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TMI Blog2018 (10) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... ions made under home base segment. This substantive grievance of the assessee is allowed. Adjustment made in the transaction of provision of Market Support Services [MSS] - segment of MSS has been benchmarked by the appellant using TNMM as the most appropriate method - selection of comparable - Held that:- Companies functionally different with that of assessee as routine service provider need to be deselected from the final list. Adherence to RPT filter need to be assured. Loss incurred during the year taken as income of the assessee - Held that:- It appears that the Assessing Officer, while passing final assessment order, has considered the returned income of the assessee as loss. We, accordingly, direct the Assessing Officer to verify and treat the income as such. - ITA No. 5451/DEL/2012 - - - Dated:- 15-10-2018 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SMT BEENA A. PILLAI, JUDICIAL MEMBER For The Assessee : Shri Vishal Kalra, Adv Shri Ankit Sahni, Adv Shri S.S. Tomar, Adv For The Revenue : Shri Sanjay I. Bara, CIT-DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, With this appeal, the assessee has challenged the correctness of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Reimbursement of freight charges NA 74,56,695 8. Reimbursement of expenses NA 2,69,28,768 9. Purchase of fixed assets NA 42,21,939 10. Sale of assets NA 5,794 3. It would be pertinent to mention here that there is no change in the functional profile of the appellant vis-a-vis the preceding year i.e. A.Y 2007-08. The international transactions entered into by the appellant with its AE during the previous year were primarily the same and no adverse inference was drawn by the Transfer Pricing Officer (TPO) for international transactions undertaken by the appellant in A.Y. 2007-08. 4. The return of income for the year under consideration was filed on 29.09.2008 declaring a loss of ₹ 13,74,73,287/-. The return was selected for scrutiny assessment and, accordingly, statutory notices were issued and served upon the assessee. A reference u/s 92CA(1) of the Act was made to the TPO by the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,27,21,421 30,37,03,259 Operating Expenses 9,23,06,510 15,23,39,180 24,46,45,690 Operating Expenses(re- allocated in revenue proportion) 14,57,88,448 9,88,57,242 24,46,45,690 Operating Profit 3,51,93,390 2,38,64,179 5,90,57,569 OP/OC 24.14% OP/OI 19.45% 9. After pooling the accounts as mentioned above, the TPO found that the current year s margin of the comparable companies chosen by the assessee was as under: Name of the Company March 2008 India Infrastructure Developers Limited 11.25 Mukunda Industrial Finance Limited 41.81 Trishakti Electronics and Industries Limited 57.60 Savitri Leasing and Finance Limited 49.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is claiming depreciation on leased assets @4.75 % (as per Companies Act). Therefore, the reduction in depreciation of ₹ 3,71,63,149/- corresponds to a reduction in the price of asset amounting to ₹ 78,23,82,084 (Rs. 3,71,63,149/.0475). Therefore, the ALP of value of assets is calculated as below: Book Value of the asset as per Form 3CEB A 98,35,34,236 Reduction in price as calculated above B 78,23,82,084 Arm's length Price of Assets A-B 20,11,52,152 15. Therefore, the arm's length price of the assets imported by the assessee comes to ₹ 20,11,52,152/-. The Assessing Officer shall reduce the value of block of fixed assets containing the leased assets of the assessee by an amount of ₹ 78,23,82,084/- while allowing the depreciation [as per Income Tax Act) on this block of fixed assets. 16. To sum up, the following adjustments were made a. On account of MSS ₹ 29,45,820/- b. On accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the matter be restored to the file of the Assessing Officer/TPO for reconsideration of this issue. We are of the considered view that no second innings should be given to the Revenue if sufficient material is on record and the revenue authorities have ignored to consider such material as held by the Hon'ble High Court of Gujarat in the case of Rajesh Babubhai Damania 251 ITR 541, the finding of which, reads as under: The assessee was carrying on business on a small-scale in stainless steel utensils. He had filed a return of income for the said assessment year declaring a total income of ₹ 15,423. The assessee had received deposits from six parties on April 14, 25, 1984, and had repaid all of them in the years 1984 and 1985. The Assessing Officer, disregarding the evidence produced by the assessee in respect of the identity and genuineness of the parties and their financial capacity, made an addition of the amount of the said six deposits totalling ₹ 2,80,000. An appeal was preferred by the assessee before the Commissioner of Income-tax (Appeals) who accepted the assessee's contentions regarding the genuineness of these transactions and deleted the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, we do not find any merits in the additions made in this segment. We, accordingly, set aside the findings of the DRP and direct the Assessing Officer to delete the additions made under home base segment. This substantive grievance of the assessee is allowed. 21. The second substantive grievance of the assessee relates to the transaction of provision of MSS. 22. Facts on record show that the appellant entered into a Consultancy Agreement with its AE, and in lieu of the agreement, it provided during the year the following MSS to its AE: a) Assistance in market research and analysis of potential customers; b) Advise on current market pricing (benchmark) and developments in the market; c) Performance of customer liaison in general and communication of customer complaints; d) Performance of networking I promotion activities with key contacts for better relationships between LHT and customers; e) Monitoring of prices, supply and demand on a country basis; f) Channelling sales enquiries to LHT, and g) Dissemination of information about LHT s products / services. 23. As per the consultancy agreement, for running the above mentioned services, the appellant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.11 92.79 11 12.84 4 Choksi Laboratories Ltd Capitaline 9.45 98.7 0 29.18 5 GeninslndiaTPALtd. Prowess 5.34 96.69 0 9.11 6 1 C R A Management Consulting Services Ltd. Prowess 18.77 96.16 13.4 1 4.18 7 1 D C (India) Ltd. Prowess 15.77 99.43 0.95 15.31 8 India Cements Capital ltd Prowess 7.95 97.48 0.72 42.46 9 Indus Technical Financial Consultants Ltd. Prowess 1.15 98.26 0 14.05 10 Mecon Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, restore the inclusion/exclusion of this company to the Assessing Officer/TPO with a direction to verify the RPT of this company and whether it passes the filter adopted by the TPO. Choksi Laboratories Ltd 32. The website extract of this company shows that this company has expertise in setting up in-house labs for large number of clients and also provides consultancy, training and independent auditing for quality management systems. Its quality assurance solutions address almost every aspect of regulatory norms set by FDA, BIS, NABL i.e. National Accreditation Board for testing and calibration Laboratories, department of health and other regulatory bodies. Thus, the company is engaged in clinical research, assaying and hall marking and instrument calibration and validation, etc. As mentioned elsewhere, the appellant company is A routine service provider, which nowhere matches with the service provided by this laboratory company. Moreover, Choksi Laboratories Ltd has assets of high value which are required for testing chemicals etc. In our considered view, this company is not comparable to routine service provider and deserves to be excluded. We order accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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