TMI Blog2019 (7) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer pricing adjustment of the book profits u/s 115JB - HELD THAT:- We direct lower authorities to exclude Transfer Pricing adjustment, if any, while computing Book Profits u/s 115JB. Accordingly, this ground stands allowed. SEE OWENS CORNING (INDIA) P. LTD. VERSUS DCIT CIR 7 (1) , MUMBAI [ 2016 (5) TMI 1098 - ITAT MUMBAI] and M/S. CASH EDGE INDIA (PVT.) LTD. VERSUS W ITO, WARD 5 (3) , NEW DELHI [ 2016 (1) TMI 598 - ITAT DELHI] - I.T.A. No.1231/Mum/2017 - - - Dated:- 3-7-2019 - Shri Pawan Singh, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : Shri Nilesh Patel- Ld. AR For the Revenue : Shri V.K. Agarwal Addl. CIT-Ld. DR ORDER PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 Aforesaid appeal by assessee for Assessment Year [in short referred to as AY ] 2012-13 contest the final assessment order dated 27/01/2017 passed by Ld. Income Tax Officer-15(1)(4), Mumbai [AO] u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act pursuant to the directions of Dispute Resolution Panel-I, Mumbai, [in short referred to as DRP] u/s 144C(5) dated 24/11/2016. 1.2 The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large geographical spread. The assessee earned revenue of ₹ 16.95 Crores by rendering these services. In its TP study report, the assessee classified itself as back office support provider and benchmarked the transaction using transactional net margin method [TNMM] as the most appropriate method. The Profit Level Indicator [PLI] was taken as Operating Profit / Operating Cost. The assessee computed its own PLI at 13.78% as against mean margin of 9.39% reflected by 7 comparable entities and the same being within tolerance range of +5%, no Transfer Pricing [TP] adjustment was proposed by the assessee. 2.4 However, the assessee s methodology was not termed as reliable and correct in view of the fact that the assessee used 3 year s data and did not apply any export filter. Therefore, applying various filters, the Ld. TPO undertook a fresh search, as a result of which 5 comparables out of 7 comparables as selected by the assessee got rejected whereas 6 new comparable were identified. The mean PLI of these 8 entities worked out to be 22.63%. Applying the same to assessee s financial data, ALP of the stated transactions was worked out to be ₹ 18.27 Crores as ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back while computing book profit u/s. 115JB. Aggrieved as aforesaid, the assessee is in further appeal before us. 4.1 The Ld. Authorized Representative for Assessee (AR), Shri Nilesh Patel, drew our attention to the functional profile of the assessee and submitted that the assessee was captive support service provider and bears minimal risk, do not deploy any intangible assets and employs ordinary non-professional graduates. The nature of services being provided by the assessee were of a supportive nature only and are not part of the core business of the Griffin Group. Merely because the functional profile of the comparable entity falls under the category of ITeS services, the same would not make these entities comparable to assessee as held by Mumbai Tribunal (Special Bench) in Maersk Global Centers (India) Pvt. Ltd. V/s ACIT [2014 43 Taxmann.com 100], Hon ble Bombay High Court in CIT V/s Aptara Technology Pvt. Ltd. [2018 92 Taxmann.com 240] Hon ble Delhi High Court in Rampgreen Solutions Pvt. Ltd. V/s CIT [2015 60 Taxmann.com 355]. 4.2 In the above background, Ld. AR argued for exclusion of 4 entities namely (i) Accentia Technologies Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct for exclusion of this entity. (ii) Universal Print Solutions Ltd. The Ld. AR disputed the inclusion of this entity on similar ground of functional dissimilarity by drawing our attention to the fact that this entity was an integrated print solution provider and operates in the segment of Repro, Label Printing, Offset Printing and Pre-Press BPO. The Ld. TPO picked up the pre-press BPO segment for the purpose of comparison. In this segment, the entity provides services in the nature of scanning, layouts, trapping, hand-outlined clipping path and image masking magazine / catalogue publishing. Another point to which our attention is drawn is the fact that this entity has unallocated expenses of ₹ 89.67 Lacs which would distort the segmental profits and therefore, the segmental results would not be reliable. Upon perusal, we find that Bangalore Tribunal in the case of XLHealth Corporation India (P.) Ltd. vs. ACIT [2018 91 taxmann.com 310] for very same AY 2012-13 directed for exclusion of this entity in case of assessee having similar functional profile on the ground that an entity which is engaged in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reliable and therefore, this entity is not suitable for comparison. Following the said decision, similar view has been expressed in BT e- Serv (India) (P) Ltd. vs. ITO [2019 101 taxmann.com 275 19/06/2018]. Respectfully following the same, we direct for exclusion of this entity. In the result, Ground No.2.2 2.3 stands allowed. 6. By way of Ground No. 2.4, the assessee seek working capital adjustment from PLI of comparable entity in terms of Rule 10B(3). The Ld. DRP has denied the same by observing that no working capital adjustment was made by the assessee in its TP study report and secondly, it was observed that fees for services is not impacted in the same manner by credit period offered or received as is the case with sale of goods. Although Ld. AR has pleaded for this adjustment on the strength of certain judicial pronouncements, however, no convincing case has been made out before us so as to justify the grant of aforesaid adjustment. Therefore, we are not inclined to interfere in the order of lower authorities, in this regard. This ground stands dismissed. 7. In Ground No. 3.1, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition by an amount of ₹ 1,30,72,762/- to the amount of net profit as per profit and loss account for the purpose of computation of income u/s 115JB without even mentioning that under what provisions this addition was being made. Such an approach is highly unfair and brings undue and avoidable hardship to the tax payers and we recommend that such a casual approach should be avoided by the revenue officers, as it may tarnish image of the income tax department, which may in turn discourage voluntarily compliance by the taxpayers. Thus, we delete the addition made by the AO. As a result, additional ground filed by the assessee is allowed. Similar is the decision of co-ordinate bench of Delhi Tribunal in Cash Edge (India) Pvt. Ltd. V/s ITO [supra], wherein the issue has been concluded in the following manner: - ADDITION OF TRANSFER PRICING ADJUSTMENT TO MAT 33. The final issue for consideration is challenge raised by the assessee to the action of the AO in adding back transfer pricing adjustment of ₹ 1,18,93,468/- to income assessed under Section 115JB (MAT). 34. In this regard, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted for preparing such accounts and the method/rate of depreciation has been incorrectly adopted for preparation of profit and loss account. 38. In the present case there is no allegation is the assessment order much less any finding that either that profit and loss account has not been drawn up in accordance with Part II and Part III of Schedule VI of the Companies Act, or that any incorrect accounting policies, accounting standards has been adopted for preparing such accounts or that the method/rate of depreciation has been incorrectly adopted for preparation of profit and loss account. 39. In view of aforesaid, we hold that the AO erred in adding back the transfer pricing adjustment of the book profits under Section 115JB of the Act. Accordingly, this ground of the appeal raised by the assessee is allowed and the AO is directed to exclude the transfer pricing adjustment, if such adjustment survives, from the book profits computed under Section 115JB of the Act. Respectfully following the same, we direct lower authorities to exclude Transfer Pricing adjustment, if any, while computing Book Profits u/s 115JB. Accordingly, this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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