Actis Advisers Pvt. Ltd., New Delhi v. ACIT, New Delhi

ITA 6390/DEL/2012 | 2008-2009
Pronouncement Date: 05-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 639020114 RSA 2012
Assessee PAN AAACC5281G
Bench Delhi
Appeal Number ITA 6390/DEL/2012
Duration Of Justice 6 month(s) 9 day(s)
Appellant Actis Advisers Pvt. Ltd., New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 05-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted I
Tribunal Order Date 05-07-2013
Assessment Year 2008-2009
Appeal Filed On 26-12-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NO. 6390/DEL/2012 ASSTT. YR: 2008-09 ACTIS ADVISERS PVT. LTD. VS. ADDL. COMMISSIONER OF MIRA THE CORPORATE SUITES INCOME-TAX RANGE-1 BLOCK D GROUND FLOOR 1 & 2 NEW DELHI. ISHWAR NAGAR NEW DELHI-110065. PAN/ GIR NO. AAACC 5281 G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI PAWAN KUMAR CA SHRI ROHIT TIWARI CA RESPONDENT BY : SHRI PEEYUSH JAIN CIT(DR) O R D E R PER R.P. TOLANI J.M : THIS IS ASSESSEES APPEAL AGAINST THE ASSESSMENT OR DER DATED 3-10- 2012 PASSED BY THE ADD. COMMISSIONER OF INCOME-TAX RANGE-1 NEW DELHI U/S 143(3) READ WITH SECTION 144C(13) OF THE INCOME -TAX ACT 1961 RELEVANT TO ASSESSMENT YEAR 2008-09. 2. VARIOUS GROUNDS ARE RAISED OUT OF WHICH ASSESS EES FOLLOWING GROUNDS ARE PRESSED; REST OF THE GROUNDS BEING NOT PRESSED ARE ACCORDINGLY DISMISSED. 1. THE LD. DRP AND THE LD. AO (FOLLOWING THE DIREC TIONS OF THE LD. DRP) ERRED BOTH ON FACTS AND IN LAW IN CON FIRMING THE ADDITION TO THE EXTENT OF RS. 3 83 76 374/- TO THE INCOME OF THE APPELLANT OUT OF THE TOTAL ADDITION OF RS.5 49 44 1 94/- AS PROPOSED BY THE LD. TPO/A.O. IN ITS DRAFT ASSESSMEN T ORDER U/S 143(3) READ WITH SECTION 144C BY HOLDING THAT ITS I NTERNATIONAL TRANSACTIONS DO NOT SATISFY THE ARMS LENGTH PRINCI PLE ENVISAGED ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 2 UNDER THE ACT. IN DOING SO THE LD. DRP AND THE LD. AO HAS GROSSLY ERRED IN AGREEING WITH AND UPHOLDING THE LD . TPOS ACTION INCLUDING CERTAIN COMPANIES THAT ARE NOT COMPARABL E TO THE APPELLANT IN TERMS OF FUNCTIONS PERFORMED ASSE TS EMPLOYED AND RISKS ASSUMED AND DOING SO HAS SELECTED CERTAIN COMPANIES WHOSE ACTIVITIES ARE IN NO WAY SIMILAR TO APPELLANT S CHARACTERIZATION (AS BUSINESS SUPPORT SERVICES/ MAR KETING SUPPORT SERVICES PROVIDER) BY THE LD. TPO HIMSELF. 2. THE LD. DRP AND THE LD. AO ERRED IN LAW IN DISAL LOWING AN AMOUNT OF RS. 7 00 000/- ON ACCOUNT OF CLUB ENTR ANCE CHARGES. 3. THE LD. DRP AND THE LD. AO ERRED IN LAW IN REDUC ING DEPRECIATION ALLOWANCE BY RS. 63 787/- DURING THE Y EAR ON ITEMS SUCH AS DOCKING STATIONS AND RACK 42U BY HOLDING TH AT SUCH ITEMS FORM PART OF PLANT AND MACHINERY DEPRECIABL E @ 15% AND NOT COMPUTERS WHICH ARE DEPRECIABLE @ 60%. THE LD. DRP AND THE LD. AO ERRED IN FACTS AND IN LA W BY ARBITRARY DISALLOWING THE DEPRECIATION AMOUNTING TO 45% OF THE OPENING WRITTEN DOWN VALUE OF THE BLOCK COMPUTERS W ITHOUT ANY BASIS AND WITHOUT APPRECIATING THAT THE DEPRECIATIO N CLAIM OF THE APPELLANT ON COMPUTERS HAS BEEN DULY ACCEPTED AND A LLOWED BY HIS PREDECESSORS IN EARLIER YEARS. 4. THAT THE LD. AO ERRED ON FACTS AND IN LAW IN CHA RGING INTEREST UNDER SECTION 234B AND 234D OF THE ACT. 3. BRIEF FACTS ARE: ACTIS ADVISERS PRIVATE LIMITED (AAPL) WAS INCORPORATED ON MARCH 26 1998. DURING FY 2007-08 THE ASSESSEE WAS ENGAGED IN THE PROVISION OF NON BINDING FINANCIAL A DVISORY SUPPORT SERVICES TO ITS GROUP COMPANIES I.E. ACTIS CAPITAL LLP (NOW KNOWN AS ACTIS LLP) AND INTERNATIONAL VENTURE CAPITAL MANAGEMENT LTD. MAURITIUS (COLLECTIVELY REFERRED TO AS ACTIS GROUP). IN RETURN FOR RENDERIN G THESE SERVICES THE ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 3 ASSESSEE WAS REMUNERATED AT A 10% COST PLUS MARK UP WHICH IS CLAIMED TO BE IN ACCORDANCE WITH THE GLOBAL TRANSFER PRICING P OLICY OF ACTIS GROUP. 