA INSTEAD OF MULTI YEAR DATA WHICH WERE FURNISHE D BY THE ASSESSEE. THEREFORE THE SINGLE YEAR DATA TAKEN INTO CONSIDER ATION FOR THE PURPOSE OF DETERMINATION THE ARMS LENGTH PRICE WERE VERY MUCH AVAILABLE IN THE PUBLIC DOMAIN AS WELL AS WITH THE ASSESSEE AT THE T IME OF DETERMINATION OF ALP BY THE TPO. THE BANGALORE BENCHES OF THE TRIBUN AL IN CASE OF 27/7 CUSTOMER COM PVT. LTD. HAS CONSIDERED AND DECIDE AN IDENTICAL IN PARA 8.5 AS UNDER: 8.5 USE OF DATA BY THE TPO AFTER THE CUT OFF DATE. AS REGARDS THE DATA USED BY THE TPO WHILE DETERMIN ING THE ALP WE FIND THAT IT IS TO BE AS PER THE PROVISIONS OF SECTION 92D OF THE ACT THAT EVERY PERSON WHO HAS ENTERED INTO I NTERNATIONAL TRANSACTIONS IS REQUIRED TO MAINTAIN INFORMATION AN D DOCUMENTATION THEREOF. RULE 1OB(4) PROVIDES THAT TH E INFORMATION AND DOCUMENTS AS SPECIFIED UNDER RULE 1 0B(1) AND 10B(2) SHOULD AS FAR AS POSSIBLE BE CONTEMPORANEOUS AND SHOULD EXIST LATEST BY THE SPECIFIED DATE REFERRE D TO IN SECTION 92F(4) WHICH HAS THE SAME MEANING AS DUE DATE IN EXPLANATION 2 TO SECTION 139(1) OF THE ACT. IN THE ASSESSEES CASE THIS WOULD BE 30TH DAY OF SEPTEMBER AS IT I S A COMPANY. IT IS CLEAR AFTER GOING THROUGH THE RELEVANT PROVI SIONS OF LAW THAT THE ACT HAS NOT PROVIDED FOR ANY CUT OFF DATE UP TO WHICH ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 25 ONLY THE INFORMATION IN THE PUBLIC DOMAIN HAS TO BE TAKEN INTO CONSIDERATION BY THE TPO WHILE ARRIVING AT THE ALP OR MAKING TP ADJUSTMENTS. BOTH THE ASSESSEE AND REVENUE BEING BO UND BY THE PROVISION OF THE ACT AND RULES ARE REQUIRED TO TAKE INTO CONSIDERATION CONTEMPORANEOUS DATA RELEVANT TO THE PREVIOUS YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS TAK EN PLACE. THE ASSESSEE IS OBLIGED TO MAINTAIN THE INFORMATION AND DOCUMENTATION AS REQUIRED RELATING TO INTERNATIONAL TRANSACTIONS AS PER THE SPECIFIED DATE SO THAT IT C AN BE MADE AVAILABLE TO THE TPO OR THE ASSESSING OFFICER OR AN Y OTHER AUTHORITY IN ANY PROCEEDINGS UNDER THE ACT. WE ARE THEREFORE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE ACTIO N OF THE TPO IN USING CONTEMPORANEOUS DATA AT THE TIME OF TRANSFER PRICING AUDIT THOUGH THE SAME MAY NOT HAVE BEEN AVAILABLE TO THE ASSESSEE AT THE TIME OF PREPARATION OF STATUTORY TR ANSFER PRICING STUDY / DOCUMENTATION. 29. ACCORDINGLY WE DO NOT FIND ANY ERROR OR ILLEGA LITY IN THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. FURTHER THERE IS N O FETTER ON THE POWERS OF THE TPO IN GATHERING MORE RELEVANT INFORMATION DOC UMENTS ETC. WHILE DETERMINING THE ARMS LENGTH PRICE IN RELATION TO I NTERNATIONAL TRANSACTION. HENCE WE REJECT/DISMISS THIS GROUND OF THE ASSESSE E. 30. GROUND NO. 12 IS REGARDING THE BENEFIT OF PROVI SO TO SECTION 92C(2) OF THE INCOME TAX ACT. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE BENEFIT OF PROVISO TO SECTION 92C(2) IS AVAILABLE ONLY WHEN THE PRICE OF INTERNATIONAL TRANSACTION OF THE ASSESSEE IS WITHIN THE TOLERANCE RANGE OF 5 % OF THE ALP COMPUTED BY TAKING THE ARITHMETIC MEAN OF MORE THAN ONE PRIC E. THUS IT IS CLEAR THAT THE BENEFIT UNDER THE PROVISO TO SECTION 92C(2 ) IS AVAILABLE ONLY AS A TOLERANCE RANGE AND NOT AS A STANDARD DEDUCTION. AC CORDINGLY WE DIRECT THE AO/TPO TO ALLOW THE BENEFIT OF THE PROVISO IF T HE PRICES OF THE ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 26 INTERNATIONAL TRANSACTION OF THE ASSESSEE ARE WITHI N THE TOLERANCE RANGE OF 5% OF THE ARITHMETIC MEAN OF MORE THAN ONE COMPARA BLE PRICES. 31. GROUND NO. 13 IS REGARDING THE ADJUSTMENT ON AC COUNT OF TRANSFER PRICING ONLY TO THE QUANTUM OF THE INTERNATIONAL TR ANSACTIONS OF THE ASSESSEE. WE HAVE HEARD THE LD. AR AS WELL AS THE L D. