M/s Vestergaard Asia Pvt. Ltd.,, New Delhi v. DCIT, New Delhi

ITA 6670/DEL/2015 | 2011-2012
Pronouncement Date: 30-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 667020114 RSA 2015
Assessee PAN AACCV2729E
Bench Delhi
Appeal Number ITA 6670/DEL/2015
Duration Of Justice 1 year(s) 11 month(s) 15 day(s)
Appellant M/s Vestergaard Asia Pvt. Ltd.,, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted I1
Tribunal Order Date 30-11-2017
Date Of Final Hearing 26-12-2016
Next Hearing Date 26-12-2016
First Hearing Date 26-12-2016
Assessment Year 2011-2012
Appeal Filed On 15-12-2015
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE : SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI L.P. SAHU ACCOUNTANT MEMBER ITA NO. 6670/DEL./2015 ASSESSMENT YEAR: 2011-12 VESTERGAARD ASIA PVT. LTD. 302 RACTANGLE ONE BLDG. D-4 SAKET NEW DELHI. PAN - AACCV2729E (APPELLANT) VS. DCIT CIRCLE 26(2) NEW DELHI. (RESPONDENT) APPELLANT BY SH. G.C. SRIVASTAVA ADVOCATE RESPONDENT BY SH. AMRENDER KUMAR CIT/DR & SH. KUMAR PRANAV SR. DR ORDER PER L.P. SAHU A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER U/S. 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT. 1961 (IN SHORT 'THE ACT') I.E. THE ORDER OF THE ASSESSING OFFICER. CIRCLE- 26(1) DATED 23.10.2015 INCORPORATING THE DIRECTIONS OF LEARNED DISPUTE RESOLUTION PANEL (DRP) ON THE ORDER OF TRANSFER PRICING OFFICER (TPO) PASSED U/S. 92CA(3) DATED 14.01.2015 AFTER DIRECTIONS OF ID. DRP U/S. 144C(5) OF THE ACT. THE APPELLANT HAS RAISED IN ALL 10 GROUNDS OF APPEAL AS UNDER : DATE OF HEARING 16.10.2017 DATE OF PRONOUNCEMENT 30 .11.2017 ITA NO. 6670/DEL./2015 2 1. 'THAT ON FACTS AND IN LAW THE ORDER PASSED BY THE D EPUTY COMMISSIONER OF INCOME TAX CIRCLE 26 (2) NEW DELHI ('LEARNED AO ') UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT 1961 ('THE ACT') ON THE DIRECTIONS OF THE HON'BLE DISPUTE RESOLUTION PA NEL ('DRP') IS BAD IN LAW IN AS MUCH AS IT FAILED TO APPRECIATE THE FACT S INVOLVED AND THE APPLICABLE LAW THEREON. 2. THAT ON FACTS AND IN LAW THE LEARNED AO HAS ERRE D IN MAKING AN ADDITION OF RS. 63 54 367 TO THE INCOME OF THE APPE LLANT ON ACCOUNT OF TRANSFER PRICING ('TP') ADJUSTMENT. 3. THAT ON FACTS AND IN LAW THE LEARNED AO/DRP HAS ERRED IN UPHOLDING THE REJECTION OF TP DOCUMENTATION OF THE APPELLANT B Y THE TRANSFER PRICING OFFICER ('TPO '). 4. THAT ON FACTS AND IN LAW THE LEARNED AO/DRP HAS ERRED IN NOT REJECTING THE FRESH ANALYSIS MADE BY THE TPO AND USE OF INAPPR OPRIATE FILTERS TO FIND THE COMPARABLES. 5. THAT ON FACTS AND IN LAW THE LEARNED AO/DRP HAS ERRED IN UPHOLDING THE REJECTION OF USE OF MULTIPLE YEAR DATA BY THE A PPELLANT. 6. THAT ON FACTS AND IN LAW THE LEARNED AO/DRP HAS ERRED IN REJECTION OF COMPARABLES ADOPTED BY THE APPELLANT AND RETAINING THE NEW COMPARABLES ADOPTED BY THE TPO. 7. THAT ON FACTS AND IN LAW THE LEARNED AO/DRP HAS ERRED IN COMPLETELY DISREGARDING THE ADDITIONAL COMPARABLES PROPOSED BY THE APPELLANT FOR WHICH DATA WAS SUBSEQUENTLY AVAILABLE DURING THE HE ARINGS. 8. THAT ON FACTS AND IN LAW THE LEARNED AO/DRP HAS ERRED IN REJECTION OF RISK ADJUSTMENT SOUGHT BY THE APPELLANT ON ACCOUNT OF DIFFERENCE IN RISK PROFILES. ITA NO. 6670/DEL./2015 3 9. THAT ON FACTS AND IN LAW THE LEARNED AO HAS ERRE D IN DISREGARDING THE DIRECTIONS OF DRP TO ADOPT CORRECT NUMBER WHILE CAL CULATING THE PROFIT MARGINS OF SOME OF THE COMPARABLES. 10. THAT ON THE FACTS AND IN LAW THE LEARNED AO HAS ERRED IN CHARGING INTEREST UNDER SECTION 234B 234C AND INITIATING PE NALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT CONSEQUENT TO TH E ADDITIONS MADE IN THE ASSESSMENT ORDER PASSED U/S. 143(3)/144C OF THE ACT . ' 2 . THE ASSESSEE FILED ITS RETURN OF INCOME ON 23.09.20 11 SHOWING AN INCOME OF RS.78 65 208/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS ENTERED INTO IN TERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISE (AE) FOR PROVISION OF BUSINESS SUPPORT SERVICES AMOUNTING TO RS. 6 41 12 171/- AND CERTAIN OTHER TR ANSACTIONS LIKE PURCHASE OF PACKING MATERIAL EXPORT OF MARKETING MATERIAL FRE IGHT RECOVERED AND INTEREST INCOME AND THEREFORE REFERENCE U/S. 92CA OF THE AC T WAS MADE BY THE ID. ASSESSING OFFICER FOR DETERMINATION OF ARM'S LENGTH PRICE (ALP) FOR THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESS EE. THE ID. TPO PASSED AN ORDER U/S. 92CA(3) VIDE ORDER DATED 14.01.2015 PROP OSING AN ADJUSTMENT ON ACCOUNT OF BUSINESS SUPPORT SERVICES OF RS. L02.04. 869/-. BASED ON THIS THE ID. ASSESSING OFFICER PASSED A DRAFT ASSESSMENT ORDER O N 03.03.2015 WHEREIN THE TOTAL INCOME OF THE ASSESSEE WAS PROPOSED TO BE ASS ESSED AT RS. 1 81 94 110/- INCORPORATING TP ADJUSTMENT PROPOSED BY THE TPO AND SOME ADDITION ON CORPORATE TAX MATTER. THE APPELLANT FURTHER FILED I TS OBJECTIONS AGAINST THE ITA NO. 6670/DEL./2015 4 TRANSFER PRICING ADJUSTMENT PROPOSED IN DRAFT ASSES SMENT ORDER BEFORE THE ID. DRP AND THE ID. DRP VIDE ITS DIRECTIONS DATED 10.09 .2015 DISPOSED OF THE OBJECTIONS OF THE ASSESSEE. CONSEQUENTLY IN THE FI NAL ASSESSMENT ORDER TRANSFER PRICING ADJUSTMENT WAS MADE OF RS. 63 54 3 67/- IN THE NORMAL COMPUTATION OF TOTAL INCOME ASSESSING THE TOTAL INC OME OF THE ASSESSEE AT RS.1 42 19 575/-. THIS ORDER OF THE ID. ASSESSING O FFICER IS IN CHALLENGE BEFORE US ON SEVERAL GROUNDS. 3. THE ASSESSEE IS ENGAGED IN PROVIDING VARIOUS BU SINESS SUPPORT SERVICES TO ITS AES SUCH AS LOGISTICS REGULATORY SUPPORT EXPO RT OF MARKETING COLLATERALS IT SUPPORT CORPORATE ACCOUNTING ETC. 4. THE ASSESSEE IN ITS TP DOCUMENTATION I.E. T. P. STUDY REPORT HAS USED TRANSACTION NET MARGIN METHOD (TNMM) AS THE MOST AP PROPRIATE METHOD AND USED OPERATING PROFIT (OP) / TOTAL COST (TC) AS THE PROFIT LEVEL INDICATOR (PLI). THE ASSESSEE HAS USED 8 COMPARABLES WITH AN AVERAGE MARGIN OF 9.54% USING THE MULTIPLE YEAR DATA AND COMPARED IT WITH MARGIN OF THE ASSESSEE AT 9.73% AND HAS SUBMITTED THAT ITS INTERNATIONAL TRANSACTIO NS ARE AT ARM'S LENGTH. THE ID. TPO REJECTED THE TRANSFER PRICING DOCUMENTATION OF THE ASSESSEE AND APPLYING ITS OWN FILTER SELECTED 10 COMPARABLES WI TH AN AVERAGE PLI OF 25.64% AND TAKING INTO CONSIDERATION THE PLI OF OP/ OC I.E. OPERATING ITA NO. 6670/DEL./2015 5 PROFIT/OPERATING COST DETERMINED THE ALP OF INTERN ATIONAL TRANSACTION OF RS.6 91 02 834/- AT RS.7 93 07 703/-AND PROPOSED AN ADJUSTMENT OF RS.1 02.04 869/-. 5. GROUNDS NO. 1 TO 4 OF APPEAL ARE STATED TO BE C OVERED AND GENERAL AND THEREFORE THEY ARE NOT ADJUDICATED SEPARATELY AND HENCE DISMISSED. GROUND NO.5 WHICH RELATES TO THE APPLICATION OF MULTIPLE YEAR DATA IS NOT PRESSED BY THE ASSESSEE AND HENCE DISMISSED. 6. GROUND NO. 6 IS AGAINST THE REJECTION BY THE TP O OF EDCIL (INDIA) LTD. AS COMPARABLE AND INCLUSION OF CERTAIN OTHER COMPANIES AS COMPARABLES BY THE TPO. THIS COMPARABLE WAS REJECTED BY THE TPO ON PAG E 21 OF HIS ORDER ON THE GROUND OF NON-AVAILABILITY OF DATA AND FUNCTIONAL D IFFERENCES. ON OBJECTION BEFORE THE DRP THE ASSESSEE SUBMITTED THAT THE FIN ANCIALS DOWNLOADED FROM MCA'S WEBSITE AND THE BUSINESS DESCRIPTION OF THE C OMPARABLE WAS FILED BEFORE THE TPO. THESE DETAILS WERE FILED AGAIN BEFO RE THE DRP. HOWEVER IN PARA 5.3 OF ITS ORDER THE DRP UPHELD THE ACTION OF THE TPO AND HELD THAT THE FINANCIALS ARE NOT AVAILABLE IN PUBLIC DOMAIN. 7. BEFORE US THE ID. AR CONTENDED THAT THE FINANC IAL INFORMATION DOWNLOADED FROM THE MCA WEBSITE CONSTITUTES INFORMATION IN PUB LIC DOMAIN AND SHOULD BE ITA NO. 6670/DEL./2015 6 CONSIDERED IN THE COMPARABILITY ANALYSIS. ON THE FU NCTIONAL PROFILE OF THE COMPARABLE THE ID. AR SUBMITTED THAT THE COMPARABL E IS ENGAGED IN PROVIDING SERVICES IN THE NATURE OF TECHNICAL ASSISTANCE PRO CUREMENT SERVICES PLACEMENT SERVICES TESTING AND RECRUITMENT ETC. H E ARGUED THAT SINCE THE FUNCTIONAL PROFILE OF BOTH THE ASSESSEE AND THE COM PARABLE IS THE SAME BEING BUSINESS SUPPORT SERVICES THE COMPARABLE SHOULD BE INCLUDED IN THE FINAL ANALYSIS. THE ID. AR FURTHER REFERRED TO PAGE 23 OF THE TPO'S ORDER WHEREIN THE TPO HAS INCLUDED ANOTHER COMPANY. GLOBAL PROCUR EMENT CONSULTANTS LTD. PROVIDING SERVICES SIMILAR TO EDCIL (INDIA) LTD. HE ALSO RELIED ON THE DECISION OF COORDINATE BENCH IN THE CASE OF ELI LILLY & CO. (INDIA) P. LTD. VS. ACIT (ITA NO. 788/DEL/2015) WHERE ON SIMILAR FACTS EDCIL (IN DIA) LTD. WAS INCLUDED IN THE FINAL LIST OF COMPARABLES. 8. THE ID. DR RELIED ON THE ORDERS OF THE ID. DRP AND THE ID. TPO. HE VEHEMENTLY SUBMITTED THAT THE COMPANY IS NOT FUNCTI ONALLY COMPARABLE TO THE ASSESSEE AND ITS FINANCIAL DATA IS NOT AVAILABLE IN PUBLIC DOMAIN. HE THEREFORE SUBMITTED THAT THE COMPANY SHOULD NOT BE INCLUDED I N THE FINAL LIST OF COMPARABLES. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS. BEFORE US THE ID. AR HAS SUBMITTED THAT THE FINANCIAL DATA WAS MADE AVAI LABLE BEFORE THE TPO AS ITA NO. 6670/DEL./2015 7 WELL AS DRP FOR THIS HE HAS REFERRED TO PAGE 113- 114 OF PAPER BOOK NO. 1 AND PAGE 159-192 OF PAPER BOOK NO. 2. IN OUR VIEW THE INFORMATION AVAILABLE ON THE MCA WEBSITE SHOULD BE CONSIDERED AS BEING AVAIL ABLE IN PUBLIC DOMAIN FOR THE REASON THAT ANYONE CAN ACCESS AND DOWNLOAD SUCH INFORMATION. ON THE COMPARABILITY OF THE COMPANY THE TPO HAS NOTED THA T THE COMPANY IS PROVIDING TECHNICAL SUPPORT SERVICES PROCUREMENT S ERVICES TRAINING AND MANAGEMENT SERVICES ETC. SUCH SERVICES ARE IN THE N ATURE OF BUSINESS SUPPORT SERVICES AND ARE COMPARABLE TO THE SERVICES PERFORM ED BY THE ASSESSEE. OUR VIEW IS FURTHER SUPPORTED BY THE DECISION OF THE CO ORDINATE BENCH IN THE CASE OF ELI LILLY & CO. (INDIA) P. LTD. VS. ACIT (SUPRA) WHERE ON THE IDENTICAL FACTS ON THE SAID COMPARABLE EDCIL (INDIA) LTD. THE COO RDINATE BENCH HAS HELD AS UNDER: '30. HAVING CONSIDERED THE RIVAL SUBMISSIONS -WE FIND TH AT THE AFORESAID COMPANY WAS HELD TO BE VALID COMPARABLE IN OUR OWN ORDER FOR ASSESSMENT YEAR 2009-10 BY HOLDING AS UNDER: '19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. IN THE PRESENT CASE THE ASSESSEE WANTS INCLUSION OF E DCIL. A GOVERNMENT COMPANY IN THE FINAL SET OF COMPARABLE S ADOPTED BY TPO/DRP. THE ASSESSEE INTER-ALIA SUBMITTED THAT IN THE APPELLANTS OWN CASE FOR THE A SSESSMENT YEAR 2008-09. DRP HAD DIRECTED THE TPO TO CONSIDER THE AFORESAID SEGME NT NAMELY 'TECHNICAL ASSISTANCE' AND 'HUMAN RESOURCE' AS COMPARABLE TO T HE ASSESSEE AND SINCE THE BUSINESS OF EDCIL AND ASSESSEE HAS REMAINED UNCHANG ED FROM PRECEDING YEARS EDCIL CONTINUES TO BE COMPARABLE TO THE ASSESSEE AN D THERE EXISTS NO LEGITIMATE REASON TO REJECT THE COMPANY IN THE YEAR UNDER CONS IDERATION. THE ASSESSEE ITA NO. 6670/DEL./2015 8 PLACED HIS RELIANCE ON THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LIMITED 358 ITR 295 WHEREIN TH EIR LORDSHIPS REITERATED THE LAW LAID DOWN IN RADHASOAMI SATSANG VS. CIT 193 ITR 3 21 TO HOLD THAT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAVE BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE PARTIES HAVE ALLOWED THE POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORD ER IT IS NOT ALLOWED TO CHANGE THE POSITION IN ANY SUBSEQUENT YEAR. HAVING GONE TH ROUGH THE ORDER DATED 30.8.2012 FOR ASSESSMENT YEAR 2008-09 IN THE CASE O F APPELLANT IT IS STATED THAT DRP HAS HELD IN REGARD TO THE ABOVE COMPARABLE AS U NDER: '1 EDUCATIONAL CONSULTANTS INDIA LTD. (EDCIL) ACCOR DING TO THE ASSESSEE EDCIL OFFER SUPPORT SERVICES IN THE FOLLOWING AREAS: STUDENT PLACEMENT SECONDMENT OF EXPERTS TECHNICAL ASSISTANCE PROCUREMENT SERVICES TESTING AND RECRUITMENT SERVICES TECHNICAL SUPPORT GROUP TRAINING AND MANAGEMENT SERVICES THE COMPANY OPERATES IN THREE SEGMENTS: TECHNICAL ASSISTANCE INSTITUTIONAL DEVELOPMENT AND HUMAN RESOURCES DEVELOPMENT. THE SERVICES PROVIDED UNDER TECHNICAL AS SISTANCE AND HUMAN RESOURCE DEVELOPMENT HAVE BEEN CONSIDERED AS COMPAR ABLE TO THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO ITS AE. FURTHER WE WISH TO SUBMIT THE EDCIL WAS ACCEPTED A S COMPARABLE TO THE ASSESSEE BY THE LEARNED TPO DURING THE ASSESSMENT PR OCEEDINGS FOR AY 2007-08 AS WELL AS EARLIER YEARS. HENCE SINCE THE BUSINESS OF EDCIL AND THE ASSESSEE HAS REMAINED UNCHANGED FROM LAST YEAR EDCIL CONTINUES TO BE COMPARABLES TO THE ASSESSEE AND THERE EXIST NO LEGITIMATE REASON TO RE JECT THE COMPANY THIS YEAR. ' AFTER CONSIDERING THE ABOVE FACTS WE FIND THAT FUN CTIONALLY IT IS COMPARABLE AND TPO IS DIRECTED TO INCLUDE IT IN THE LIST OF COMPARA BLES FOR COMPUTATION OF ALP' ITA NO. 6670/DEL./2015 9 21 FOR THE FOREGOING REASON AND THERE BEING NO CHAN GE IN THE FACTS FOR THE INSTANT ASSESSMENT YEAR THE AO/DRP IS DIRECTED TO INCLUDE EDCIL IN THE FINAL SET OF COMPARABLE COMPANIES. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING OBSERVATION OF THE MUMBAI BENCH OF THE TRI BUNAL IN THE CASE OF ACIT VS. NGC NETWORK INDIA (P) LTD. 10 TAXMANN.COM 140 WHEREIN IT HAS BEEN HELD AS UNDER: ''THESE COMPARABLES AND THE METHOD OF COMPUTATION OF ARM'S LENGTH PRICE HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE SUBSEQUENT A SSESSMENT YEAR I.E. 2004- 05. THEREFORE IN OUR VIEW COMPARABLES SELECTED BY TH E ASSESSEE HAVE TO BE ADOPTED FOR THE PURPOSE OF COMPUTATION OF TRANSFER PRICING ADJUSTMENTS THIS YEAR ALSO. ' 31. FOLLOWING THE SAME EDCIL IS HELD TO BE FUNCTION ALLY COMPARABLE TO THE APPELLANT AND THEREFORE INCLUDED IN THE FINAL SET O F COMPARABLE COMPANIES. ' THEREFORE FOLLOWING THE ORDER OF COORDINATE BENCH WE ALSO HOLD THAT EDCIL BEING FUNCTIONALLY SIMILAR AS PER ITS BUSINESS PROF ILE WHICH REMAINS UNCONTROVERTED BY THE REVENUE REQUIRES TO BE INCLU DED. 10. THE ASSESSEE HAS ALSO CHALLENGED THE