3.1. IT IS CLAIMED THAT WHILE OPERATING AS A CONTR ACT SERVICE PROVIDER FOR GROUP COMPANIES AND IN BEING COMPENSATED ON A COST PLUS REVENUE MODEL BASIS THE ASSESSEE IS COMPLETELY SHIELDED FROM RIS KS SUCH AS COST VARIANCE/ COST ESCALATION RISK REWORK/ CORRECTION RISK PRIC E RISK AND CAPACITY UTILIZATION RISK. THE CUSTOMERS ARE GROUP COMPANIE S ONLY AND AS THEY UNDERTAKE ALL THE MARKETING AND BUSINESS DEVELOPMEN T FUNCTIONS OVERSEAS WITH NO INVOLVEMENT OF THE ASSESSEE IT IS ALSO CLA IMED TO BE NOT EXPOSED TO OTHER CRITICAL RISKS SUCH AS CREDIT RISK/ DEBT COLL ECTION RISK AND MARKET RISK. 3.2. DURING THE RELEVANT FY THE ASSESSEE UNDERTOOK THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES (AES) WHICH WERE DULY REPORTED IN THE ACCOUNTANTS REPORT (FOR M NO 3CEB) FILED ALONG WITH THE ASSESSEES RETURN OF INCOME: S. NO NATURE OF TRANSACTIONS VALUE (RS.) 1. PROVISION OF ADVISORY AND CONSULTANCY SERVICES 383 783 645 2. REIMBURSEMENT OF EXPENSES 76 449 THE ABOVE TRANSACTIONS BEING CLOSELY INTERRELATED HAVE BEEN AGGREGATED FOR THE PURPOSE OF ANALYSIS FROM A TRANSFER PRICING PER SPECTIVE. 3.3. ASSESSEE THUS CLAIMS THAT IT PROVIDES NON BIND ING FINANCIAL ADVISORY SUPPORT SERVICES IN THE NATURE OF RESEARCH ACTIVITY SERVICES TO ITS AES. AS PER THE ADVISORY AGREEMENT DATED MAY 05 2005ENTERED BE TWEEN ACTIS LLP AND ACTIS INDIA THE LATTER PROVIDES VARIOUS SERVICES T O ITS AES WHICH ARE MENTIONED IN SCHEDULE 1 OF THE SAID AGREEMENT ARE A S UNDER: ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 4 (I) IDENTIFY CREATE EVALUATE SCREEN REVIEW CO NDUCT DUE- DILIGENCE CARRY OUT INVESTMENT ANALYSIS AND RESEAR CH REPORT ON NEW OPPORTUNITIES FOR THE POSSIBLE INVESTMENT BY THE FU NDS MANAGED BY THE AE AND ADVISE ON SUCH PARTICULAR FACTORS RELATING THERETO AS ACTIS INDIA CONSIDERS RELEVANT FOR CONSIDERATION BY THE A E; (II) IN ITS CAPACITY AS ADVISOR RECOMMEND FOR CON SIDERATION BY THE AE FROM TIME TO TIME THE PURCHASE OR SALE OF PARTI CULAR INVESTMENTS OR PROPOSED INVESTMENTS AND RECOMMEND TO THE AE FR OM TIME TO TIME REGARDING THE AMOUNT AND THE TERMS FOR THE PROPOSED PURCHASE/ SALE; (III) MONITOR AND EVALUATE THE PROGRESS OF ALL INV ESTMENTS AND REPORT ON SUCH PROGRESS TO AE AS ACTIS INDIA MAY CONSIDER APPROPRIATE; (IV) ADVISE IN RELATION TO ANY GUARANTEES INDEMNI TIES COVENANTS OR UNDERTAKINGS IN FAVOUR OF THIRD PARTIES AS MAY BE G IVEN BY THE FUNDS MANAGED BY THE AE IN CONNECTION WITH OR FOR THE PUR POSES OF THE ACQUISITIONS HOLDING OR DISPOSAL OF ANY INVESTMENT ; (V) ADVISE AND REPORT TO THE AE ON ANY RIGHTS EXE RCISABLE IN RELATION TO ANY INVESTMENT; (VI) PROVIDE SUCH OTHER SERVICES TO THE AE AS MAY REASONABLY BE REQUIRED IN ORDER TO PRESERVE AND PROMOTE THE INTER ESTS OF THE FUNDS MANAGED BY THE GROUP; AND (VII) ADVISE ON THE NEGOTIATIONS OF THE TERMS OF A NY PURCHASE OR SALE OF AN INVESTMENT OR PROPOSED INVESTMENT. 3.4. THE ASSESSEE SUBMITTED ITS TP STUDY FOR THE RE LEVANT YEAR ON THE BASIS OF DETAILED FUNCTION ASSET AND RISK (FAR) ANALY SIS AND ECONOMIC ANALYSIS. WHILE CONDUCTING THE ECONOMIC ANALYSIS T HE ASSESSEE APPLIED THE TNMM WITH OPERATING PROFIT (OP)/ TOTAL COST (TC ) AS THE RELEVANT PROFIT LEVEL INDICATOR (PLI) IN ACCORDANCE WITH T HE INDIAN TRANSFER PRICING ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 5 LEGISLATION IN ORDER TO CONFIRM THE ARMS LENGTH NA TURE OF ITS INTERNATIONAL TRANSACTIONS PERTAINING TO THE PROVISION OF BACK O FFICE FINANCIAL ADVISORY SUPPORT SERVICES THE SAME IS PLACED ON THE PAPER B OOK. 3.5. AT THE TIME OF PREPARATION OF THE TP REPORT FO R FY 2007-08 IT IS CLAIMED THAT THE ASSESSEE WAS UNABLE TO FIND INDIA N COMPANIES COMPARABLE TO IT WHILE CARRYING OUT ITS SEARCH ON INDIAN DATAB ASES. HOWEVER THE ASSESSEE CONDUCTED A SEARCH FOR THE GLOBAL COMPARAB LE COMPANIES FROM ONESOURCE.COM (ASIA PACIFIC DATABASE) AND THE SAME WAS INCLUDED IN THE TP REPORT FOR THE YEAR. THE FINAL COMPARABLE COMPAN IES AND THE RESULTS CONSIDERED IN THE TP REPORT ARE AS FOLLOWS: 3.6. AS AGAINST THE FINAL COMPARABLES SET ADOPTED BY THE LD. TPO IN THE TP ORDER IS AS UNDER: SR. NO. NAME OF THE COMPARABLES FY 2005-06 FY 2006-07 FY 2007-08 THREE YEARS AVERAGE 1 AEGIS GROUP PLC 15.21% 15.28% 14.97% 15.11% 2 CRESTON PLC 18.94% 16.69% 17.38% 17.39% 3 CRM COMPANY GROUP SA 16.33% 6.30% 1.38% 4.30% 4 FORRESTER RESEARCH INC. 10.83% 12.38% 12.04% 11 .82% 5 HARRIS INTERACTIVE INC. 5.33% 7.17% 5.90% 6.15% 6 GARTNER INC. 4.24% 10.95% 12.59% 9.38% 7 HURON CONSULTING GROUP 16.26% 17.31% 18.05% 17.46 % 8 THE HACKETT GROUP INC. 1.55% 0.95% 5.26% 2.60% 9 IPSOS SA 10.40% 9.84% 9.27% 9.90% 10 LECG CORPORATION 15.68% 11.42% 6.28% 10.57% 11 THE CORPORATE EXECUTIVE BOARD COMPANY 38.14% 29.31% 26.62% 