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TMI Blog2018 (8) TMI 1624X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. Hence we direct that this comparable should be excluded from the final list of comparables. The TPO could not have included this company as a comparable, without investigating the reasons for Malabar declaring abnormal profits at 42.33%, as compared to all other comparables including its holding company. - decided in favour of assessee. - ITA No. 178/Kol/2017, ITA No. 187/Kol/2017, ITA No. 188/Kol/2017 - - - Dated:- 31-7-2018 - Sri J. Sudhakar Reddy, Accountant Member And Sri Aby T. Varkey, Judicial Member Shri Naresh Jain Mrs. Arati Debnath, AR, appeared on behalf of the assessee Shri G. Mallikarjuna, CIT, D/R. appearing on behalf of the revenue ORDER Per J. Sudhakar Reddy, AM All these appeals filed by the assessee are directed against the separate orders passed u/s 144C r.w.s. 143(3) of the Income Tax Act, 1961 (in short the Act ). As the issues arising in all these appeals are common, for the sake of convenience they are heard together and disposed off by way of this common order. 2. Brief facts of this case are brought out by the ld. DRP at page 1 of his order which is extracted for ready reference:- Bothra India is engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case and in law, the Ld. Assessing Officer has failed to apply his mind and has mechanically referred the matter to the Ld. Transfer Pricing Officer u/s 92CA(1)and also violated principle of natural justice, thereby rendering the reference bad in law. 7. On the facts and in the circumstances of the case and in law, the Ld. Aa I Ld. Panel I Ld. TPO erred in: i. rejecting the transfer pricing study which was maintained in good faith and with due diligence despite satisfying conditions prescribed under section 92C(3) of the Act; ii. rejecting use of multiple year data; iii. using the data available at the time of assessment for undertaking comparability analysis; iv. not applying the filter on net fixed assets; v. incorrectly applying different accounting year end filter; vi. incorrectly applying related party transactions filter with denominator as sales and purchase combined; vii. incorrectly applying persistent losses I diminishing revenues filter; viii. incorrectly modifying sales filter; ix. including certain comparables, which were not comparable based on the functions performed, asset used and risks assumed (FA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore prays that the Ld. Aa / Ld. Panel be directed to delete the impugned ad-hoc disallowance of dock labour charges. 14. On the facts and circumstances of the case, and in law, the Ld. Panel erred in confirming the action of the Ld. AO in disallowing speed money of ₹ 3,03,265 on the alleged ground that the payment are illegal in nature. The Appellant therefore prays that the Ld. AO / Ld. Panel be directed to delete the impugned disallowance of speed money. 15. On the facts and circumstances of the case, and in law, the Ld. Panel erred in confirming the action of the Ld. AO in restricting the claim of depreciation on Tata JCB Loaders at 15% on the alleged ground that these equipments cannot be put in the same category as Lorry, Taxi, Bus or treated as specific commercial vehicles in accordance with Section 32(1) of the Act r.w. Section 2 of the Motor Vehicles Act, 1988 without appreciating the fact the Hon'ble Calcutta High Court in the appellant's own case for the Assessment Years 2004-05 to 2007-08 has allowed the same in ITA No. 144 of 2015 vide order dated 5th September, 2016. The Appellant therefore prays that the Ld. AO / Ld. Panel be direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. TPO. 7. Ground No. 8 specifically disputes the inclusion of Aegis in the final set of comparables. 7.1. The ld. Counsel for the assessee submits that the functional profile of Aegis and the functional profile of the assessee are not comparable and hence Aegis should be excluded from the final list of comparables. We now examine the functional profile of the assessee company as well as the comparable i.e. Aegis . The TPO in his order u/s 92CA (3) of the Act, 29/01/2016, at page 2 para 3 states the functional profile of the assessee as follows:- 3.0. Functional Profile of Bothra Shipping: Bothra Shipping renders various services as a logistics service provider in the Indian Market. It operates in the port of Visakhapatnam, Kakinada and Mangalore. Key operations of se India are s follows, Stevedoring and Clearing: The activity primarily relates to loading, unloading and cargo handling. It requires employment of loading equipment, proper techniques for lifting and stowing cargo had correct handling of materials. Majority of non-bulk cargo is transported in Shipping containers. The containers arrive at the port by truck, rail or ship and are stacked in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directions of the ld. DRP to the TPO, to take segmental data if available, amounts to further enquiry and is illegal and is in contravention of Section 144C(8) r.w.s. 144C(5) of the Act. Reliance was placed on the following case-law:- IBM India (P.) Ltd. v. Joint Commissioner of Income-tax, Large Taxpayers Unit [2014] 46 taxmann.com 129 (Bangalore - Trib.) It was argued that the ld. DRP having come to a conclusion that the functional profile is not the same, it should have directed exclusion of Aegis as a comparable and not order further investigation. 7.2.1. On considering these submissions, the findings of the DRP and the fact that the functional profile of both these companies are different, we direct the assessing officer to exclude Aegis Logistics Ltd. from the list of final comparables for the purpose of computation of ALP, under the Act. In the result, this ground of the assessee is allowed. 8. The next issue that arises for our consideration, is whether the company Malabar should be excluded from the final list of comparables. The assessee contends that Malabar should not be included in the final list of comparable for the following reasons: a. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selection of comparables, the turnover filter, in our opinion, has to be the basis for selection. A company having turnover of ₹ 11 crores cannot be compared with a company which is having turnover of ₹ 260 crores which is more than 23 times the turnover of the Assessee. This company cannot be regarded to be in equal size to the Assessee. We, accordingly, direct the AO to exclude this company out of the comparables. (ii) Infosys BPO Ltd. :- In this case also we noted the turnover in respect of this Company is ₹ 649.56 crores while the turnover of the Assessee company is around ₹ 11 crores which is much more than 65 times of the Assessee's turnover. We, therefore, do not find any illegality or infirmity in the order of CIT (A) in excluding this Company out of the comparables. Accordingly, we confirm the order of the CIT (A). (iii) Wipro Ltd. :- After hearing the rival submissions, we noted that the CIT (A) applying the turnover filter has excluded this company out of the comparables. The turnover reported in the case of Wipro Ltd. Is ₹ 939.78 crores while in the case of the Assessee the turnover is around ₹ 11 crores. Therefore, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable for the purpose of computation of ALP. Consistent with the view taken by us for the Assessment Year 2010-11, we direct the Assessing Officer to exclude this comparable from the final list of comparables. Hence we allow Ground no. 8 of the assessee. 13. Ground no. 11 12, are on the issue of computation of PLI. The assessee s contention is that the assessing officer has committed a prima facie error in computing the PLI at 0.2%, whereas the correct PLI works out to 3.88%. After considering the submissions of the ld. D/R, we restore this issue to the file of the Assessing Officer for verifying the claim of the assessee and calculating the correct PLI and dispose off the issue. In the result ground no. 11 12 are allowed for statistical purpose. 14. All other grounds both technical and otherwise, are hereby dismissed as not pressed. 15. In the result this appeal of the assessee is allowed in part. 16. Now we take up ITA No. 188/Kol/2017 for the Assessment Year 2012-13. The only ground agitated before us is the inclusion of M/s. Aegis Logistics Ltd. in the final list of comparables. Consistent with the view taken by us for the Assessment Year 2010-11, we dir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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