SELECTION OF CERTAIN COMPANIES BY THE TPO WHICH ARE NOT COMPARABLE TO THE ASSESSEE AS PER FAR ANALYSIS. THE ASSESSEE HAS CONTESTED THE FOLLOWING COMPARABLES IN CLUDED BY THE ID. TPO. (I). APTICO LIMITED (II). TSR DARASHAW LIMITED (III). CAMEO CORPORATE SERVICES LIMITED (I). APTICO LIMITED: ITA NO. 6670/DEL./2015 10 11. THE ID. TPO INCLUDED THIS COMPANY IN THE FINAL SET OF COMPARABLES. THE ASSESSEE OBJECTED TO THE INCLUSION OF THIS COMPANY BEFORE THE TPO STATING THAT THIS COMPANY IS FUNCTIONALLY NOT COMPARABLE AS IT P ROVIDES HIGH END CONSULTANCY SERVICES AND HAS HIGHLY SKILLED PROFESS IONALS TO COLLATE AND ANALYZE DATA. THE ID. TPO REJECTED ALL THESE ARGUME NTS STATING THAT THE COMPANY IS PROVIDING VARIOUS SUPPORT SERVICES FOR T HE DEVELOPMENT OF TOURISM INDUSTRY. THEREFORE HE INCLUDED IT AS A CO MPARABLE. THE ID. DRP ALSO REJECTED THE OBJECTIONS OF THE ASSESSEE IN PARA 5.4 OF ITS ORDER FOR THE SAME REASONS. 12. THE LEARNED AR OF THE ASSESSEE REFERRED TO THE EXTRACT OF THE ANNUAL REPORT GIVEN ON PAGE 25 OF THE TPO'S ORDER AND SUBMITTED T HAT THE COMPANY IS ENGAGED IN HIGH END CONSULTANCY SERVICES SUCH AS CL USTER DEVELOPMENT ENTREPRENEURSHIP DEVELOPMENT & TRAINING ASSET RECO NSTRUCTION & MANAGEMENT SERVICES MICRO ENTERPRISES DEVELOPMENT ETC. HE SUBMITTED THAT THESE SERVICES ARE VERY SOPHISTICATED AND NOT AT AL L COMPARABLE TO THE BUSINESS SUPPORT SERVICES PROVIDED BY THE ASSESSEE LIKE LOGI STICS. IT SUPPORT ACCOUNTING ETC. HE FURTHER RELIED ON THE DECISION O F THE COORDINATE BENCH IN THE CASE OF ADIDAS TECHNICAL SERVICES P. LTD. VS. D CIT (2016) (69 TAXMANN.COM 401)(DELHI TRIBUNAL) WHEREIN ON SIMILAR FACTS THI S COMPARABLE WAS REJECTED. ITA NO. 6670/DEL./2015 11 13. THE ID. DR RELIED ON THE ORDER OF THE ID. TPO A ND REITERATED THE FINDINGS GIVEN AT PAGE NO. 25 OF THE ORDER OF THE TPO. HE SU BMITTED THAT THIS COMPARABLE SHOULD NOT BE EXCLUDED. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO REFERRED TO THE EXTRACT OF THE ANNUAL REPORT OF THE COMPANY WHEREIN IT IS S TATED THAT IT IS ENGAGED IN PROVIDING SERVICES IN THE NATURE OF ENTREPRENEURSHI P DEVELOPMENT & TRAINING ASSET RECONSTRUCTION & MANAGEMENT SERVICE S. MICRO ENTERPRISES DEVELOPMENT ETC. IN OUR VIEW THE ARGUMENTS OF THE ASSESSEE MERIT CONSIDERATION. THE SERVICES MENTIONED ABOVE CANNOT BE CATEGORIZED AS BUSINESS SUPPORT SERVICES. OUR VIEW IS FURTHER SUPP ORTED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF ADIDAS TECHNICAL SE RVICES PVT. LTD. VS. DCIT (SUPRA) WHEREIN ON THE IDENTICAL FACTS ON THE SAM E COMPARABLE OF APTICO LTD. THE COORDINATE BENCH HAS HELD AS UNDER: ''8.3. WE FIRST TAKE UP THE CASE OF APITCO LTD. (A) APITCO LTD.:- APITCO LTD. IS A PUBLIC SECTOR UNDERTAKING PROVIDING VARIOUS SUPPORT SERVICES FOR THE DEVELOPMENT OF TOURISM INDUSTRY. LATER THE FUNCTION AL PROFILE OF THE COMPANY HAD UNDERGONE A CHANGE AND IT IS NOW ENGAGED IN PR OVIDING TECHNICAL CONSULTANCY RELATING TO ASSET RECONSTRUCTION COMPAN IES MANAGEMENT SERVICES MICRO ENTERPRISE DEVELOPMENT SKILL DEVELOPMENT ETC . THIS IS A GOVERNMENT COMPANY. THE FACT THAT ITS OPERATIONS ARE MAINLY BAS ED ON THE POLICY REQUIREMENTS OF THE GOVERNMENT AND THE FACT THAT IT IS A PREFERRED COMPANY OF THE GOVERNMENT OF INDIA FOR ENTRUSTMENT OF WORKS C ANNOT BE IGNORED. BE IT AS IT MAY IN OUR CONSIDERED OPINION THE FUNCTIONAL PROF ILE OF THIS COMPANY IS DIFFERENT ITA NO. 6670/DEL./2015 12 FROM THAT OF THE ASSESSEE COMPANY AND HENCE THE SAM E SHOULD BE EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES -WHILE COMPUTING T HE ALP. ' THEREFORE FOLLOWING THE ORDER OF THE COORDINATE BE NCH WE HOLD THAT APTICO LIMITED IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE AND IS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. (II). TSR DARASHAW LIMITED 15. THIS COMPARABLE WAS SELECTED BY THE LEARNED TPO AFTER REJECTING THE CONTENTIONS OF THE ASSESSEE REGARDING FUNCTIONAL NO N-COMPARABILITY. THE LEARNED TPO HELD THAT SINCE THE CLIENTS OF THE COMP ANY ARE IN INDIA IT IS NOT IN FACT PROVIDING IT ENABLED SERVICES TO ITS GROUP EN TITIES BUT PROVIDING THEM BUSINESS SUPPORT SERVICES. HE HELD THAT THIS COMPAN Y IS PROVIDING BUSINESS OUTSOURCING SERVICES AND IS THEREFORE COMPARABLE TO THE ASSESSEE. THE ID. DRP ALSO REJECTED THE OBJECTIONS OF THE ASSESSEE. 