30.45% 12 OPTIMISA PLC 17.14% 12.50% 12.32% 12.87% 13 ICF INTERNATIONAL INC. 3.20% 7.46% 10.74% 8.71% AVERAGE 12.06% ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 6 TP ORDER COMPARABLES S.NO. NAME OF THE COMPANY MARGIN (OP/TC) % WORKING CAPITAL ADJUSTED (OP/TC)% 1 APITCO LIMITED 49.35% 46.40% 2 BEST MULYANKAN CONSULTANTS LIMITED 12.85% 2.65% 3 CHOKSI LABOURATORIES LIMITED 29.20% 28.09% 4 ICRA MANAGEMENT CONSULTING SERVICES LIMITED 4.18% 1.85% 5 IDC (INDIA) LIMITED 15.48% 15.88% 6 INDUS TECHNICAL & FINANCIAL CONSULTANTS LIMITED 14.56% 17.56% 7 RITES LIMITED (SEG) 25.77% 36.28% 8 TECHNICOM CHEMIE (INDIA) LIMITED 7.32% 12.76% 9 VAPI WASTE & EFFLUENT MANAGEMENT CO. 18.53% 9.23% 10 WAPCOS LIMITED (SEG) 40.37% 60.09% AVERAGE 21.76% 23.08% 3.7. THIS RESULTED IN FINAL TP ADJUSTMENT BY AVERAG ING THE E MARK-UP ON COST OF 23.08% AFTER ADJUSTING FOR WORKING CAPITAL DIFFERENCE IT WAS HIGHER THAN THE MARK UP ON COST OF 9.25% 1 EARNED BY THE ASSESSEE DURING FY 2007- 08. IGNORING OBJECTIONS THE LD. TPO PROPOSED AN AD JUSTMENT OF RS. 54 944 194 TO THE INCOME OF THE ASSESSEE ON THE BAS IS WHEREOF THE DRAFT ASSESSMENT ORDER U/S 144C(1) OF THE ACT WAS ISSUED BY ASSESSING OFFICER. 3.8. ASSESSEE CARRIED THE MATTER BEFORE DRP WHICH O VERRULED THE ASSESSEES OBJECTIONS AND CONFIRMED THE TPOS ADJUS TMENTS. AGGRIEVED ASSESSEE IS BEFORE US. 4. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE E NTIRE CONTROVERSY ABOUT TRANSFER PRICING ADJUSTMENTS CAN BE RESOLVED IF THE TWO COMPARABLES ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 7 ADOPTED BY THE TPO AND APPROVED BY DRP VIZ. NO. 9 V API WASTE & EFFLUENT MANAGEMENT CO. LTD.; AND NO. 10 WAPCOS AS MENTIONE D ABOVE WHICH ARE NOT APPROPRIATE COMPARABLES ARE EXCLUDED. IF THESE TWO COMPARABLES ARE EXCLUDED THEN TRANSFER PRICING RESULTS ARE ACCEPTA BLE TO THE ASSESSEE WHICH BY AND LARGE WILL MEET WITH ITS TRANSFER PRICING R EPORT. 4.1. ASSESSEE BEING A NON RISK BEARING FINANCIAL SU PPORT SERVICE ENTITY SHOULD NOT BE COMPARED WITH THESE COMPANIES WHICH A RE ENGAGED IN RENDERING MARKETING/ BUSINESS SUPPORT SERVICES. ALT ERNATIVELY IF THE CHARACTERISATION OF AAPL IS A ACCEPTED AS A BUSINE SS/ MARKET SUPPORT SERVICES PROVIDER (AS CHARACTERISED BY THE TPO/ DR P IN THE ORDER) EVEN THEN BASED ON THE REVIEW OF THE ACTIVITIES OF THESE TWO COMPARABLES ADDED BY THE LD. TPO I.E. VAPI WASTE & EFFLUENT MANAGEMEN T CO. LIMITED AND WATER AND POWER CONSULTANCY SERVICES LIMITED (WAPC OS LIMITED) CANNOT BE COMPARED. DETAILS OF CONSULTANCY AND ENGI NEERING PROJECTS SEGMENTS AS EMERGING FROM THE ANNUAL REPORTS OF THE SE COMPANIES THE ACTIVITIES PERFORMED BY THEM CANNOT IN ANY MANNER B E CONSIDERED SIMILAR TO THE ACTIVITIES PERFORMED BY ASSESSEE AS BUSINESS/ MARKET SUPPORT SERVICES PROVIDED BY IT. 4.2. IT IS SUBMITTED THAT ANALYSIS OF VAPI WASTE & EFFLUENT MGMT. CO LIMITED (VAPI) AND WAPCOS (SEGMENT) WILL MAKE IT EVIDENT THAT THEY OPERATE IN ALTOGETHER VERY DIFFERENT LINES OF BUSIN ESS (PRIMARILY ACTIVITIES INCLUDING HIGH END TECHNICAL SERVICES ENGINEERING SERVICES INFRASTRUCTURE PROJECT ENGINEERING/ IMPLEMENTATION ETC). THEY CAN IN NO WAY BE CONSIDERED SIMILAR TO EVEN THE ACTIVITIES PERFORMED BY A BUSIN ESS SUPPORT SERVICES COMPANY OR A MARKETING SUPPORT SERVICES PROVIDER W HICH ARE BRIEFLY TABULATED AS UNDER: ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 8 SR. NO. NAME OF THE COMPARABLE FAR ANALYSIS 1 VAPI WASTE & EFFLUENT MGMT. CO LIMITED THE COMPANY IS ENGAGED IN UNDERTAKING HIGH END TECH NICAL SERVICES AND PROJECT IMPLEMENTATION ON VARIED NATUR E OF INFRASTRUCTURE PROJECTS. THE COMPANYS REVENUE STRE AMS INCLUDE EFFLUENT TREATMENT COMMON SOLID WASTE TREATMENT AN D MANAGEMENT ETC. 2 WAPCOS LTD (SEGMENTAL) CONSULTANCY AND ENGINEERING PROJECTS SEGMENT THE SEGMENT OF THE COMPANY IS ENGAGED IN HIGH-END C ONSULTANCY AND WORKING ON ENGINEERING PROJECTS. FURTHER THE C OMPANYS MAIN STRENGTH LIES IN ITS TECHNICAL EXPERTISE AND IT WORKS AS A TECHNICAL CONSULTANCY ORGANIZATION. (I) VAPI WASTE & EFFLUENT MANAGEMENT CO. LIMITED: I T IS A FUNCTIONALLY DIFFERENT COMPARABLE. THE COMPANY DEAL S IN THE INFRASTRUCTURE SECTOR AND IS ENGAGED IN UNDERTAKING HIGH END TECHNICAL SERVICES AND PROJECT IMPLEMENTATION ON VARIED NATUR E OF INFRASTRUCTURE PROJECTS. THE