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO QUARRE L ON THE POINT THAT THE ADJUSTMENT IF ANY ON ACCOUNT OF TRANSFER PRICING SH ALL BE RESTRICTED ONLY TO THE INCOME FROM INTERNATIONAL TRANSACTION AND NOT T O THE INCOME OF THE ASSESSEE AT ENTITY LEVEL. ACCORDINGLY THE AO/TPO IS DIRECT TO RESTRICT THE ADJUSTMENT ONLY TO THE QUANTUM OF ITS INTERNATIONAL TRANSACTION. 32. IN THE GROUND NO. 14 THE ASSESSEE HAS RAISED TH E GROUND THAT THE AE OF THE ASSESSEE HAS BEEN CONSISTENTLY SUFFERING FRO M OPERATIONAL LOSS AND THEREFORE NO ADJUSTMENT CAN BE MADE IN RESPECT OF I NTERNATIONAL TRANSACTION. WE HAVE HEARD THE LD. AR AS WELL AS TH E LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. UNDER T HE TRANSFER PRICING REGULATION/PROVISIONS THE TESTING PARTY IS THE ASSE SSEE AND THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSES SEE HAS TO BE TESTED BY COMPARING THE SAME WITH UNCONTROLLED UNRELATED COM PARABLE TRANSACTION THEREFORE THE PRICE OF INTERNATIONAL TRANSACTION I N THE HAND OF THE AE OF THE ASSESSEE IS ABSOLUTELY IRRELEVANT. THE CONCEPT OF TRANSFER PRICING BASED ON THE PRINCIPLE THAT INSTEAD OF ENTERING INT O A TRANSACTION WITH RELATED PARTY IF THE ASSESSEE HAD ENTERED INTO A SI MILAR TRANSACTION WITH UNRELATED PARTY WHAT WOULD HAVE BEEN THE PRICES OF SAID TRANSACTION ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 27 BETWEEN THE ASSESSEE AND UNRELATED PARTY. THE COMPA RISON IS ALWAYS IN THE CONTEXT OF THE EFFECT OF THE RELATED PARTY TRAN SACTION AND UNRELATED PARTY TRANSACTION AT THE HAND OF THE ASSESSEE. THER EFORE THE FINANCIAL RESULTS OF THE AE ARE NOT AT ALL RELEVANT FOR THE P URPOSE OF DETERMINATION OF ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE. ACCORDINGLY WE DO NOT FIND ANY ME RIT IN THE GROUND RAISED BY THE ASSESSEE. THE SAME IS DISMISSED. 33. GROUND NO. 15 IS REGARDING ADDITION ON PROTECTI VE BASIS ON ACCOUNT OF AIR RECONCILIATION. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR AND CONSIDER THE RELEVANT MATERIAL ON RECORD. THE DRP H AS ADJUDICATED THIS ISSUE IN PARA 26-27 AS UNDER: 26. THE 12 TH GROUND IS AGAINST ADJUSTMENT TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF AIR RECONCILIATION. THE ASSESSING OFFICER HAS ADDED AN AMOUNT OF ` 435 673/- BEING TH E DIFFERENCE ON ACCOUNT OF AIR RECONCILIATION WHICH C OULD NOT BE RECONCILED BY THE ASSESSEE. THE ASSESSEE ITSELF STA TED THAT AFTER MAKING CONSIDERABLE EFFORTS HAS BEEN ABLE TO TRACE THE ENTITY TO WHICH THE AMOUNT MENTIONED IN THE AIR REPORT TO WHI CH THE AMOUNT BELONGS. 27. THE GROUND IS DISPOSED OFF WITH THE DIRECTION TO THE ASSESSING OFFICER TO TAKE THE MATTER WITH THE CONCE RNED AUTHORITIES MANAGING THE AIR INFORMATION AND GET TH E MISTAKE RECTIFIED IF ANY BEFORE MAKING THE ADDITION. 34. IT IS CLEAR FROM THE FINDINGS OF THE DRP THAT T HE ASSESSING OFFICER WAS DIRECTED TO TAKE THE MATTER WITH THE CONCERNED AUTHORITIES MANAGING THE AIR INFORMATION AND GET THE MISTAKE RECTIFIED I F ANY BEFORE MAKING THE ADDITION. THE ASSESSING OFFICER WHILE PASSING THE I MPUGNED ORDER IN COMPLIANCE TO THE DRP DIRECTION HAS MENTIONED THAT IF ANY INFORMATION ITA NO.327/M/2013 SYSCOM CORPORATION LTD. . 28 RECEIVED FROM CIB DELHI WITH AN INDICATION THAT TH E INFORMATION UPLOADED BY THE CIB IS NOT CORRECT/NOT PERTAINING TO THE ASS ESSEE THE ADDITION MADE ON THIS ACCOUNT WILL STAND CANCELLED. 35. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AN D IN THE INTEREST OF JUSTICE WE DIRECT THE ASSESSING OFFICER TO GET THE RELEVANT INFORMATION IN THIS REGARD AND ACCORDINGLY DECIDE THIS ISSUE. 36. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 12 TH JULY 2013 0 - ./& 1 2 %3 12 TH / - SD/- SD/- ( . . ) ! ( P. P.P. P. M. JAGTAP M. JAGTAP M. JAGTAP M. JAGTAP ) ACCOUNTANT MEMBER ( ' ) $ ! (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 12 TH JULY 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI