TaxTMI 
TaxTMI 
2022 (12) TMI 330
X X X X Extracts X X X X
X X X X Extracts X X X X
....That on facts and in law the DRP erred in sustaining an adjustment to total income of Rs.8,37,93,883/- under Chapter- X of the Income Tax Act, 1961. 2.1 That on facts and in law the DRP erred in issuing directions to AO/TPO resulting in enhancement of TP adjustment by Rs 52,66,229/- (i.e from Rs.8,37,93,883/- to Rs.8,90,60,1121- ). 3. That on facts and in law the TPO erred in observing that the appellant is providing following services: (a) Fuel Management (b) Escort Services 4. That on facts and in law the TPO erred in rejecting and the DRP inter alia erred in upholding the rejection of economic and benchmarking analysis conducted by the appellant. 4.1 That without prejudice on facts and in law the TPO/DRP erred in: (a) Rejecting the use of internal TNMM benchmarking analysis conducted by the appellant. (b) Rejecting the use of multiple year data. (c) Holding that the segmental accounts submitted by the appellant are not reliable. (d) Computing PLI of the tested party at 3.91 %. (e) Computing PLI of comparable companies at 24.84%. (e) Rejecting applicability of an upper turn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue of transaction i Provision of Grounding handling services TNMM 414,263,721 ii Receipt of Training 3,156,900 iii Payment for Professional services received 886,630 Iv Payment for chip cards 751,347 v Reimbursement of expenses 7,040,259 6. The taxpayer furnished its TP study and selected TNMM as the most appropriate method to benchmark its international transactions at S.No. (i) to (iv). Since the taxpayer was providing ground handling services both to its AE and non AE, the taxpayer computed the operating profit (OP/TC) for each of this segments. The OP/TC of AE segment was 61.22% and that of non AE segment was (-)34.42%, therefore the taxpayer held that since the profit of AE segment was more than the non AE segment therefore, the payments charged for providing ground handling services to its AE was at arm's length. 7. However, in TPO's view the method of using internal TNMM was not correct because there was no reliability about the segmental accounts drawn up because the same were not part of the audited financials and further reasonable allocation keys were not prese....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rly appreciated the functional profile of the' A' - Copy of order dated 09th January 2013 passed by the TPO for AY 2009-10 is enclosed at pages 126 to 149 of PB-1. At page 127, para 2 show-cause notice issued by TPO is reproduced. TPO records (at pages 129 - 130) that he has examined the website of the 'A'. In this regard it is submitted that the TPO has not properly appreciated the functional profile of the 'A'. Similar allegations were levied by the TPO in case of 'A' for AY 2007-08. Issue was adjudicated upon by Hon'ble ITAT vide order dated 18th ITA No.1479/Del./2014 7 February 2019 reported in (2019) 103 taxmann.com 268( Del) and at para 7 it was held as under: "7. We have carefully considered the rival contentions and also perused the orders of the lower authorities. Firstly it is important to identify the exact nature of the services rendered by the assessee to understand the functional profile of the assessee. Such profile has been disputed by the assessee wide ground number 2.2 of the grounds of appeal. The functional profile stated in the transfer pricing study report prepared by the assessee is sketchy and does not deserve any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 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/-." The above conclusions of Hon'ble IT AT has thereafter also been followed in case of 'A' for AY 2008-09 {refer ITAT order dated 30th June 2021 in ITA No. 5711/Dell2012 copy enclosed at pages 106-131, relevant at pages 117 to 123, para 5 and 5.1.} It is therefore submitted that the TPO has not properly appreciated the functional profile of the 'A'. Once the understanding of functional profile by the TPO was wrong there was bound to be errors in search and selection of comparable companies. B. Once the functional profile as accepted by Hon'ble ITAT in immediately preceding year is considered then the following comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 38, last para without any objective analysis. It is submitted that MIs Sanco Trans is a company which is principally engaged in a single business segment viz. Cushions cleaning and forwarding, container freight station and related activities. Director's Report (at page 205 of PB) acknowledges that the main growth area for the company was business of Container and Warehouses as under: "During the year under report your company incurred major capital expenditure to an extent of Rs.790.222 lakhs. Apart from this, your company incurred major expenditure on an ongoing basis to maintain its container yard and warehouses and its operating fleet and equipments of Rs 231.81 lakhs. The above stated major initiative on facilities and its upgradation will have a positive factor on improving the customer satisfaction in the long run" This highlights the nature of business primarily carried on by the M/s Sanco Trans wherein it is into a business of earning passive income. Revenue shown in P&L Account is as under (refer Pg. 216 and 223 of PB) : "Operating earnings (Rs Lakhs) 2009 2008 Handling Charges earned 2307.15 1760.18 Equipment and fleet hire char....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herefore submitted that M/s Container Corporation of India and M/s Sanco Trans may kindly be excluded from the list of comparable companies." 11. Thus, from the above submissions, it transpires that ld. counsel of the assessee is restricting his arguments to exclusion of two of the comparables selected by the TPO on the ground that ITAT in assessee's own case has found the same to be not comparable to assessee and thereafter pleads for application of tolerance range of +/- 5%. 12. Per contra ld. DR for the Revenue submitted that since there is only one comparable remaining and hence only one price the tolerance range of +/- 5% is not applicable as it is applicable only when there are more than one price and an arithmetic mean has been arrived at. Ld. DR submitted that he shall be submitting case law in this regard. However, till date, no such case law has been submitted. 13. In this regard, we may gainfully refer to the concerned provisions of the Act :- "92C. (1) The arm's length price in relation to an international transaction or specified domestic transaction shall be determined by any of the following methods, being the most appropriate method, having reg....