COMPANYS REVENUE STREAMS INCLUDE EFF LUENT TREATMENT COMMON SOLID WASTE TREATMENT AND MANAGEMENT ETC. T HIS IS EVIDENT FROM THE ANNUAL REPORT OF THE COMPANY FOR THE FY 20 07-08. THE RELEVANT EXTRACT OF THE ANNUAL REPORT OF THE COMPAN Y IS AS UNDER: OPERATIONS: DURING THE YEAR UNDER REVIEW YOUR COMPA NY HAS SUCCESSFULLY CONTINUED WITH ITS ACTIVITIES OF E FFLUENT TREATMENT AND COMMON SOLID WASTE MANAGEMENT CLUSTER PROJECTS: THE MINISTRY OF COMMERCE & INDUSTRIES GOVERNMENT OF INDIA THOUGH DEPARTMENT OF INDUSTRIES POLICY & PROMOTION (DIPP) HA APPROVED THE VAPI CHEMICAL CLUSTER PROJECT COST AT RS. 5431 CROR ES UNDER THE INDUSTRIAL INFRASTRUCTURE UPGRADATION (IIUS)SCHEME OF 2003 AND THE GOVERNMENT OF INDIA HA SANCTIONED A GRANT IN AID OF RS. 40.49 CRORES AGAIN ST THIS PROJECT. THE COMPANY I.E. VAPI WASTE & EFFLUENT ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 9 MANAGEMENT CO. LTD. HAS BEEN APPROVED AS THE SPECI AL PURPOSE VEHICLE (SPV) FOR THE IMPLEMENTATION OF THE SE PROJECTS. THUS THERE IS COMMITTED LIABILITY OF RS. 13.82 CRORES TOWARDS THIS PROJECT. ROAD UPGRADATION PROJECT: THE ROAD UPGRADATION PROJECT IS ONE OF THE PROJECT COMPONENTS UNDER INDU STRIAL INFRASTURE UPGRADATION (HUS) SCHEME WHICH IS UNDERTAKEN BY THE COMPANY ON BEHALF OF NOTIFIED ARE A AUTHORITY (NAA). WHATEVER EXPENSES INCURRED BY THE COMPANY ON ROAD UPGRADATION PROJECT ON AND ABOVE GRANT IN AID RECEIVED OR TO BE RECEIVED FROM CENTRA L GOVT. WOULD BE RECOVERABLE FROM THE NOTIFIED AREA AUTHORITY FROM TIME TO TIME. THE COMPANY AHS ALREAD Y RECEIVED THE INITIAL CONTRIBUTION OF RS. 180.00 LAC S (PREVIOUS YEAR RS. 180.00 LACS) FROM THE NOTIFIED A REA AUTHORITY. 4.3. IGNORING THESE GLARING DIFFERENCES TPO HOWEVE R HELD THAT VAPI WASTE AND EFFLUENT MANAGEMENT COMPANY LIMITED IS FU NCTIONALLY COMPARABLE TO THE APPELLANT. IT IS PLEADED THAT THE COMPARABLE IS INVOLVED IN PECULIAR TYPE OF CONSULTANCY REGARDING MANAGEMENT O F WASTE ENVIRONMENTAL IMPACT ASSESSMENT ETC. THE VERTICALS OF THE PROPOS ED COMPARABLES ARE LESS IMPORTANT THAN THE QUANTITATIVE ASPECTS WHICH IS W HY THERE IS A WIDE SPREAD OF COMPARABLES. 4.4. BEFORE THE LD. DRP IT WAS LUCIDLY EXPLAINED T HAT THE FUNCTIONS PERFORMED BY THE APPELLANT WHICH PERTAIN ONLY TO FI NANCIAL ADVISORY SUPPORT SERVICES ARE IN THE NATURE OF RESEARCH ACTIVITY SER VICES TO ITS AES WHICH CANNOT BE COMPARED WITH THE ACTIVITIES PERFORMED BY THE V API WHICH ARE TOTALLY UNCOMPARABLE AND UNLIKE ASSESSEE THE NATURE OF HIG H END TECHNICAL AND PROJECT IMPLEMENTATION SERVICES. ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 10 4.5. THE LD. DRP IN ITS DIRECTIONS HAS NEITHER GIV EN ANY COMMENTS AGAINST THE CONTENTIONS OF THE APPELLANT FOR EXCLUD ING VAPI FROM THE FINAL COMPARABLE SET NOR GIVEN COGENT REASONS FOR HOLDING IT TO BE A FIT COMPARABLE. 4.6. VAPI IS NOT ONLY ENGAGED IN RENDERING CONSUL TANCY SERVICES BUT DEALS IN THE INFRASTRUCTURE SECTOR AND IS ENGAGED IN UNDE RTAKING HIGH END TECHNICAL SERVICES AND PROJECT IMPLEMENTATION ON VARIED NATUR E OF INFRASTRUCTURE PROJECTS AND STANDS MILES APART FROM ASSESSEES AC TIVITIES. IN THIS BEHALF ASSESSEE PLACED RELIANCE ON THE DELHI ITAT ORDER I N THE CASE OF VERIZON INDIA PRIVATE LIMITED WHEREIN THE ITAT HAS SPECIF ICALLY HELD THAT A COMPANY ENGAGED IN RENDERING ENGINEERING CONSULTANC Y IS EXPOSED TO HIGHER RISKS BECAUSE OF ITS NATURE OF BUSINESS AND CANNOT BE COMPARED WITH ROUTINE MARKETING SUPPORT SERVICE BY FOLLOWING OBSERVATION S: WE AGREE WITH THE VIEW OF THE FIRST APPELLATE AUTH ORITY THAT EIL RITES WAPSOS AND TCE ARE ENGINEERING COMPANIE S AND PROVIDE END-TO-END SOLUTIONS AND WHEREAS THE APPELL ANT COMPANY PROVIDES MARKETING SUPPORT SERVICES TO THE PARENT COMPANY WHICH IS IN THE NATURE OF SUPPORT SERVICE AND HENCE NOT FUNCTIONALLY COMPARABLE. SHE RIGHTLY CONCLUDED THAT THE RISK PROFILE IS VASTLY DIFFERENT AND HENCE ON THIS COUNT ALSO THEY ARE NOT COMPARABLE. II) WAPCOS 4.7. THE ASSESSEE SUBMITS THAT WAPCOS LIMITED IS A MINI RATNA PUBLIC SECTOR ENTERPRISE AND IS ENGAGED IN PROVIDIN G HIGH END TECHNICAL CONSULTANCY SERVICES MAINLY IN THE NATURE OF THE EN GINEERING SERVICES IN THE FIELD OF WATER RESOURCES POWER AND INFRASTRUCTURE SECTORS IN INDIA AND ABROAD. 4.8. THE FACTS OF FOREIGN PROJECTS HANDLED BY THE C OMPANY CLEARLY INDICATE ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 11 THAT THE COMPANY IN INVOLVED IN DESIGN ENGINEERING KIND OF ACTIVITIES. THESE FACTS EMERGE FROM THE PUBLIC DOMAIN INFORMATION I.E . WEBSITE AND ANNUAL REPORT OF THE COMPANY FOR THE FY 2007-08. IT IS C LAIMED BY THIS INFORMATION THAT THAT THE WAPCOS ENSURES QUALITY AND TIME BOUN D SERVICES TO THE CLIENTS WHICH IS THE VERY ESSENCE OF WAPCOS OPERATI ONS. WAPCOS DRIVES ITS STRENGTH FROM ITS HUMAN RESOURCES WHICH FORM T HE BACKBONE OF THE ORGANISATION. THE CONSULTANCY SERVICES ARE CARRIED OUT IN 3 MAIN AREAS OF WATER RESOURCES POWER AND INFRASTRUCTURE. WAPCOS' SPECTRUM OF SERVICES COVERS A WIDE RANGE OF ACTIVITIES THAT INCLUDES: - PRELIMINARY INVESTIGATIONS/RECONNAISSANCE - FEASIBILITY STUDIES/PLANNING/PROJECT FORMULATION - FIELD INVESTIGATIONS AND TESTING - ENGINEERING DESIGNS DRAWINGS AND TENDERING PROCE SS - CONTRACT MANAGEMENT AND CONSTRUCTION SUPERVISION - OPERATION AND MAINTENANCE - INSTITUTIONAL/HUMAN RESOURCES DEVELOPMENT 4.9. THE LD. TPO HAS HELD THAT WAPCOS LIMITED IS FU NCTIONALLY COMPARABLE TO THE APPELLANT BY FOLLOWING OBSERVATIO NS: AS STATED IN THE SHOW CAUSE THIS IS A SUPPORT SERV ICE PROVIDER AND ITS SERVICES ARE SIMILAR TO THOSE PROVIDED BY T HE ASSESSEE IN TERMS OF TECHNICAL SUPPORT TECHNICAL KNOW-HOW VALU ATIONS AND ASSISTANTS IN DEVELOPMENT/ UPGRADATION OF POTENTIAL SUPPLIER ADVICE ON BUSINESS PROCEDURES AND PRACTICES ADVICE ON APPLICABLE LAWS AND REGULATIONS ETC. THE SEGMENTAL DATA IN RESPECT OF CONSULTANCY SERVICES WILL BE USED FOR TH E PURPOSE OF COMPARISON. ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 12 4.10. BEFORE THE LD. DRP THE APPELLANT REITERATED THE SUBMISSIONS TAKEN BEFORE THE LD. TPO THAT THE FUNCTIONS PERFORMED BY THE APPELLANT PERTAINING TO FINANCIAL ADVISORY SUPPORT SERVICES ARE IN THE N ATURE OF RESEARCH ACTIVITY SERVICES TO ITS AES. SUCH SERVICES CANNOT BE COMPAR ED TO THE ACTIVITIES PERFORMED BY THE WAPCOS WHICH ARE IN THE NATURE OF HIGH END TECHNICAL CONSULTANCY SERVICES MAINLY IN THE NATURE OF THE EN GINEERING SERVICES. 4.11. EVEN GOING BY THE BUSINESS SUPPORT SERVICES P ROVIDER CHARACTERIZATION BY THE LD. TPO IN THE ORDER THE ACTIVITIES PERFORM ED OF WAPCOS CANNOT BE IN ANY WAY CONSIDERED SIMILAR TO THE ACTIVITIES PER FORMED BY ASSESSEE AS A BUSINESS SUPPORT SERVICE PROVIDER. 4.12. THE LD. DRP IN ITS DIRECTIONS WITH RESPECT TO WAPCOS (SEGMENTAL) ALSO HAS NOT PROVIDED ITS COMMENTS ON THE CONTENTIO NS RAISED BY THE APPELLANT DURING THE PROCEEDINGS. ON THE CONTRARY THE LD. DRP HAS PROVIDED ITS COMMENTS AGAINST THE CONTENTION OF THE APPELLANT WHICH WERE NOT RAISED AT ANY POINT OF TIME DURING THE COURSE O F THE DRP PROCEEDINGS. THE RELEVANT EXTRACT OF THE DRP ORDER IS PROVIDED B ELOW FOR READY REFERENCE: ACCORDING TO THE ASSESSEE WAPCOS IS A MINI RATNA PUBLIC SECTOR ENTERPRISE UNDER THE AEGIS OF THE UNI ON MINISTRY OF WATER RESOURCES. WAPCOS HAS BEEN PROVIDING CONSU LTANCY SERVICES IN 4 CENTRES I.E. WATER RESOURCES POWER A ND INFRASTRUCTURE. APART FROM INDIA THE COMPANY IS PR OVIDING ITS CONSULTANCY SERVICES IN 40 OTHER COUNTRIES. BROADLY FUNCTIONALLY SIMILAR BEING IN SERVICES SECT OR. ACCORDING TO THE ASSESSEE ECONOMIC FACTORS PENDING A PAY REVI SION IS EFFECTING ITS RESULTS. WE HAVE EXAMINED THE ISSUE A ND FIND PAY REVISION OCCURS IN NORMAL COURSE AND CANNOT BE TREA TED AS AN EXTRAORDINARY CIRCUMSTANCE AFFECTING COMPARABILITY ANALYSIS. HENCE IN VIEW OF DRP IT CAN BE RETAINED AS A COMPAR ABLE. ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 13 4.13. ASSESSEE CONTENDS THAT ITS SUBMISSIONS BEFORE THE LD. TPO AND DRP WERE UNAMBIGUOUS TO THE EFFECT THAT WAPCOS CANNOT B E FUNCTIONALLY COMPARED TO A COMPANY ENGAGED IN RENDERING BUSINESS / MARKETING SUPPORT SERVICES SINCE THE REVENUE GENERATED BY THEM THROUG H THE CONSULTANCY AND ENGINEERING PROJECTS SEGMENT INCLUDES REVENUE FROM HIGH END TECHNICAL CONSULTANCY SERVICES MAINLY IN THE NATURE OF THE EN GINEERING SERVICES IN THE FIELD OF WATER RESOURCES POWER AND INFRASTRUCTURE SECTORS. THUS THE OBSERVATIONS OF DRP ARE CLEARLY CONTRARY TO THE REC ORD AND ON WRONG ASSUMPTION OF ASSESSEES CONTENTIONS. THE ITAT DELH I ORDER IN THE CASE OF VERIZON INDIA PRIVATE LIMITED WHEREIN THE ITAT HAS SPECIFICALLY