16. THE LEARNED AR OF THE ASSESSEE RELIED ON PAGE N O. 128 OF PAPERBOOK-2 AND SUBMITTED THAT THIS COMPANY IS PRIMARILY A SHARE TR ANSFER AND REGISTRY AGENT WHO PERFORMS SOME OTHER ANCILLARY SERVICES SUCH AS RECORD MANAGEMENT AND CORPORATE FIXED ASSET MANAGEMENT. HE SUBMITTED THAT THE SERVICES PROVIDED BY THE COMPANY ARE COMPLETELY DIFFERENT FROM THE BU SINESS SUPPORT SERVICES PROVIDED BY THE ASSESSEE. TO SUBSTANTIATE HIS CLAIM HE RELIED ON THE DECISIONS ITA NO. 6670/DEL./2015 13 OF THE COORDINATE BENCH IN THE CASE OF ADIDAS TECHN ICAL SERVICES P. LTD. VS. DCIT (SUPRA) AND ELI LILLY & CO. (INDIA) P. LTD. VS . ACIT (SUPRA). 17. THE LD. DR REFERRED TO THE FINDINGS OF THE TPO ON PAGE 25 OF THE TPO'S ORDER AND SUBMITTED THAT THE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS SERVICES. HE FURTHER ARGUED THAT IN TNMM B ROAD COMPARABILITY IS TO BE SEEN AND THAT IT IS NOT POSSIBLE TO FIND TWO COM PANIES PROVIDING IDENTICAL SET OF SERVICES. IT WAS ARGUED THAT COMPARISON HAS TO BE MADE BETWEEN THE FAR ANALYSIS OF THE COMPARABLE WITH THE ASSESSEE AN D OTHER MINOR DIFFERENCES WOULD NOT BE SUFFICIENT FOR EXCLUDING THE COMPANY F ROM THE LIST OF COMPARABLES. RELIANCE WAS PLACED ON THE DECISIONS O F THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISO RS (INDIA) (P.) LTD. VS DCIT (56 TAXMAN.COM 417) AND RAMPGREEN SOLUTIONS (P.) LT D. VS CIT (60 TAXMAN.COM 355) AND THE COORDINATE BENCH DECISION I N THE CASE OF COPAL RESEARCH INDIA (P.) LTD. VS DCIT (73 TAXMAN.COM 157 ). HE THEREFORE SUBMITTED THAT THE COMPANY SHOULD NOT BE EXCLUDED FROM THE LI ST OF COMPARABLES. 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. WE AGREE WITH THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE AFORESAID CASES THAT A COMPARISON HAS TO BE MADE BETWEEN THE FAR ANALYSIS OF THE ASSESSEE AND THE COMPARABLES. APPLYING THIS PRINCIPLE IN THE PRESENT CASE WE CANNOT ACCEPT THE ITA NO. 6670/DEL./2015 14 CONTENTION OF THE ID. DR THAT FAR ANALYSIS OF TSR D ARASHAW LTD. IS SIMILAR TO THE ASSESSEE. THE COMPANY SOUGHT TO BE INCLUDED BY THE ID. DR IS PERFORMING SHARE REGISTRY SERVICES WHEREAS THE ASSESSEE PERFOR MS LOGISTICS IT SUPPORT SERVICES ETC. THE FUNCTIONS INVOLVED ASSETS USED A ND RISKS BORNE BY THESE TWO ENTITIES WILL BE COMPLETELY DIFFERENT. WE FURTHER D RAW SUPPORT FROM THE DECISION OF THE COORDINATE BENCH IN THE CASE OF ADI DAS TECHNICAL SERVICES P. LTD. VS. DCIT (SUPRA) WHEREIN ON IDENTICAL FACTS TSR DARASHAW LTD. WAS EXCLUDED AS A COMPARABLE OBSERVING AS UNDER: '(D) TSR DARASHAW LTD.:- THE TPO INCLUDED THIS COMPANY ON THE GROUND THAT THE COMPANY IS PROVIDING BUSINESS OUT SOURCING SERVICES TO CLIENTS IN INDIA THESE SERVICES ARE PROVIDED TO LOCAL CLIENTS AND NOT THE FOREIGN CLIENTS AND HENCE THEY ARE NOT SIMILAR TO ITES SERVICES. THE TPO OBSERVED THA T ITES COMPANIES HAVE THE ADVANTAGE OF LOCATION SAVINGS WHILE THE BUSINESS S ERVICE COMPANIES DO NOT HAVE ADVANTAGE. SINCE IN THIS CASE THE SERVICES ARE PRED OMINANTLY PROVIDED IN INDIA THE COMPANY IS A CORRECT COMPARABLE. HE ALSO HELD T HAT THE ASSESSEE HAD NOT GONE INTO THE VERTICALS OR HIGH END OR LOW END DIST INCTIONS WHILE SELECTING THE COMPARABLES AND HAS SELECTED COMPANIES OPERATING IN VARIOUS VERTICALS. THE TPO HAS ALSO SELECTED COMPARABLES WHICH ARE BROADLY ENG AGED IN THE FIELD OF MARKETING SUPPORT SERVICES WHICH HAS SIMILAR TO THE SERVICES PROVIDED BY THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT THE COMPANY IS NOT FUNCTIONALLY COMPARABLE. IT IS CONTENDED THA T THERE CAN BE NO COMPARISON BETWEEN A SPECIFIC PAY ROLL SERVICE RENDERED AND MA RKETING SUPPORT SERVICE PROVIDED. IT WAS CONTENDED THAT TSR DARASHAW LTD. IS A BROKING AND INVESTMENT BANKING HOUSE AND AS 57.4% OF ITS INCOME IS FROM TH E SHARE REGISTRY SERVICES SEGMENT AND HENCE NOT A COMPARABLE. RELIANCE IS PLA CED ON THE FOLLOW ING DECISIONS. ITA NO. 6670/DEL./2015 15 I. MICROSOFT CORPORATION P. LTD VS. DC IT IN ITA NO . 5766/DEL/2011; II. PREMIER EXPLORATION SERVICES P. LTD. VS. ITO IN ITA NO.4935/DEL/2011. IN OUR CONSIDERED OPINION TSR DARASHAW LTD. CANNOT B E TAKEN AS A COMPARABLE AS 57.4% OF ITS INCOME IS FROM SHARE REGISTRY SERVI CES SEGMENT. THIS SHOWS THE FUNCTIONAL PROFILE OF THE ASSESSEE IS DIFFERENT. IN THE CASE OF MISCROSOFT CORPORATION LTD. (SUPRA) AT PARA 18 THE TRIBUNAL HAS HELD AS FOLLOWS. 