TMI Blog2022 (12) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proof of their becoming bad has not been established - HELD THAT:- We find that the law in this regard has already been settled in the case of TRF Ltd [ 2010 (2) TMI 211 - SUPREME COURT] . The AO is directed to follow the same. - ITA No.1479/Del./2014 - - - Dated:- 30-8-2022 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and MS. ASTHA CHANDRA, JUDICIAL MEMBER ASSESSEE BY : SHRI TARANDEEP SINGH, SHRI PULKIT VERMA REVENUE BY : SHRI MAHESH SHAH ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal by the assessee is directed against the order of Assessing Officer dated 20.01.2014 passed under section 143(3) r.w.s. 144C of the Income-tax Act, 1961 (for short the Act ) pursuant to the directions of the Dispute Resolution Panel (DRP). 2. The grounds of appeal raised by the assessee read as under :- 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' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of bad debts written off. 3. Apropos transfer pricing adjustment. Brief facts of the case are that the taxpayer filed its return of income on 30.09.2009 declaring income of Rs.4,91,82,210/-. Since the taxpayer had undertaken international transactions with its associated enterprises, a reference was made by the Assessing Officer (AO) to the Transfer Pricing Officer, New Delhi, under section 92CA(1). Vide order dated 09.01.2013 the Transfer Pricing Officer (TPO) proposed an addition of Rs.8,37,93,883 and AO vide his draft assessment order dated 08.03.2013 after considering the above International transaction, proposed to assess the taxpayer at an income of Rs.13,72,42,420. 4. The taxpayer company (GGIPL) is a subsidiary of Globe Ground Deutschland GmbH ( GGO ). GGD holds 51 percent shares in GGIPL. GGIPL is engaged in airport ground handling services which inter-alia includes passenger services, ramp services, cargo handling services, security services, and other airport ground handling support services to airlines. 5. The international transactions entered into are tabulated below:- S.No. Types of International Transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Container Corpn. of India Ltd. 31.67 2 Delhi International Airport Pvt. Ltd. 1.14 3 Sanco Trans Ltd. 41.71 AVERAGE 24.84 8. Calculation of arms length price :- Operational Cost 398,956,748 Arm s Length Price at a Margin of 24.84% 498,057,604 Price received 414,263,721 Proposed adjustment u/s 92CA 83,793,883 The arm s length price related to providing ground handling services is determined at Rs.49,80,57,604/- as against Rs.41,42,63,721/- determined by the assessee. The upward adjustment of Rs.8,37,93,883/- is required to bring it to arms length. The assessee shall not get the benefit of proviso to Sec.92C(2) as the difference arrived at is more than 5% of the value of international transactions. 8. Upon taxpayer s objections, the DRP rejected the same. Agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctions and responsibility of the company and the employees of the assessee become almost significant and require highquality. 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 officer. The assessee has submitted the copy of the ground handling agreement between the assessee and its associated enterprises. It is a standard ground handling agreement between the parties effective from 01/02/2002 and it is claimed that the same agreement continues. The services to be provided by the assessee are listed in paragraph 1 of the agreement. Same are also compared with the standard ground handling agreement version of 1998 and it is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual Accounts It is Government Company - Govt. holds 63.09% of share capital. Pg 136/142 Container Corporation of India's income from operation are from Freight, Handling, Terminal Service charges, Demurrage and others of Rs. 3,417.16 crores. There are no segmental accounts prepared Pg145 Pg 151, para 7(1) It is not a employee-oriented company ratio of employee cost is 2.36% (i.e 80.84 cr 13417.16 cr) whereas assessee's employee cost is 47%. This is an important fact which merits consideration. DRP in case of 'A' for AY 08-09 - DRP has directed exclusion of Cochin International Airport (CIAL) taking employee cost as one of the important factors. Pg 149 This is Giant Company with (a) turnover of more than Rs. 3417.16 crores, (b) fixed asset base of around Rs. 2640.95 crores (c) Container fleet of 13,576 units (d) Speed Wagons of 8117 . (e) Owing Terminals 'A' on the other hand is a service-oriented company with turnover of Rs 72.05 cr (refer page 7) and fixed asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Warehousing charges earned 2590.81 1577.05 6166.52 4296.36 Handling charges earned is 37.41 % of total revenue and balance passive income i.e., hire charges earned and warehouse charged earned is 62.59%. There is no segmental accounts prepared (refer page 226, para 19 of PB). MIs Sanco Trans has earned total operating revenue of Rs. 6166.52 lakh and total employee cost income is 583.14 lakhs which in ratio terms is 9.45%. This shows that this is not an employee-oriented company unlike the 'A'. For above stated reasons Hon'ble ITAT in case of 'A' for A Y 2008-09 has rejected the use of Sanco Trans Limited as a comparable. {refer ITAT order dated 30th June 2021 in ITA No.5711/Del/2012 copy enclosed at pages 106-131, relevant at pages 127 to 129, para 5.3.2.0, 5.3.2.1 and 5.3.2.2} C. Once the above facts regarding above alleged comparable companies are considered then they merit exclusion on following grounds which have been judicially upheld considering the functional profile of the 'A': (i) 'A' is only pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely :- (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method; (f) such other method as may be prescribed by the Board. (2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arm's length price, in the manner as may be prescribed: Provided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices: Provided further that if the variation between the arm's length price so determined and price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed such percentage not exceeding three per cent of the latter, as may be notified by the Central Government in the Official Gazette in this behalf, the price at which the international transaction or specified domes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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