HELD THAT WAPCOS IS ENGAGED IN RENDERING ENGINEERING CONSULTA NCY AND IS EXPOSED TO HIGHER RISKS BECAUSE OF ITS NATURE OF BUSINESS. THE RELEVANT EXTRACT OF THE TRIBUNAL JUDGMENT IS GIVEN BELOW FOR YOUR READY REF ERENCE: WE AGREE WITH THE VIEW OF THE FIRST APPELLATE AUTH ORITY THAT EIL RITES WAPSOS AND TCE ARE ENGINEERING COMPANIE S AND PROVIDE END-TO-END SOLUTIONS AND WHEREAS THE APPELL ANT COMPANY PROVIDES MARKETING SUPPORT SERVICES TO THE PARENT COMPANY WHICH IS IN THE NATURE OF SUPPORT SERVICE AND HENCE NOT FUNCTIONALLY COMPARABLE. SHE RIGHTLY CONCLUDED THAT THE RISK PROFILE IS VASTLY DIFFERENT AND HENCE ON THIS COUNT ALSO THEY ARE NOT COMPARABLE. 4.14. TPO & DRP HAVE INCORRECTLY REJECTED THE SEARC H STRATEGY ADOPTED BY ASSESSEE IN ITS TRANSFER PRICING DOCUMENTATION MAI NTAINED AS PRESCRIBED UNDER SECTION 92D OF THE INCOME TAX ACT 1961 ACT RE AD WITH RULE 10D OF THE INCOME TAX RULES 1962. THE FRESH SEARCH CONDUCT ED BY TPO IS IN CONTRAVENTION OF SET PARAMETERS OF COMPARABILITY. T HE ASSESSEE RELIES ON THE ORDER OF DELHI BENCH OF THE ITAT IN THE CASES OF M/ S MENTOR GRAPHICS (NOIDA) PVT. LTD. ITA NO. 1969/D/2006 (MENTOR RULI NG) WHEREIN IT IS HELD ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 14 THAT THE TPO COULD HAVE CARRIED OUT A FRESH SEARCH ONLY IF THE COMPARABLES DRAWN BY THE TAXPAYER WERE INSUFFICIENT OR DEFICIEN T IN OTHER RESPECTS. 4.15. IT IS PLEADED THAT RULE 10C(2) OF THE INCOME- TAX RULES 1962 PROVIDES THAT IN SELECTING THE MOST APPROPRIATE METHOD THE FOLLOWING FACTORS SHALL BE TAKEN INTO ACCOUNT: THE CLASS OR CLASSES OF ASSOCIATED ENTERPRISES ENT ERING INTO THE TRANSACTION AND THE FUNCTIONS PERFORMED BY THEM TA KING INTO ACCOUNT ASSETS EMPLOYED OR TO BE EMPLOYED AND RISKS ASSUMED BY SUCH ENTERPRISES 4.16. THE OECD TRANSFER PRICING GUIDELINES (REVIEW OF CHAPTERS I-III OF THE TRANSFER PRICING GUIDELINES JULY 22 2010) ALS O EMPHASIZE THE IMPORTANCE OF FUNCTIONAL COMPARABILITY AS A FACTOR FOR COMPARABILITY ANALYSIS PARAGRAPH 1.42 OF THE OECD GUIDELINES STATES: IN TRANSACTIONS BETWEEN TWO INDEPENDENT ENTERPRISE S COMPENSATION USUALLY WILL REFLECT THE FUNCTIONS THAT EACH ENTERP RISE PERFORMS ( TAKING INTO ACCOUNT ASSETS USED AND RISKS ASSUMED). THERE FORE IN DETERMINING WHETHER CONTROLLED AND UNCONTROLLED TRANSACTIONS OR ENTITIES ARE COMPARABLE A FUNCTIONAL ANALYSIS IS NECESSARY. 4.17. THE SPECIAL BENCH OF THE ITAT ON THE SIMILAR TYPE OF ISSUE IN THE CASE OF AZTEC (I.T.A. NO.584/BANGALORE/2006) HELD AS UND ER: BEFORE WE GO INTO EACH ONE OF THESE METHODS THE F UNDAMENTAL REQUIREMENT IN ANY OF THE METHOD SELECTED IS THE S ELECTION OF COMPARABLES FOR BENCHMARKING INTERNATIONAL TRANS ACTIONS. THIS SELECTION OF A COMPARABLE SHOULD BE BASED ON F UNCTIONAL ASSET AND RISK ANALYSIS OF BOTH THE PARTIES AND TR ANSACTIONS. ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 15 4.18. THE LD. AR SUBMITTED THAT DRP WITH RESPECT TO WAPCOS (SEGMENT) HAS NOT CONTROVERTED ITS CONTENTIONS RAISED DURING THE COURSE OF THE DRP PROCEEDINGS. 4.19. THE RESULTANT ARITHMETIC MEAN OF THE COMPARAB LE COMPANIES (AFTER EXCLUDING WAPCOS (SEGMENTAL) AND VAPI COMES TO AS U NDER: SR. NO. COMPANY NAME WORKING CAPITAL ADJUSTED MARGINS TPO/RPS OP/TC 1. BEST MULYANKAYAN CONSULTANTS LTD. 11.84% 11.84% 2. CHOKSI LABORATORIES LTD. 27.59% 27.59% 3. ICRA MANAGEMENT CONSULTING SERVICES LTD. 0.72% 0.72% 4. IDC(INDIA) LTD. 15.87% 15.87% 5. INDUS TECHNICAL & FINANCIAL CONSULTANTS LTD. 15.85% 15.85% 6. TECHNICOM CHEMIE (I) LTD. 8.38% 8.38% 7. VAPI WASTE & EFFLUENT MGMT. CO. LTD. 8.22% REJECTED- FUNCTIONALLY DIFFERENT AVERAGE 18.67% 13.38% 4.20. THE RESULTS OF THE OP/TC MARGIN OF THE COMPAR ABLE COMPANIES (AFTER EXCLUSION OF THE WAPCOS (SEGMENT) AND VAPI FOR BEIN G FUNCTIONALLY DIFFERENT FOR THE FY 2007-08 IS 13.38% WHICH FALLS WITHIN THE +/- 5 PERCENT RANGE AROUND THE APPELLANTS OP/ TC MARGIN OF 9.25% EARNED BY THE APPELLANT DURING THE AY 2008-09. THUS THE INTERNAT IONAL TRANSACTIONS OF THE APPELLANT DURING THIS YEAR WOULD COME WITHIN THE RA NGE OF ALP. 4.21. LD. COUNSEL THEN ADVERTED TO THE ITAT DELHI B ENCH H ORDER IN THE CASE OF DCIT VS. M/S MCI CORN INDIA P. LTD. (ITA N O. 4187/DEL/2010 & OTHERS) WHICH IS A CONSOLIDATED ORDER DATED 30-8-2 012 WHEREIN ON THE ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 