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TMI Blog2019 (2) TMI 1945X X X X Extracts X X X X X X X X Extracts X X X X ..... are not comparable. We direct the transfer pricing officer/officer to exclude the above comparable from the comparability analysis for determining the arm's-length price of the international transactions entered into by the assessee. - Appeal of the assessee is partly allowed. - ITA No. 3630/Del/2011 - - - Dated:- 18-2-2019 - Prashant Maharishi and K.N. Chary, JJ. For Appellant: Tarandeep Singh, Adv. For Respondents: H.K. Chaudhary, CIT, DR ORDER Prashant Maharishi, J. 1. This appeal is filed by assessee against the order of the learned Assistant Commissioner Of Income Tax, circle 12 (1), New Delhi [ The ld. AO ] dated 31/5/2011 passed under section 143 (3) read with section 144C of The Income Tax Act 1961 [ the Act] passed in pursuance of the direction issued by The Dispute Resolution Panel-1, New Delhi [ The Ld. DRP] dated 25/04/2011 under section 144C (5) of the act determining total income of the assessee at INR 93254530/-against the returned income of the assessee of ₹ 41350620/-for assessment year 2007-08. The assessee has raised the following grounds of appeal:- GROUNDS OF APPEAL 1. That on facts and in law the orders pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 41350620/-on 30/10/2007. As the assessee has entered into an international transactions of ground handling services rendered to its associated enterprise of INR 312584553/-along with other international transactions, case of the assessee was referred by the learned assessing officer to The Additional Commissioner Of Income Tax, Transfer Pricing-1 (2), New Delhi [The LD. TPO] to determine the arm's-length price of such international transactions. 3. The assessee benchmarked the about transaction by adopting the transactional net margin method [TNMM] as the most appropriate method [MAM]. Assessee selected certain comparable companies. The learned transfer pricing officer carried out the fresh search and ultimately selected 5 comparable companies whose profit level indicator [ PLI] such as OP/TC was found to be 38.67 percentage. The total cost incurred by the assessee of INR 297133853/-was determined at margin of 38.61 percentage determining the price at INR 411857233 against which the price received by the assessee was only INR 327120031/-and therefore an adjustment u/s. 92CA was proposed of INR 84737202/-. Consequently the order u/s. 92CA (3) of the income tax act was passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es also. He submitted that the company earns the majority of its income from its tangible asset that is air cargo terminals and such stream of income includes fees paid by cargo airlines for making use of the cargo terminals, warehousing facilities and related infrastructure. He stated that the assessee's Functional Profile does not include all such income. Main source of the assessee's income is for providing ground handling support services to the airline only. He stated that there is a vast difference between a company which is handling cargo complex which is related to the logistic and cargo operation sector and not cargo handling incidental to passenger services like baggage handling etc. and therefore the profile of the company does not match with the profile of the comparable company selected by the learned transfer pricing officer. He referred to the various pages of the annual report of the Kerala state industrial enterprises Ltd. to show that it is functionally different and cannot be compared with the assessee for the purpose of determination of the arm's-length price. He further stated that the comparable company is a government company and therefore it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in financials cannot be accepted. He submitted that the mere availability of the proportion of the turnover allocable for trading activities per se cannot lead to an assumption that segmental data for relevant facts are available to determine the profitability of the concerned comparable. With respect to selection of a government company as a comparable he referred to the decision of the honourable Delhi High Court in case of principal Commissioner of income tax vs. international SOS services India private limited dated 30/5/2017 in ITA number 454/2016 wherein the honourable High Court has held that whether taking up hundred percent government-owned company as a comparable would be justified or not would depend on the facts and circumstances of the case and the basic rule as contained in rule 10 B of the income tax rules would apply. The special leave petition filed before the honourable Supreme Court in the present case has also been dismissed wide order dated 3/7/2018. He therefore submitted that the government company may be taken as a comparable provided the conditions envisaged under rule 10 B of the income tax rules 1962 are satisfied. In the present case he submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng services:- According to the above extraction the assessee does not provide any lounge service, ticketing services, Crew briefing, fuelling supervisions, aircraft Security services, other than listed above. Therefore it is apparent that the learned transfer pricing officer has wrongly interpreted the functions provided by the assessee. The assessee is providing mainly the passengers and baggage is handling services as listed in section 4 of the above version. The other services provided are the informative services such as informing the airport activities concerning the specific carriers' aircraft to the concerned persons/agencies/other operators and to operate certain facilities available at the airport for these passenger and baggage services. Therefore according to the above finding the functional profile of the assessee is now undisputed. In the revenue profile of the assessee it derives income from providing ground services inclusive of all type of cargo and passenger handling services to the airlines at Indian airports. In its asset base it does not have any immovable property but the total asset base is INR 25,76,70,389/-. 8. Now we consider the functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in the director's report. Further on looking at the balance sheet and the notes on accounts attached to that the company has not drawn the segmental accounting with respect to trading activities as well as activities of operating cargo complex. Looking at the assets employed by the comparable company at schedule/D of the accounts it has land of INR 15786221 and building of INR 57002163/-it is also in its balance sheet the assets of forklift weighbridge and x-ray machine. The total asset block of the company is 110676538/-. While looking at note number I of the balance sheet it shows the inventory of various items in the form of opening stock, closing stock, purchases and turnover. The note number 3 (I) speaks that part of the buildings at Trivandrum Air cargo terminal is situated on leasehold land and may 350 5 m taken from Airport authority of India. Export operations such as cooling room, cold storage, weighbridge et cetera are accommodated on this land. The fixed assets include a cool room and cargo handling facility set up by APEDA at a cost of INR 26,718,000 which is shown at INR 1 in the accounts as the entire cost is borne by them. Similarly actual room, cold sto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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