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TMI Blog2011 (4) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year - it is clear that the assessee has itself accepted that the bad debts recovered, email facility charges, discount receipts and handling charges would be part of the operating income As far as the other receipts are concerned, which amounts to Rs.88,82,624/- in the case of DTDC and Rs.47,24,772/- in the case of First Flight Couriers Ltd., these are large amounts, but in the absence of details it is difficult to comment on the nature of these receipts though Ld.DR has made a good point that when small items have been segregated, chances are that these receipts may be related to operational income - Appeal is allowed for statistical purposes - I.T.A.NO.7360/Mum/2010 - - - Dated:- 27-4-2011 - SHRI D.MANMOHAN, SHRI T.R.SOOD, JJ. Appellant by : S/Shri Kanchan Kaushal Raju Vakharia. Respondent by : Shri Sponthil Kumar. O R D E R Per T.R.SOOD, AM: In this appeal various grounds have been raised but at the time of hearing Ld.counsel of the assessee submitted that the only dispute is regarding adjustment of Rs.14.82 crores on account of Arm s Length Price in accordance with the order passed by the Transfer Pricing Officer [for short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his company is into surface/road transport of goods. Hence rejected. Initially TPO wanted to include M/s. Blue Dart Express Ltd. also as comparables, but after considering the objection of the assessee the same was dropped. Out of the other six comparables four were dropped because in the case of On-dot Couriers Cargo Ltd. and Skypak Services Specialists Ltd. the turn over was Rs.27.19 crores and Rs.18.48 crores which was below 5% of assessee s turnover. In the case of Overnite Express Ltd. also the turnover was only Rs.94.99 crores which was less than 20% and, therefore, same was also rejected. In the case of Transport Corporation 0f India it was observed that it was functionally a different company and the main activity of this company was of surface/road transport of goods. Accordingly, only two comparables i.e. DTDC Courier Cargo Ltd. and First Flight Couriers Ltd. were considered. 3. The assessee company had also objected to the inclusion of miscellaneous income in the operating profits in the case of DTDC Courtiers And Cargo Ltd. [for short DTDC] and First Flight Couriers Ltd. However, on examining the details, the TPO noted that in the case of DTDC non operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to air courier services outside India. The assessee conducted tis Tainwala Polycontainers Ltd. research and worked out its margin at 4.40% as against the average margin of 3 comparable companies selected by the assessee at 3.4k9% and no adjustment was made by the assessee. the TPO asked the assessee to conduct a fresh search, during which the assessee gave the list of 7 companies, out of which the TPO rejected 5 companies and selected only 2 companies which were also selected by the assessee and the TPO worked out the margin at 7.35% as against the marging of 4.40$ and made an adjustment of `.14.82 crores. The assessee has objected to the rejection of other companies like Patel On-Board Couriers Ltd. for which the TPO had given the reasons financial results are not available , which appears to be correct approach and the DRP agrees with the finding recorded by the TPO. The TPO rejected 3 other companies Overnite Express Ltd., On-dot Couriers Cargo Ltd Skypak Services Specialists Ltd. on the ground that the turnover of these companies is less than 20% of the assessee s turnover. The assessee has objected to AO s rejection on the grounds that the AO should not have appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected by applying 20% filter. He emphasized that the comparable in the case of On-Dot Couriers Cargo Ltd. and Over Night Express Ltd. were accepted as comparables in the earlier year i.e. A.Y 2005-06 and, therefore, the same should not have been rejected. His second objection is that comparable in the case of Transport Corporation of India could not have been rejected as segmental result which should not have rejected merely because direct comparables were available. It was argued that Transport Corporation of India Ltd. (TCI) was also engaged in the business of couriers and segmental data of courier business was easily available. He submitted that as per OECD guidelines if segmental data is available and if the same can provide better comparables, then same should be considered. His last submission on which he placed lot of emphasis is that while making comparisons only operating profits should be considered and other income including miscellaneous receipts etc. could not be considered for the purpose of comparison. The TPO has wrongly rejected this argument by including some portion of the other receipts. Then he referred to various pages in the paper book and pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to page 233 of the paper book and pointed out that in the case of DTDC even small item like dividend receipts of Rs.11,839/- has been segregated separately, then obviously the largest item being Rs.88,82,624/- must be relating to the operational receipts because all other items like interest income, rent income, penalty collected, insurance charges etc., have already been listed separately. 7. We have considered the rival submissions carefully. We are unable to agree with the first submission of the assessee because in the case of On-Dot Couriers Cargo Ltd. and Skypak Services Specialists Ltd. the turnover is less than 5% and, therefore, these two comparables are totally non comparables. Even in the case of Over Night Express Ltd. the turnover is less than 20%. It is a universal fact that there are lot of differences between the large businesses and small businesses operating in the same field. In the case of small business economies of scale are not available and, therefore, generally less profitable. Therefore, merely because these two companies were considered as comparables in A.Y 2005-06 it is not necessary that this year also they should be considered particularly whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the operating income. There is no dispute on that. We agree with the submissions of the Ld.counsel of the assessee that interest income, rent receipts, dividend receipts, penalty collected, rent deposits returned back, foreign exchange fluctuations and profit on sale of assets do not form part of the operational income because these items have nothing to do with the main operations of the assessee. As far as insurance charges are concerned, it would depend on the nature of insurance charges, for example, if the insurance charges were on account of loss of some parcel or courier against which courier has made a payment of compensation, then such charges would constitute operational income. As far as the other receipts are concerned, which amounts to Rs.88,82,624/- in the case of DTDC and Rs.47,24,772/- in the case of First Flight Couriers Ltd., these are large amounts, but in the absence of details it is difficult to comment on the nature of these receipts though Ld.DR has made a good point that when small items have been segregated, chances are that these receipts may be related to operational income. Since the details are not available and the Ld.counsel of the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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