TMI Blog2021 (7) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of ₹ 4296.36 lakh and total employee cost incurred is 511.96 lakhs which in ratio terms is 11.91%. This shows that this is also not a service-oriented company. For reasons akin to that stated above we, therefore, hold that M/s. Sanco Trans cannot be selected as a comparable TPO had computed the PLI of companies selected by him by presuming that FBT expense is a non-operating item - HELD THAT:- We have perused the material on record and it is seen that there is no adjudication by the Ld. DRP on this issue. We, therefore, direct the TPO to adopt a uniform policy. Once FBT expense is taken as non-operating while computing the PLI of comparable companies, a similar effect should also be given while computing PLI of the tested party. We, therefore, direct the TPO to re-compute the PLI of assessee excluding FBT expense. - I.T.A. No. 5711/Del/2012 - - - Dated:- 30-6-2021 - R. K. Panda , Member ( A ) And Sudhanshu Srivastava , Member ( J ) For the Appellant : Tarandeep Singh , Adv. For the Respondents : Bhuvnesh Kulshrestha , CIT-DR ORDER Sudhanshu Srivastava, Member (J) This is an appeal filed by the assessee, against final order of assessment dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not appreciated its own functions properly. Had it done so it would not have liked to compare itself with companies that are engaged in event management, financial analysis, turnkey projects etc. the assessee's functions have been listed out at Para 2 of the show cause notice. If the assessee had looked carefully it would have found 'fueling supervision' and 'aircraft security' among its services. Therefore, the assessee's contentions are made in ignorance of its own functions. 2.1. The TPO, thereafter, conducted a fresh search for comparable companies and selected a set of 4 comparable companies whose OP/TC was found to be 27.99%. The TPO, thereafter, proposed a Transfer Pricing adjustment as under: Total Cost 29,24,08,151 ALP@27.99% 37,42,53,192 Price received 32,26,71,057 Adjustment u/s 92CA 5,15,82,135 2.2. Being aggrieved, the assessee filed detailed objections before the Ld. DRP. The Ld. DRP partly allowed the objections raised by excluding M/s. Cochin International Airport Ltd. as a comparable. The Ld. DRP however upheld the selection of other comparable companies. In this regard it was held by the Ld. DRP vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us and has raised the following grounds of appeal: 1. That on facts and in law the orders passed by the Assessing Officer [hereinafter referred as AO ]/dispute Resolution panel [hereinafter referred as DRP ]/Transfer Pricing Officer [hereinafter referred as TPO] are bad in law and void ab-initio. 1.1 That on facts and in law, the assumption of jurisdiction by the AO/TPO to determine Arm's length price is bad in law and void ab-initio. 2. That on facts and in law, the DRP erred in sustaining an adjustment to total income of ₹ 3,53,24,242/- under Chapter-X of the Income Tax Act, 1961. 3. That on facts and in law, the DRP erred in holding that for the purpose of benchmarking the international transactions the TPO was justified in using current year data only while computing the Profit Level Indicator of the comparable companies. 4. That on facts and in law the TPO erred in observing that the assessee is providing following services: (a) Lounge Services (b) Ticketing (c) Crew briefing (d) Fueling Supervisions (e) Passenger Boarding Bridges Handling (f) Aircraft Security (g) Executive Aviation Handling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trans Ltd. cannot be selected as a comparable. In support, the Ld. AR also relied upon the Coordinate Bench decisions in case of Kuehne + Nagel Pvt. Ltd. reported in 49 SOT 592(Del) and JAS Forwarding Worldwide reported in (2020) 113 taxmann.com 390(Del). It was submitted by the Ld. AR that once these two companies are excluded, then the other grounds of appeal would become in fructuous. 3.1. The Ld. AR also submitted that the TPO should have recomputed the PLI of the assessee once expenditure incurred on Fringe Benefit Tax was being considered as non-operating in case of comparable companies. 4. Per Contra, the Ld. CIT (DR) vehemently supported the adjustment made by the TPO which has been partly upheld by Ld. DRP. It was submitted by the Ld. CIT (DR) that the lower authorities have justifiably selected M/s. Container Corporation of India Ltd. and M/s. Sanco Trans Ltd. as a comparable. The Ld. CIT (DR) invited our attention to the following observations of the TPO in this regard: Container Corporation of India Limited ( CONCOR ) As per assessee, the services of the company can be categorized as transportation of containers, handling of containers and parking of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara number 2 is extracted the activities carried out by the assessee from the website of the assessee. On that basis the learned transfer pricing officer and stated that the assessee is providing a very specific mission services and having