16 ASPECT OF FUNCTIONAL COMPARABILITY IT HAS BEEN HELD THAT ENGINEERING COMPANIES INCLUDING WAPCOS WHO PROVIDE END TO END E NGINEERING SOLUTIONS CANNOT BE COMPARED WITH ROUTINE MARKETING SUPPORT SERVICES ENTITY BY FOLLOWING OBSERVATIONS: 23. A PERUSAL OF THE ABOVE DEMONSTRATES THAT THE A SSESSEE HAS NOT CONDUCTED A PROPER T.P. STUDY AND HAS WRONGLY C HOSEN THESE 4 COMPARABLES. WHEN ON FACTS WE ARE OF THE O PINION THAT THE T.P. STUDY WHEREIN THESE 4 COMPARABLES TAKEN WE RE WRONG AS APPARENTLY THERE IS NO FUNCTIONAL COMPARABILITY WE CANNOT APPROVE SUCH T.P. STUDY EVEN IF THE TPO HAS ACCEPT ED IT. WRONG FACTS HAVE TO BE CORRECTED. THERE CAN BE NO E STOPPEL IN SUCH FACTUAL SITUATION. THE LD. CIT(A) HAS THE POW ER TO ACCEPT FRESH CLAIM OF THE ASSESSEE. MARKETING SUPPORT SERV ICES CANNOT BE COMPARED WITH TURN KEY ENGINEERING SERVICES. WE AGREE WITH THE VIEW OF THE FIRST APPELLATE AUTHORITY THAT EIL RITES WAPSOS AND TCE ARE ENGINEERING COMPANIES THAT PROVI DE END TO END SOLUTIONS AND WHEREAS THE ASSESSEE COMPANY P ROVIDES MARKETING SUPPORT SERVICES TO THE PARENT COMPANY W HICH IS IN THE NATURE OF SUPPORT SERVICE AND HENCE NOT FUNCTIO NALLY COMPARABLE. SHE RIGHTLY CONCLUDED THAT THE RISK PRO FIT IS VASTLY DIFFERENT AND HENCE ON THIS COUNT ALSO THEY ARE NOT COMPARABLE. 4.22. THE DIFFERENCE BETWEEN CAPITAL FINANCE/ MARK ET CONSULTANCY PROVIDER AND INDEPENDENT HIGH-TECH ENGINEERING END TO END SO LUTIONS PROVIDER HAVE BEEN EXPLAINED IN DETAIL BEFORE THE TPO/DRP AND IN WRITTEN SUBMISSIONS. IN VIEW OF THE ABOVE SUBMISSIONS AND CASE LAWS IT IS P LEADED THAT THESE TWO COMPARABLES DESERVES TO BE EXCLUDED FROM T.P. WORKI NG. 4.23. APROPOS ADDITION ON ACCOUNT OF EXCESS DEPRECI ATION ON COMPUTER PERIPHERALS RS. 258 110 LD. COUNSEL CONTENDS: 4.23.1. ASSESSEE AS EARLIER CLAIMED DEPRECIATION ON COMPUTER AND PERIPHERALS @ 60%. ASSESSING OFFICER HOWEVER MADE D ISALLOWANCE OF RS. 258 110/- ON 45% OF THE TOTAL OPENING WRITTEN DOWN VALUE OF THE BLOCK OF ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 17 COMPUTERS AS ON APRIL 1 2007 ON THE PREMISE THAT THE SAME CONTAIN ITEMS IN NATURE OF PLANT AND MACHINERY ENTITLED FOR DEPRECIA TION @ 15% ONLY. 4.23.2. FURTHER DRP HAS REDUCED DEPRECIATION ALLOW ANCE BY RS. 63 787/- DURING THE YEAR ON ITEMS SUCH AS DOCKING S TATIONS AND RACK 42U BY HOLDING THAT SUCH ITEMS FORM PART OF PLANT AND MAC HINERY DEPRECIABLE @ 15% AND NOT COMPUTERS WHICH ARE DEPRECIABLE @ 60% . IT IS PLEADED THAT DEPRECIATION ON THE SAME ITEMS HAS BEEN ALLOWED BY THE LD. AO HIMSELF IN THE ASSESSMENT YEAR 2005-06 AND 2006-07. 4.24. APROPOS ADDITION ON ACCOUNT OF CLUB ENTRANCE FEES RS. 700 000 LD. COUNSEL CONTENDS: 4.24.1. APROPOS THE CLUB ENTRANCE FEES AMOUNTING TO RS. 700 000 IN RESPECT OF ENTRANCE FEE PAID BY THE APPELLANT COMPA NY TO THE BELVEDERE OBEROI ASSESSEE CLAIMED IT AS ALLOWABLE EXPENDITU RE. ASSESSING OFFICER HOWEVER HELD THAT MEMBERSHIP WAS ADVANTAGE OF ENDUR ING NATURE AND IS AN EXPENDITURE OF CAPITAL NATURE. THE AO/DRP HAS FAILE D TO APPRECIATE THE BUSINESS EXPEDIENCY OF THE ONE TIME EXPENDITURE SO INCURRED. THE ALLOWABILITY OF CLUB ENTRANCE FEE STANDS SQUARELY C OVERED BY THE RECENT HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS UNITED GLASS MFG CO. LTD (TS 798 SC 2012) AND DELHI HIGH COURTS IN THE CASE OF CIT VS. SAMTEL COLOR LTD. (180 TAXMAN 82) CIT VS. NESTLE I NDIA LTD. (296 ITR 682) 5. LD. CIT (DR) SHRI PEEYUSH JAIN APROPOS TRANSFER PRICING ADDITIONS CONTENDS THAT ITAT DELHI BENCH B IN ASSESSEES OW N CASE FOR A.Y. 2006/07 & 2007-08 (ITA NOS. 958/DEL/12 & 5277/DEL/2 011) VIDE ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 18 CONSOLIDATED ORDER DATED 12-10-2012 ON THE ASPECT OF RISKS HAS OBSERVED THAT: THERE ARE LARGE NUMBER OF FACTORS WHICH EFFECT THE BUSINESS SUCH AS FUNCTION PERFORMED ASSETS EMPLOYED AND RIS K ASSUMED THE CONCEPT OF RISK IN ITSELF PROVIDES VARIOUS TYPE S OF RISKS. LEARNED TPO IN HIS ORDER ON PAGE NO. 24 HAS CONSIDE RED 17 TYPES OF RISKS IN A TABULAR FORM NAMELY MARKET RI SK CUSTOMERS CREDIT RISK AND FOREIGN EXCHANGE RISK. THE ASSESSEE IN ITS TP STUDY REPORT HAS ALSO ACCEPTED THAT THROUGH IT IS A CAPTIVE SERVICE PROVIDER AND NOT EXPOSED WITH VARIOUS RISKS BUT IT IS NOT A TOTALLY RISK FREE ENTERPRISES. THE