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TMI Blog2018 (12) TMI 1853X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and the settled position of law, the whimsical rejection of the aforementioned companies viz (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. by the TPO for benchmarking the ALP of the international transactions of the assessee with its AEs during the year under consideration not being justified, thus cannot be sustained and is liable to be vacated. We direct the AO/TPO to re-workout the ALP in the hands of the assessee after including the aforementioned companies i.e. (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. as comparables in the final list of comparables. In case, the claim of the assessee that after including the aforementioned companies its ALP would fall within the range of is found to be in order then no adjustment to the ALP would be called for in the hands of the assessee. Unexplained credit - Difference between the closing stock and opening stock -A submitted by the assessee before the DRP that the difference in the valuation of stock had arisen only due to software system while preparing the stock statement as per the format that was required during the course of the assessment proceedings - HELD THAT:- In the course of proceedings before the DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant's impugned international transaction of provision of business facilitation services to its associated enterprises ('AE') and in doing so, the Ld. AO/ TPO grossly erred in - 2.1. rejecting the following nine companies in the Appellant's comparable company set which are functionally comparable to Appellant's "Business Facilitation Services" segment: i. AOK In-House BPO Services Ltd. ii. Caliber Point Business Solutions Ltd. iii. Cyber Media Research Ltd. iv. ICRA Online Ltd. v. Jindal Intellicom Ltd. vi. M C S Ltd. vii. P L Worldways Ltd. viii. Pipal Research Analytics and Information Services India Private Ltd. ix. Sparsh BPO Services Ltd. 2.2. not considering the infrastructure cost re-imbursements received by the Appellant from its AEs as "operating revenues" and thereby erred in computing OP/OC margin of Appellant's "Business Facilitation Services" segment at 10.01% instead of 19.41% as worked out by Appellant. Ground No. 3: 3. The Ld. AO / Ld. TPO [pursuant to non-adjudication by the DRP in its order under section 144C(5) of the Act] grossly erred, in law and in facts, in - 3.1. not allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices to its AEs using Transaction Net Margin Method (for short "TNMM"). The assessee company was selected as a tested party. The ALP was determined by the assessee using Prowess database and fourteen companies were selected as comparables. The arithmetic mean Operating Profit ("OP")/Operating Cost ("OC") margin of the comparable companies worked out at 10.56% vis-a-vis the OP/OC margin of the assessee‟s business facilitation service segment of 19.41%. The TPO rejected 13 comparables on the ground that their functional profiles were different from that of the assessee. One of the comparable viz M/s Genins India Insurance TPA Ltd. was however accepted by the TPO. The TPO further selected certain fresh comparables and came up with a final set up of comparables, as under:- S. No. Name of the comparable Company OP/OC Margin 1 Empire Industries Ltd.(Segmental) 22.63% 2 HSCC (India) Ltd.-Corrected OP/OC margin 16.72% 3 HCCA Business Services Pvt. Ltd. 13.99% 4 ICRA Management Consulting Services Ltd.Corrected OP/OC margin 15.34% 5 India Cements Capital Ltd.-Corrected OP/OC margin 18.00% 6 Spectrum Business Solutions Ltd. 10.25% 7 Genins India TPA Ltd. 19.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Margin 1 Aditya Birla Insurance Brokers Ltd. 16.98% 2 Almondz Insurance Brokers Pvt. Ltd. 21.79% 3 Bajaj Capital Insurance Broking Ltd. 14.15% 4 India Infoline Insurance Brokers Ltd. 12.20% 5 Genins Inida TPA Ltd. 19.52% 6 Spectrum Business solutions Ltd. 10.25% Mean Margin 15.81% 7. Insofar the addition of ₹ 3,53,550/- that was proposed by the Assessing Officer in respect of difference in "closing stock‟ and "opening stock‟ shown by the assessee was concerned, it was the contention of the assessee before the DRP that the said difference had arisen due to software system while preparing the statement of stock in the format in which the same was required by the A.O. It was observed by the DRP that the assessee had furnished item-wise details of the "closing stock‟ with the Assessing Officer in the course of assessment proceedings. The DRP directed the Assessing Officer to examine the working submitted by the assessee and delete the addition if the variation was reconciled. 8. The Assessing Officer after receiving the order of the DRP referred the matter to the TPO for reworking of the ALP as per the directions of the DRP. The TPO vide hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book‟ (for short "APB‟). The Ld. A.R drew our attention to the fact that both of the aforesaid parties were accepted by the TPO as comparable in the aforesaid years. Further, the Ld. A.R took us through the order of the TPO in the case of the assessee for A.Y 2009-10 (Page 692 of "APB‟). The Ld. A.R drew our attention to the fact that the aforementioned comparables i.e. (i) Cyber Media Research Ltd.; and (ii) ICRA Online Ltd. were accepted by the TPO as a comparable for benchmarking the international transactions of the assessee with its AEs. The Ld. A.R taking support from the aforesaid facts submitted, that now when the aforementioned comparables were accepted by the TPO for benchmarking the international transactions of the assessee with its AEs in the immediately preceding years, therefore, without pointing out any shift in the functional profile of the either the assessee or that of the aforementioned comparables the said parties could not have been whimisically rejected as comparable for the year under consideration. In support of his contention the Ld. A.R placed reliance on the judgment of the Hon'ble High Court of Bombay in the case of Pr. CIT -1 vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, stakeholder satisfaction, growth opportunity identification, incubation advisory, and go-to-market services, which were similar to the services provided by the assessee to its AEs. It is the claim of the assessee that as the said company was functionally similar to the assessee, therefore, the same was rightly selected by the assessee as a comparable. It was averred by the ld. A.R that the TPO had wrongly rejected the said company i.e. Cyber Media Ltd. as a comparable on the ground that it was functionally different from the assessee. The ld. A.R taking us through the order of the TPO submitted, that he had observed that the said company being part of Cyber Media, South Asia‟s largest speciality media and media services group viz. Cyber Media Research (CMR) had been a front runner in market research, consulting and advisory services since 1986. Insofar as the other comparable i.e. ICRA Online Ltd. is concerned, it was averred by the ld. A.R that the said company provides outsourcing support to its clients in data services, research and analytics. Further, the Knowledge Process Outsourcing (KPO) division of the company provided financial and analytical services and support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h any difference in the facts from that existing in the earlier Assessment Year 2007-08 to that existing in the subject Assessment Year, there is no warrant to exclude the same. (b) Before us, the Revenue is not able to indicate any reason as to why in the absence of any change in the circumstances in the subject Assessment Year to that in the earlier Assessment Year the exclusion of Pentamedia Graphics Ltd. as comparable was justifiable. We find that the view taken by the Tribunal in the impugned order of including Pentamedia Graphics Ltd. as a comparable is a possible view." 13. Still further, we find that a similar view had also been taken by the Tribunal in the case of Thomas Cook (India) Ltd. vs DCIT1(3)(2), Mumbai, (2016) 70 taxmann.com 322(Mum). In the aforementioned case, it was observed that without assigning any valid reason of the earlier years stand the TPO cannot reject the comparables that were found as valid comparables in the previous year. The Tribunal while concluding as hereinabove had observed that though the principle of res-judicata do not apply to the income tax proceedings, but the rule of consistency applies. 14. We are of the considered view that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "closing stock‟ and "opening stock‟ shown by the assessee. As the assessee failed to reconcile the aforesaid difference, therefore, the A.O in the draft assessment order proposed an addition of ₹ 3,53,550/- as an unexplained credit in the hands of the assessee. 16. The assessee assailed the aforesaid proposed addition of ₹ 3,53,550/- towards stock valuation before the DRP. The DRP, after deliberating upon the facts directed the A.O to delete the addition if the variation in the stock was reconciled by the assessee. The A.O giving effect to the directions of the DRP called upon the assessee to reconcile the difference of ₹ 3,53,550/- on account of valuation of inventories. However, as the assessee failed to reconcile the discrepancy/difference in the stock, therefore, the AO made an addition of ₹ 3,53,550/-. 17. We have deliberated at length on the issue under consideration in the backdrop of contentions advanced by the authorized representatives for both the parties. Admittedly, the assessee despite having been afforded an opportunity by the AO while giving effect to the directions of the DRP, however miserably failed to reconcile the discrepan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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