a specialized functions which require critical knowledge of the dynamics of the industry, specialized training of the staff of the assessee. And therefore looking at the present environment of high security the functions and responsibility of the company and the employees of the assessee become almost significant and require high-quality. Therefore the learned transfer pricing officer proceeded to compare the functions of the assessee on those criteria. Assessee has objected before the learned transfer pricing officer that learned transfer pricing officer is not appreciated activities of the assessee which are in the nature of only business support services. It was further contended by the assessee that it is not providing any refueling services or any security services and therefore the services provided by the assessee are not specialized services. Such objection is recorded in para number 3.1 of the order of the learned transfer pricing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracing Section 3 Unit Load Device Control 3.1 Handling 3.1. (b) Arrange for 1 suitable storage space for ULD's, as mutually agreed. 3.1. 2 Apply correct storage and handling techniques in accordance with the Carrier's requirements. 3.1. 3 Take appropriate action to prevent theft or unauthorized use of, or damage to the Carrier's ULD's in the custody of the Handling Company. Notify the Carrier immediately of any damage to or loss of such items. 3.2 Administration 3.2. 3 (a) Take physical inventory of ULD stock and maintain a stock record. (b) Compile and dispatch ULD Control Mes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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/-. 5.1. The Ld. CIT (DR) has not been able to highlight any distinguishable fact. Therefore, respectfully following the findings of coordinate bench for AY 2007-08, it held that the TPO, in the year under consideration also, has not properly appreciated the functional profile of the assessee. From the facts on record, it is discernible that the assessee is mainly providing passengers and baggage handling services to its AE and is not providing other specialized airport services as alleged by the TPO. For rendering such services, the assessee has a Net Gross Asset Base of ₹ 31,22,65,835/- which comprises of Know How/Royalty, Temporary Structures, Office equipment, safety equipment's, air-conditioners, data processing equipment, electrical equipment, furniture and fittings, Motor Car, and Plant and Machinery. In the year under consideration, the assessee has incurred total expenditure of ₹ 34,73,49,275/- out of which Personnel Expenditure incurred is ₹ 20,16,09,112/- which is 60% of the total expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard we draw support from wisdom of the Hon'ble Jurisdictional High Court in case of M/s. Saxo India Limited reported in 397 ITR 160(Del) and M/s. SEZ Gurgaon reported in 416 ITR 51(Del). Moreover, we find that Container Corporation of India is also not a service-oriented company as the ratio of employee cost is merely 1.65% (i.e. 55cr/3347cr). This is an important fact which merits consideration. The Ld. DRP has itself made this as a ground while excluding M/s. Cochin International Airport (CIAL) as a comparable which was originally proposed by the TPO. From perusal of the annual accounts of this company, we also find that Container Corporation of India is a Giant Company with turnover of more than ₹ 3,300/- crores, fixed asset base of around ₹ 2,244/- crores, Container fleet of 13,517 units, Speed Wagons of 6,722 and owning Terminals. The assessee, on the other hand, is a service-oriented company with turnover of ₹ 33.24 cr and fixed asset base (gross) of only ₹ 31.22 crores. Container Corporation of India is also operating in Virtual Monopoly conditions. From the above cumulative reasons, we find that FAR of Container Corporation of India is not akin t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 136.23 130.22 Warehousing charges earned 1577.05 947.56 4296.36 3269.14 5.3.2.2 Handling charges earned is 40.96% of the total revenue and balance is passive income i.e., hire charges earned and warehouse charges earned which is 59.03%. There are no segmental accounts prepared. M/s. Sanco Trans has earned total operating revenue of ₹ 4296.36 lakh and total employee cost incurred is 511.96 lakhs which in ratio terms is 11.91%. This shows that this is also not a service-oriented company. For reasons akin to that stated above we, therefore, hold that M/s. Sanco Trans cannot be selected as a comparable. We direct accordingly. 5.4.0 Before us, the Ld. AR has also submitted that the TPO had computed the PLI of companies selected by him by presuming that FBT expense is a non-operating item. In this regard we note that at page 28 his order it is held by the TPO as under: The computations made by the assessee have been considered. It is seen that the assessee has considered fringe benefit tax as of oper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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