'COMING TO THE MERITS OF COMPARABILITY WE FIND THA T THIS COMPANY HAS THREE SEGMENTS WHICH INTER ALIA INCLUDE: 'PAY ROLL AND TR UST FUND ACTIVITY (PAY ROLL) '. IT IS THIS SEGMENT WHICH HAS BEEN CONSIDERED BY THE ASSESSEE AS COMPARABLE. THIS COMPANY ON AN OVERVIEW IS A BROKING AND INVESTMENT BANKING HOUSE. ITS OTHER SEGMENTS ARE : 'REGISTRAR AND TRANSFER AGENT ACTIVIT Y (R&D)' AND 'RECORDS MANAGEMENT ACTIVITY (RECORDS)'. THE SEGMENT OF 'PAY ROLL' WAS CONSIDERED BY THE ASSESSEE AS COMPARABLE IN ITS TP STUDY REPORT AN D THE SAME IS NOW ASSAILED. UNDER THE 'PAY ROLL' SEGMENT THIS COMPANY UNDERTAK ES PAY ROLL AND EMPLOYEE TRUST FUND ADMINISTRATION AND MANAGEMENT. WHEN WE C OMPARE THE NATURE OF PAY ROLL ACTIVITY UNDERTAKEN BY THIS COMPANY WITH T HE MARKETING SUPPORT SERVICES RENDERED BY THE ASSESSEE TO ITS AES WE FI ND THAT BOTH ARE WAY APART FROM EACH OTHER. THERE CAN BE NO LOGICAL COMPARISON BETWEEN A SPECIFIC PAY ROLL SERVICES RENDERED BY A COMPANY TO ITS CLIENTS WITH THE MARKETING SUPPORT SERVICES RENDERED BY THE ASSESSEE TO ITS AES. THIS C OMPANY IS THEREFORE DIRECTED TO BE EXCLUDED FROM THE FINAL SET OF COMPARABLES. ' CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CASE W E DIRECT THE AO/TPO TO EXCLUDE THIS COMPARABLE. ' THE LD. DR COULD NOT CONTROVERT HOW THE FACTS OF TH E CASE OF THE ASSESSEE ARE DIFFERENT FROM THE CASE ABOVE AND THEREFORE FOLLO WING THE DECISION OF COORDINATE BENCH WE HOLD THAT TSR DARASHAW LTD. CA NNOT BE SAID TO BE ITA NO. 6670/DEL./2015 16 PROVIDING BUSINESS SUPPORT SERVICES AND IS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES. (III). CAMEO CORPORATE SERVICES LIMITED 19. THIS COMPARABLE WAS INCLUDED BY THE TPO BY HOLD ING THAT IT WAS PERFORMING BUSINESS SERVICES. HE REJECTED THE CONTE NTIONS OF THE ASSESSEE REGARDING ITS FUNCTIONAL DISSIMILARITY. THE ID. DRP ALSO REJECTED THE OBJECTIONS OF THE ASSESSEE AGAINST THE COMPANY'S INCLUSION. 20. BEFORE US THE LEARNED AR RELIED ON THE EXTRACT S OF THE COMPANY'S ANNUAL REPORT GIVEN ON PAGE 23 OF THE TPO'S ORDER AND SUBM ITTED THAT LIKE TSR DARASHAW LTD. THIS COMPANY IS ALSO PRIMARILY ENGAG ED IN THE BUSINESS OF REGISTRY AND SHARE TRANSFER AND WAS THEREFORE NOT C OMPARABLE TO THE ASSESSEE. HE RELIED ON THE DECISION OF THE COORDINATE BENCH I N THE CASE OF ADIDAS TECHNICAL SERVICES PVT. LTD. VS. DCIT (ITA NO. 862/ DEL/2016). 21. THE LEARNED DR RELIED ON THE ORDER OF THE TPO A ND REFERRED TO THE FUNCTIONAL PROFILE OF THE COMPANY. IT WAS SUBMITTED THAT THE COMPANY IS ENGAGED IN PROVIDING BUSINESS SERVICES AND IS COMPA RABLE TO THE ASSESSEE. HE VEHEMENTLY SUBMITTED THAT THE COMPANY SHOULD BE INC LUDED IN THE LIST OF COMPARABLES. ITA NO. 6670/DEL./2015 17 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E EXTRACTS FROM THE COMPANY'S ANNUAL REPORT. IN OUR VIEW THE FUNCTIONA L PROFILE OF CAMEO CORPORATE SERVICES LTD. IS SIMILAR TO THE PROFILE O F TSR DARASHAW LTD. AS WE HAVE ALREADY REJECTED TSR DARASHAW LTD. FROM THE LI ST OF COMPARABLES CAMEO CORPORATE SERVICES LTD. IS ALSO DIRECTED TO BE EXCL UDED FROM THE LIST OF COMPARABLES. WE FIND SUPPORT FROM THE DECISION OF T HE COORDINATE BENCH IN THE CASE OF ADIDAS TECHNICAL SERVICES PVT. LTD. VS. DCIT (ITA NO. 862/DEL/2016) WHEREIN ON IDENTICAL FACTS THE COMP ANY WAS EXCLUDED BY OBSERVING AS UNDER: '6. IN THE CASE OF CAMEO CORPORATE SERVICES LTD. TH E DRP IS OF THE VIEW THAT THE FUNCTIONS ARE COMPARABLE WITH THAT OF TSR DRAWSHAW L TD. AS THE TRIBUNAL IN ITS ORDER FOR THE A.Y. 2010-11 HAS DIRECTED EXCLUSION O F TSR DRAWSHAW LTD. FROM THE LIST OF COMPARABLES FOR THE SAME REASONS WE DIR ECT THE A.OJT.P.O. TO EXCLUDE CAMEO CORPORATE SERVICES LTD. FROM THE LIST OF COMP ARABLES IN THIS YEAR. ' IN THE RESULT GROUND NO. 6 OF THE APPEAL IS ALLOWE D. 23. GROUND NO. 7 IS AGAINST THE REJECTION OF COMPAN IES WHICH WERE PROPOSED BY THE ASSESSEE AT THE TIME OF TP ASSESSMENT AS THE IR DATA WAS NOT AVAILABLE AT THE TIME OF PREPARING TP REPORT. THE ASSESSEE SEEKS THE INCLUSION OF THE FOLLOWING THREE COMPARABLES- (I). MARKETING CONSULTANTS & AGENCIES LTD. ITA NO. 6670/DEL./2015 18 (II). SPORTING & OUTDOOR AD-AGENCY PVT. LTD. (III). OVERSEAS MANPOWER CORPORATION LTD. (I). MARKETING CONSULTANTS & AGENCIES LTD. 24. THIS COMPARABLE SOUGHT TO BE INCLUDED BY THE A SSESSEE WAS REJECTED BY THE TPO ON THE GROUND THAT ITS RATIO OF SERVICE INC OME TO TOTAL INCOME IS 67% HENCE IT FAILS THE SERVICE FILTER OF 75% APPLIED BY THE TPO. 25. BEFORE US THE ID. AR SUBMITTED THAT THE TPO H AS NO OBJECTIONS REGARDING THE FUNCTIONAL SIMILARITY OF THIS COMPARABLE. THE O NLY OBJECTION IS REGARDING THE SERVICE FILTER. HE SUBMITTED THAT THE COMPARABL E IS REPORTING A SEPARATE SERVICE SEGMENT IN ITS ANNUAL REPORT AND FOR THE PU RPOSE OF COMPARABILITY ANALYSIS ONLY THE FIGURES OF THE SERVICE SEGMENT A RE TAKEN. HE ARGUED THAT WHERE SEGMENTAL DATA FOR SERVICE INCOME IS AVAILABL E THERE CAN BE QUESTION OF APPLYING A SERVICE INCOME FILTER. HE THEREFORE SUBM ITTED THAT THIS COMPARABLE SHOULD BE INCLUDED IN THE LIST OF COMPARABLES. 