NATURE OF RISK IN THE CASE OF ASSESSEE ARE DIFFERENT. WE HAVE MADE A ANALYSIS OF THE ASSESSEES TP STUDY REPORT A SWELL AS THE FINDINGS RECORDED BY THE LEARNED TPO AND THE DRP. WE HAVE EXTRACTED THE FILTERS APPLIED BY THE ASSESSEE FOR ELIMINATING THE NON-COM PARABLE COMPANIES OR ADJUSTING THEIR PROFIT MARGIN THE ASS ESSEE HAS NOT APPLIED THE FILTER I.E. THE COMPANIES WHO HAVE INCU RRED EXPENSES OF MORE THAN 5% OF ITS SALES ON ADVERTISEMENT AND MARKETING WHICH REQUIRED TO BE EXCLUDED. AT THIS STAGE IN TH E ABSENCE OF ANY FINDING AT THE LEVEL OF THE TPO OR OF THE LEAR NED DRP IT IS DIFFICULT TO VERIFY THE VERSION PUT FORTH BY THE LE ARNED COUNSEL FOR THE ASSESSEE. 5.1. THUS THE CLAIM OF THE ASSESSEE THAT IT CARRIE D NO RISK IS NOT A CORRECT ARGUMENT. IT IS TO BE BORNE IN MIND THAT IT CARRIES ELEMENTS OF RISK. 5.2. COMING TO THE ISSUE OF EXCLUSION OF THESE TWO COMPARABLES LD. CIT (DR) RELIES ON THE FOLLOWING JUDGMENTS: (I) M/S BAYER MATERIAL SCIENCE P. LTD. VS. ADDL. CIT ITA NO. 7977/MUM/2010 ORDER DATED 16-12-2011. (II) ITA NO. 7894/MUM/2010 M/S SYMANTEC SOFTWARE SOLUT IONS PVT. LTD. VS. ACIT ORDER DATED 31-5-2011. (III) ITA NO. 1082/HYD/2010 DCIT VS. M/S DELOITTE CONSU LTING INDIA PVT. LTD. ORDER DATED 22-7-2011. ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 19 FOR THE PROPOSITION THAT THE COMPARABLES CANNOT BE EXCLUDED MERELY ON THE BASIS OF TURN OVER OR SOME MARGINAL DIFFERENCE OF F UNCTIONALITY. DETERMINATION OF ALP IS A WORK OF ESTIMATE AND THE ASSESSEE IS IN MARKETING CONSULTANCY SO ARE THE FUNCTIONS OF VAPI AND WAPCO S WHICH HAVE BEEN HELD AS COMPARABLES ON REASONABLE BASIS. THEREFORE THE TPO AND DRP RIGHTLY APPLIED THESE COMPARABLES. 5.3. APROPOS CORPORATE ADDITIONS RELIANCE IS PLACE D ON THE ORDERS OF LOWER AUTHORITIES. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. APROPOS ASSESSEES CONTENTION THAT ASSESSEE IS IN MERELY FUNCTIONAL ADVISORY CONSULTANCY SERVICE WITHOUT ANY RISK CANNO T BE ACCEPTED AS IN PRECEDING TWO YEARS THE ITAT HAS HELD THAT IT IS IN MARKETING SERVICES WHICH CARRY ELEMENTS OF RISK AND THE ASSESSEES SERVICES ARE TO BE TREATED AS MARKETING SERVICES. 6.1. COMING BACK TO THE ISSUE OF COMPARABILITY THE INCLUSION/ EXCLUSION OF VAPI AND WAPCOS THE ITAT IN THE CASES OF M/S MCI C OM INDIA P. LTD. AND M/S VERIZON INDIA P. LTD. (SUPRA) HAS HELD THAT COMPANIES LIKE EIL RITES WAPSOS AND TCE ARE ENGINEERING COMPANIES AND PROVIDE END TO END SOLUTIONS AND THEREFORE THEY CANNOT BE COMPARED WIT H THOSE ASSESSEE WHO WERE INTO PROVIDING MARKETING SUPPORT SERVICES TO T HE PARENT COMPANY. THEY WERE HELD TO BE FUNCTIONALLY NOT COMPARABLE WITH TH EE ENGINEERING COMPANIES. THE CASE OF VAPI ALSO FALLS ON THE SAME FOOTING. THEREFORE RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN THE CASES OF M/S MCI COM INDIA P. LTD. AND M/S VERIZON INDIA P. LTD. (SUPRA) AND ESTEL IN ITA NO. 584/BANGLORE/06 WE ARE OF THE VIEW THAT VAPI AND WA PCOS ARE FUNCTIONALLY NOT COMPARABLE TO THE ASSESSEE. THEREF ORE THEY ARE TO BE EXCLUDED. THE ISSUE OF TURN OVER DOES NOT ARISE IN THIS CASE. IN VIEW OF THESE ITA 6390/DEL/2012 ACTIS ADVISERS PVT. LTD. 20 FACTS THE MATTER WILL GO BACK TO THE FILE OF AO /T PO WHO WILL DETERMINE THE T.P. ADJUSTMENTS BY EXCLUDING VAPI AND WAPCOS COMP ARABLES. THIS GROUND OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 6.2. APROPOS CORPORATE ADDITIONS - THE ISSUE ABOU T DEPRECIATION IT IS NOW WELL SETTLED THAT COMPUTERS AND PERIPHERALS ARE EL IGIBLE FOR DEPRECIATION @ 60%. BESIDES ASSESSEES OPENING WDV CANNOT BE DISTU RBED. IN VIEW THEREOF WE DIRECT THE ASSESSING OFFICER TO ALLOW ASSESSEE THE DEPRECIATION ON THE COMPUTERS AND PERIPHERALS @ 60% WITHOUT DISTURBING THE OPENING WDV. 6.3. APROPOS CLUB ENTRANCE FEES RESPECTFULLY FOLLO WING THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF UNITED GLASS MFG. CO. LTD. AND HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF SA MTEL COLOR LTD. & NESTLE INDIA LTD. (SUPRA)THIS CLAIM OF THE ASSESSE E IS ALLOWED. 6.4. CHARGING OF INTEREST U/S 234B & 234D ARE CONSE QUENTIAL. 7. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 05-07- 2013. SD/- SD/- ( SHAMIM YAHYA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH JULY 2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR