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TMI Blog2017 (12) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... on the issue of NET R&D segment amounting to Rs.51,62,628/- and in the NIC R&D segment amounting to Rs.38,68,161/- (thereby allowing total relief of Rs.90,30,789/- on issue of arm's length pricing). 4. The appellant craves to be allowed to add, delete or amend any other grounds of appeal." 2. Brief facts of the case are as under: The assessee filed its return of income on 02/12/03 declaring total income of Rs. 70,62,48,750/-. The case was selected for scrutiny and notices under section 142(1) were issued. In response to the statutory notices, representative of assessee appeared and filed necessary details as called for and the case was discussed with Ld. AO. 2.1. During the assessment proceedings Ld.AO observed that assessee is 100% subsidiary of corporation, Finland and is incorporated under Companies Act, 1956. It was observed that assessee has its registered office at Delhi and branches at Bangalore, Mumbai, Hyderabad and Ahmadabad. Ld.AO observed that assessee is engaged in trading of mobile phones and their accessories and installation of network equipments. In addition to this, assessee also has research and development centre at Hyderabad and Bangalore. Ld.AO after co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue is in appeal before us now. 4. Ground No. 1 This ground has been raised by revenue against the deletion of foreign travel expenses made by Ld. AO. 4.1. At the outset Ld.Counsel submitted that the issue stands settled by various decisions of this Tribunal in assessee's own case from assessment year 1998-99, 1999-00, 2000-01, 2001-02 and 2002-03. He also submitted that, consistent view taken by this Tribunal for assessment year 2000-01 and 2001-02 has been upheld by Hon'ble jurisdictional High Court. The Ld.Counsel referred to the orders for the above referred assessment years which are placed in paper book volume 2, the details of which are as under: S. No. Asst.Yr. Covered by Paper book /Page NO./Volume number 1. 1998-99 ITAT in ITA no.2146/Del/10 vide order dated 16/12/00 followed High Court order dated 14/07/09 in ITA No. 841 of 2009 and 842 of 2009, for assessment year 2000-2001 and 2001-02 ITAT order at page 593-595, volume 2 High Court order at page 578 of volume 2 2. 2000-01 & 2001-02 ITAT order in as well as High Court order dated 14/07/09 in ITA No. 841 of 2009 and 842 of 2009 ITAT order at page 558-559 of volume 2 High Court order at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of travelling expenditure, 10% retained by CIT(A) is deleted. This ground of the assessee is allowed and revenue's sole ground in this behalf is dismissed." Hon'ble High Court upheald the findings of this Tribunal by observing as under: "We find from the order of CIT as well as ITAT that the explanation given by assessee was that this provision was made on the basis of past experience and other relevant consideration. The very fact that the provision for lesser amount is made in spite of the fact that as well as had indicates in this issue would itself demonstrate that there was a proper application of mind on the part of the assessee in making this provision. Merely on this ground, the AO could not have disallowed the provision to the extent of 25% and thus the ITAT rightly allowed the entire provision towards warranty. We may also observe here that such provision has been made in preceding as well as subsequent AYs and has been allowed in full by the ITAT and affirmed by this Court. Therefore, no question of law arises." 4.5. Ld. Counsel submitted that, for the year under consideration, there has been no change in factual position in so far as foreign travel expenses are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 23,640,603/- in the hands of assessee. 5.2. In case of NET R&D segment, Ld. CIT (A) relied upon order passed by his predecessor officer for assessment year 2002-03. Ld. CIT (A) observed that his predecessor for assessment year 2002-03 had adopted a threshold of 25% for detecting companies having RPT. Accordingly Ld. CIT(A) on the present facts of the case also rejected the company is having RPT more than 25% and revised the list of comparables and computed the margin at 12.13% by applying OP/TC. 5.3. So far as NIC R&D segment is concerned, as the remuneration from the segment was exceeding plus/-5% range, the difference was confirmed by the him thereby restricting adjustment at Rs. 6,202,876/-. 5.4. Aggrieved by the action of Ld. CIT (A) revenue is in appeal before us now. 5.5. Ld. CIT DR submitted that Ld. TPO applied a lower turnover filter for the purpose of comparability analysis, whereas Ld. CIT (A) directed this filter and applied a new filter of having upper sales. He submitted that Ld. CIT (A) has merely followed the order of his predecessor for assessment year 2002-03 without remanding the issue back to ld.TPO. He submitted that Ld. CIT (A) while changing the filter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son that a remand was called for from Ld. TPO. This Tribunal for assessment year 2002-03 gave a categorical finding that as the filter has been applied and acted upon by Ld. TPO partially it cannot be applied because the companies favouring the assessee on this filter was already excluded by Ld. TPO which cannot be brought back and therefore upheld the rejection of the balance companies by applying the same filter by Ld. CIT (A). It is further observed that Ld. CIT (A) for assessment year 2002-03 had obtained a remand report in order to exclude the companies having sales more than 50 crores, as Ld. TPO for that assessment year had rejected the company is having sales less than 5 crores without having any upper. 5.11. Under these circumstances, we do not see any similarity between the facts that existed for the year under consideration, and that with assessment year 2002-03. We refer to certain observations by this Tribunal in its orders dt. 13.10.14 for Assessment Year 2002-03, in respect of turnover filter that has been applied to the comparables which is reproduced hereunder: "39. After considering the rival submissions and perusing the relevant material on record, we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of Hon'ble Jurisdictional High Court in CIT vs. Agnity India Technologies (P) Ltd. (2013) 219 Taxman 26 (Del). In that case, the assessee was a captive unit providing software services to its associated enterprises. The Hon'ble High Court directed the exclusion of Infosys Ltd. from the list of comparables, which list otherwise included several companies with huge turnover. The exclusion was ordered on account of the giantness of this company, which was, in turn, determined by seeing the cumulative effect of several factors, including risk profile, nature of services turnover, ownership of branded/proprietary products, onsite vs. offshore services, expenditure on advertisement and R&D etc. The higher turnover was only one of the criterion and not the sole criteria for exclusion of this company. In view of the above discussion, we hold in principle that no potentially comparable company can be expelled from the list of comparables simply for the reason of high or low turnover. 41. Adverting to the facts of the instant case, it is seen that the assessee's turnover under this segment amounted to less than Rs.10 crore. The TPO has applied the turnover filter by setting a lower ..... X X X X Extracts X X X X X X X X Extracts X X X X
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