TMI Blog2020 (9) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... Nageshwar Rao, Adv For the Revenue : Shri Surendra Pal, CIT. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, These two appeals by the assessee are preferred against the order of the CIT(A) - 44, New Delhi dated 14.02.2016 pertaining to assessment years 2004-05 and 2005-06. Since in both these appeals, common grounds are involved, both these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. 2. The grievance of the assessee is two fold firstly, the assessee is aggrieved by the Transfer Pricing adjustment made in the marketing support service segment and secondly, the assessee is aggrieved by allowing of depreciation @ 10% instead of 15% as claimed by the assessee. 3. The assessee is a wholly owned subsidiary of Microsoft Corporation, US. The assessee creates awareness of Microsoft products in India in general through seminars, conferences, advertisement in public media, promotional campaigns. For such services, the assessee is remunerated by its AEs on a cost plus basis. 4. International transactions of the assessee with its AEs reported in form 3CEB are as under: Assessment Year 2004-05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Consultancy Services Ltd. 9. CRISIL 10. VIMTA LABS 11. KITCO 12. ICRA 8. The assessee has objected for inclusion of six comparable companies, namely, i) WAPCO Ltd ii) CRISIL Ltd iii) ICRA Ltd iv) RITES Ltd v) VIMTA Lab vi) Engineers India Ltd 9. The contention of the assessee is that these six comparable companies are functionally dissimilar. It has been strongly argued that these companies have been excluded by the Tribunal in assessee s own case in earlier and subsequent Assessment Years i.e. Assessment Years 2003-04, 2006-07 and 2007-08. 10. Before us, the ld. DR has strongly supported the findings of the ld. CIT(A) and the ld. counsel for the assessee has placed orders of the Tribunal for Assessment Years 2003-04, 2006-07 and 2007-08. 11. We have given thoughtful consideration to the orders of the authorities below. We have also gone through the orders of the coordinate bench. We find force in the contention of the ld. counsel for the assessee. The Tribunal in assessee s own case in ITA No. 5980/DEL/2016 has considered the aforementioned six comparable companies and has excluded the same. The relevant findings of the co-ordinate bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e its international revenues in the current year. Government's disinvestment programme and a further round of refinancing by stronger corporate, are expected to drive CSRS revenues in the coming year. 26. Furthermore, from the financial conditions explained at page 423 of the annual report, it has come on record that huge intangibles have been employed by CRISIL in order to achieve its targets, which make it incomparable vis- -vis the taxpayer. Consequently, we order to exclude CRISIL from the final set of comparables. 21. In view of what has been discussed above and following the decision rendered by the coordinate Bench of the Tribunal in taxpayer's own case (supra) in the similar facts and circumstances wherein there is no change in the business model and taxpayer is providing services under the same master service agreement, Crisil being owner of huge intangibles having been employed in order to achieve its target and that it is a high risk profile entity cannot be a suitable comparable vis- -vis the taxpayer who is a non-risk bearing routine marketing service provider to its AE working on cost plus mark up basis, hence ordered to be excluded. ICRA LIMITED (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 24. In view of what has been discussed above and following the order passed by the coordinate Bench of the Tribunal in taxpayer's own case for AYs 2002-03 and 2007-08 (supra), we are of the considered view that ICRA is not a suitable comparable vis- -vis the taxpayer on ground of functional dissimilarity but being into providing advisory services which is no match to the company providing actual marketing support services, hence ordered to exclude ICRA from the final set of comparables. WATER AND POWER CONSULTANCY SERVICES (INDIA) LTD. (WAPCOS) 25. The taxpayer sough exclusion of WAPCOS on the grounds inter alia that WAPCOS is functionally dissimilar being into non- comparable companies; that it is a 100% Government owned entity and that it has been ordered to be excluded by the coordinate Bench of the Tribunal in taxpayer's own case for AY 2002-03, 2007-08 and 2008-09 (supra). 26. Perusal of annual report at pages 628 to 640 of the paper book, shows that WAPCOS is into distinct activities viz. commercial and informatics centre for providing services in publishing of publicity material, technical bulletins, status report, providing consultancy services in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consultancy organization rendering consultancy services in all facets of transportation. Its major areas of operations are consultancy services; Export of Rolling Stock, Equipments and Spares; and leasing of Railway Rolling Stock and Equipments. It can be seen that the functional profile of this company is nowhere near the assessee, which is simply providing marketing support services by largely creating customer awareness for the Microsoft products in India. This company is, therefore, directed to be excluded. 31. Keeping in view the facts and circumstances of the case that Rites being into providing engineering and consultancy services and is an international recognised company engaged in transport infrastructure has been excluded by the ld. DRP in taxpayer's own case for AY 2007-08 on ground of functional dissimilarity being in niche area engineering consultancy and following the order passed by the coordinate Bench of the Tribunal in AY 2006-07 in taxpayer's own case is not a suitable comparable vis- -vis the taxpayer who is a routine low end marketing support services provider on cost plus mark up basis, hence ordered to be excluded. VIMTA LABS LTD. (VIMTA) 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded from the final set of comparables. 12. A perusal of the order of the ld. CIT(A) for Assessment Year 2004- 05 shows that at para 4.4. of his order, the ld. CIT(A) has held While passing the appellate order in the appellant s case for Assessment Year 2003-40 dated 18.07.2016 in appeal No. 113/2003-04-CIT(A)-44, I have held that the appellant is providing high end services and accordingly the six companies cannot be excluded from the final list . This shows that the first appellate authority himself has followed the order of the Assessment Year 2003-04 on finding parity in the facts. 13. As mentioned elsewhere, the Tribunal in Assessment Year 2003- 04 has directed for exclusion of six comparable companies. Therefore, respectfully following the same, we direct the Assessing Officer/TPO to exclude the six comparable companies mentioned hereinabove. 14. All the grounds relating to TP adjustments are allowed. 15. Coming to the second grievance of the assessee which relates to the claim of depreciation @ 15%, during the course of assessment proceedings, the assessee was asked to furnish details of the additions to fixed assets made during the year. 16. On perusal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reliance of Ld AR on the decision of jurisdiction High court in the case of Installment Supply Pvt. Ltd. cited supra where which has been held the customer on lease hold as revenue expenditure. I have perused the order the expenditure and question was made for ₹ 5000 was in the order of thousand here the expenditure is crores of rupees where the head of expenditure is apparently for civil work. Therefore the said decision will not apply to the facts of the case. In my view the expenditure shows that there is addition of civil work, such addition of civil work even on long lease is to be treated a building for providing depreciation. Hence, action of the Assessing Officer is confirmed. Accordingly these grounds of appeal are dismissed. 19. Before us, the ld. counsel for the assessee vehemently stated that expenditure incurred by the assessee are towards furniture and fixtures and, therefore, rate of depreciation applied for block of furniture and fixtures should be allowed. 20. The ld. DR strongly supported the findings of the first appellate authority. 21. We have given thoughtful consideration to the orders of the authorities below. Undisputedly, expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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