26. THE ID. DR RELIED ON PARA 11.2 OF TPO'S ORDER A ND ARGUED THAT ONCE THE ASSESSEE HAS ACCEPTED THE 75% SERVICE INCOME FILTER THE COMPANIES WHICH FAIL THIS FILTER CANNOT BE ACCEPTED. HE THEREFORE SUBMI TTED THAT THE COMPANY SHOULD REMAIN EXCLUDED FROM THE LIST OF COMPARABLES . ITA NO. 6670/DEL./2015 19 27. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. THE SHORT QUESTION TO BE ANSWERED REGARDING THIS COMPARABLE IS THAT WHERE A COMPANY REPORTS A SEPARATE SERVICE SEGMENT IN ITS ANNUAL REPORT IS T HERE A NEED TO APPLY SERVICE INCOME FILTER. IN OUR VIEW THERE IS NO NEED OF APP LYING SUCH A FILTER IF THE SEGMENTAL DATA IS BEING USED FOR COMPARABILITY ANAL YSIS. SUCH FILTER IS TO BE APPLIED ONLY IF THE ENTITY LEVEL PROFIT MARGIN IS B EING CONSIDERED IN THE COMPARABILITY ANALYSIS. IN THE PRESENT CASE SINCE THE SERVICE SEGMENT OF THE COMPARABLE IS BEING CONSIDERED IN THE FINAL ANALYSI S THE APPLICATION OF SUCH FILTER IS NOT REQUIRED. WE THEREFORE DIRECT THE TPO TO INCLUDE THIS COMPANY IN THE LIST OF COMPARABLES. (II). SPORTING & OUTDOOR AD-AGENCY PVT. LTD. 28. THIS COMPARABLE SOUGHT TO BE INCLUDED BY THE AS SESSEE WAS REJECTED BY THE TPO ON THE GROUND THAT ITS REVENUE IS CONTINUOUSLY DIMINISHING OVER THE YEARS. 29. BEFORE US THE ID. AR SUBMITTED A CHART SHOWING THE COMPANY'S REVENUE OVER THE PRECEDING FOUR FINANCIAL YEARS (INCLUDING THE RELEVANT FINANCIAL YEAR. I.E. FY 2010-11). REFERRING TO THE CHART IT WAS SU BMITTED THAT THE REVENUE IN FY 2010-11 WAS RS. 3.98 CRORE AS COMPARED TO THE RE VENUE OF RS. 3.99 CRORE IN FY 2009-10 THEREFORE THE DECLINE WAS A NEGLIGIBLE 0.25%. HE FURTHER ITA NO. 6670/DEL./2015 20 SUBMITTED THAT THE TPO HAS NOT RAISED ANY OBJECTION S REGARDING THE COMPANY'S FUNCTIONAL SIMILARITY WITH THE ASSESSEE. IT WAS ARG UED THAT IF A COMPANY WAS FUNCTIONALLY COMPARABLE THEN IT SHOULD NOT BE REJE CTED BECAUSE OF ITS REVENUE. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISO RS (INDIA) (P.) LTD. VS. DCIT (SUPRA). 30. THE LD. DR ON THE OTHER HAND ARGUED THAT THE RE VENUE OF THE COMPANY HAS BEEN REDUCING OVER A NUMBER OF YEARS. THIS FACT IND ICATES THAT THE COMPANY IS UNDERGOING ABNORMAL/EXCEPTIONAL CIRCUMSTANCES AND T HEREFORE ITS MARGINS CANNOT BE TAKEN AS REFLECTING THOSE OF THE INDUSTRY . HE VEHEMENTLY ARGUED THAT THIS COMPANY SHOULD BE EXCLUDED FROM THE COMPARABIL ITY ANALYSIS. 31. IN PARA 11.4 OF HIS ORDER THE TPO HAS NOTED TH AT THE DATA FOR FY 2010-11 WAS NOT AVAILABLE IN PUBLIC DOMAIN. HE TOOK THE DAT A OF OTHER YEARS TO HOLD THAT THERE WAS A PATTERN OF DIMINISHING REVENUE AND REJECTED THE COMPARABLE. 32. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. AS RE GARDS THE AVAILABILITY OF DATA FOR FY 2010-11 THE ID. AR REFERRED TO PAGE 31 2-316 OF PAPER BOOK 2 TO ARGUE THAT FINANCIAL DATA OF FY 2010-11 WHICH WAS AVAILABLE IN PUBLIC DOMAIN ITA NO. 6670/DEL./2015 21 WAS IN FACT ON RECORD. WE THEREFORE HOLD THAT SUCH DATA WAS ON RECORD AND SHOULD HAVE BEEN CONSIDERED IN THE FINAL ANALYSIS. 33. AS REGARDS THE ARGUMENT OF DIMINISHING REVENUE WE NOTE THAT THE REDUCTION OF REVENUE FROM FY 2009-10 (3.99 CRORE) T O FY 2010-11 (3.98 CRORE) IS APPROXIMATELY RS. 1 LAC. IN OUR VIEW SUCH A MIN OR DIFFERENCE IN REVENUE CANNOT BE TAKEN TO MEAN THAT THE COMPANY IS UNDERGO ING ABNORMAL CIRCUMSTANCES AND SHOULD BE REJECTED. EVEN OTHERWIS E IF THE FUNCTIONAL SIMILARITY OF THE COMPANY WITH THE ASSESSEE IS ACCE PTED THE SAME SHOULD NOT BE REJECTED SIMPLY BECAUSE OF DIFFERENCE IN REVENUE . OUR VIEW IS SUPPORTED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) (P.) LTD. VS DCIT (SUPR A) IN WHICH IT WAS OBSERVED: '33. SUCH BEING THE CASE IT IS CLEAR THAT EXCLUSIO N OF SOME COMPANIES \VHOSE FUNCTIONS ARE BROADLY SIMILAR AND WHOSE PROFILE - I N RESPECT OF THE ACTIVITY IN QUESTION CAN BE VIEWED INDEPENDENTLY FROM OTHER ACT IVITIES-CANNOT BE SUBJECT TO A PER SE STANDARD OF LOSS MAKING COMPANY OR AN 'ABN ORMAL' PROFIT MAKING CONCERN OR HUGE OR 'MEGA' TURNOVER COMPANY. AS EXPL AINED EARLIER RULE JOB (2) GUIDES THE SIX METHODS OUTLINED IN CLAUSES (A) TO ( F) OF RIDE 10B(1) -WHILE JUDGING COMPARABILITY. RULE JOB (3J ON THE OTHER HA ND INDICATES THE APPROACH TO BE ADOPTED WHERE DIFFERENCES AND DISSIMILARITIES AR E APPARENT. THEREFORE THE MERE CIRCUMSTANCE OF A COMPANY - OTHERWISE CONFORMI NG TO THE STIPULATIONS IN RULE 10B (2) IN ALL DETAILS PRESENTING A PECULIAR FEATURE - SUCH AS A HUGE PROFIT OR A HUGE TURNOVER IPSO FACTO DOES NOT LEAD TO ITS EXCLUSION. THE TPO FIRST HAS TO BE SATISFIED THAT SUCH DIFFERENCES DO NOT 'MATERIAL LY AFFECT THE PRICE...OR COST'; ITA NO. 6670/DEL./2015 22 SECONDLY AN ATTEMPT TO MAKE REASONABLE ADJUSTMENT TO ELIMINATE THE MATERIAL EFFECT OF SUCH DIFFERENCES HAS TO BE MADE. ' IN LIGHT OF THE ABOVE WE DIRECT THE TPO TO INCLUDE THIS COMPANY IN THE LIST OF COMPARABLES. (III). OVERSEAS MANPOWER CORPORATION LTD. 34. THIS COMPARABLE WAS SOUGHT TO BE INCLUDED BY TH E ASSESSEE. THE ID. AR REFERRED TO PAGE NO. 157 OF PAPERBOOK-1 AND SUBMITT ED THAT THIS COMPANY IS ENGAGED IN PROVIDING PLACEMENT SERVICES WHICH FALL UNDER THE HEAD OF BUSINESS SUPPORT SERVICES. HE FURTHER SUBMITTED THA T THE TPO HAS NOT DRAWN ANY ADVERSE INFERENCE AGAINST THE INCLUSION OF THIS COMPANY BUT HAS SIMPLY IGNORED IT IN HIS FINAL SET OF COMPARABLES. HE THER EFORE SUBMITTED THAT THE COMPANY SHOULD BE CONSIDERED IN THE FINAL LIST OF C OMPARABLES. 35. IN THE COUNTER THE ID. DR COULD NOT BRING ANY SPECIFIC MATERIAL ON RECORD TO SHOW THAT THE COMPANY WAS NOT COMPARABLE TO THE ASS ESSEE. 36. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE AG REE WITH THE ARGUMENTS OF THE ASSESSEE THAT PLACEMENT SERVICES PERFORMED BY T HIS COMPANY ARE IN THE NATURE OF BUSINESS SUPPORT SERVICES. AS NEITHER THE TPO NOR THE DR HAS BEEN ABLE TO PLACE ANY CONTRARY MATERIAL ON RECORD TO SH OW DIFFERENCE BETWEEN THE PROFILES OF THE ASSESSEE AND THE COMPANY WE DIRECT THE TPO TO INCLUDE THIS ITA NO. 6670/DEL./2015 23 COMPANY IN THE FINAL SET OF COMPARABLES. IN THE RES ULT THIS GROUND OF APPEAL IS ALLOWED. 37. GROUND NO. 8 OF THE APPEAL WHICH RELATES TO TH E CLAIM OF RISK ADJUSTMENT WAS NOT PRESSED BY THE ID. AR. THIS GROUND IS ACCOR DINGLY DISMISSED. 38. IN GROUND NO. 9 THE ASSESSEE HAS CHALLENGED TH E INCORRECT CALCULATION OF THE PROFIT MARGIN OF ONE OF THE COMPARABLES HSCC ( INDIA) LTD. 39. BEFORE US THE ID. AR HAS SUBMITTED THAT THE MA RGIN ADOPTED BY THE TPO IS 21.04% WHEREAS THE CORRECT MARGIN OF THE COMPARABLE IS 17.10%. HE SUBMITTED THAT THE DIFFERENCE IS BECAUSE THE TPO HA S NOT CONSIDERED BAD DEBTS AND PROVISION FOR DOUBTFUL DEBTS AS PART OF OPERATI NG EXPENSES. HE SUBMITTED THAT BAD DEBTS AND PROVISION FOR DOUBTFUL DEBTS ARE PART OF THE DAY TO OPERATION OF A BUSINESS AND SHOULD BE CONSIDERED AS OPERATING EXPENSES. HE FURTHER SUBMITTED THAT THE DRP HAD DIRECTED THE AO/ TPO TO VERIFY THE CLAIM OF THE ASSESSEE AND CORRECT THE COMPUTATION OF MARGINS . THE ID. DR RELIED ON THE ORDER OF THE TPO AND PARA 5.5 OF THE DRP'S ORDER. H E SUBMITTED THAT THESE EXPENSES ARE NOT OPERATING IN NATURE AND HAVE BEEN RIGHTLY EXCLUDED BY THE TPO FROM OPERATING EXPENSES. ITA NO. 6670/DEL./2015 24 40. IN HIS WRITTEN NOTE THE ID. AR HAS SUBMITTED T HE FOLLOWING COMPUTATION WHICH ACCORDING TO HIM IS CORRECT IF BAD DEBTS AND PROVISION FOR DOUBTFUL DEBTS ARE CONSIDERED PART OF OPERATION EXPENDITURE. INCOME FROM CONSULTANC Y SERVICES 23 11 39 955 OTHER INCOME 10 34 40 416 TOTAL INCOME 33 45 80 371 LESS: NON - OPERATING INCOME - PROVISION WRITTEN BACK 97 69 066 - INTEREST ON DEPOSITS 9 14 57391 - INTEREST ON STAFF LOANS 2 45 839 OPERATING INCOME (A) 23 31 08 075 TOTAL EXPENDITURE 19 92 74 343 LESS: NON - OPERATING EXPENSES - PROVISION FOR DOUBTFUL DEBT 2 05 230 - LOSS ON SALE OF ASSETS 16 122 OPERATING COST (B) 19 90 52 991 OPERATING PROFIT (C) [A - B] 3 40 55 084 OPERATING PROFIT/OPERATING COST [C/B] 17.10% 41. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. WE FIND FORCE IN THE SUBMISSION OF THE ID. COUNSEL FOR THE ASSESSEE THAT BAD DEBTS AND PROVISION FOR DOUBTFUL DEBTS ARE MADE AS A PART OF THE OPERATING ACTIVITIES OF BUSINESS GOVERNED BY THE PRINCIPLES OF PRUDENCE. WE DIRECT THE TPO TO VERIFY THE ABOVE PROFIT MARGIN CALCULATION OF THE COMPARABLE SUBMITT ED BY THE ASSESSEE AND TO TREAT THE EXPENSES OF BAD DEBTS AND PROVISION FOR D OUBTFUL DEBTS AS PART OF ITA NO. 6670/DEL./2015 25 OPERATING EXPENDITURE. IN THE RESULT GROUND NO. 9 OF THE APPEAL IS ALLOWED ACCORDINGLY. 42. GROUND NO. 10 IS WITH RESPECT TO INITIATION OF PENALTY PROCEEDINGS AND INTEREST U/S. 234 B AND 234C OF THE ACT WHICH ARE CONSEQUENTIAL AND PREMATURE IN NATURE. THEREFORE WE REFRAIN TO ADJUD ICATE ON THEM AND DISMISS THE SAME. 43. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11. 2017. SD/- SD/- (BHAVNESH SAINI) (L.P. SA HU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30.11.2017 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES NEW DELHI