ITO, ANGUL WARD, ANGUL vs. NCC-SMASL-JRT(JV), ANGUL

आयकर अऩीऱीय अधधकरण, कटक न्यायऩीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER आयकर अऩीऱ सं/ITA No.39/CTK/2018 आयकर अऩीऱ सं/ITA No.99/CTK/2019 (ननधाारण वषा / Assessment Year : 2013-2014 & 2014-2015) ITO, Angul Ward, Angul Vs M/s NCC-SMASL-JRT(JV), C/o-Sainik Mining and Allied Services Ltd., Near Jagannath Project Office PO: South Balanda, Talcher, Angul-759116 PAN No. :AABAN 3785 B AND Cross Objection No.27/CTK/2018 (Arising out of ITA No.39/CTK/2018) (ननधाारण वषा / Assessment Year : 2013-2014 & 2014-2015) M/s NCC-SMASL-JRT(JV), Vs ITO, Angul Ward, Angul C/o-Sainik Mining and Allied Services Ltd., Near Jagannath Project Office PO: South Balanda, Talcher, Angul-759116 PAN No. :AABAN 3785 B (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. ननधााररती की ओर से /Assessee by : Shri Salil Kapoor and Bibhu Jain, Advs राजस्व की ओर से /Revenue by : Shri Sanjay Kumar, CIT-DR सुनवाई की तारीख / Date of Hearing : 25/07/2024 घोषणा की तारीख/Date of Pronouncement : 25/07/2024 आदेश / O R D E R Per Bench : The revenue has filed two appeals against the separate orders of the ld. CIT(A)-2, Bhubaneswar, passed in I.T.Appeal No.0265/2016-17, dated 16.10.2017 and IT Appeal No.0309/2017-18, dated 22.01.2019, for the assessment years 2013-2014 & 2014-2015. The assessee has also

2 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 filed cross objection arising out of the appeal of the revenue for A.Y.2013- 2014. 2. First, we shall take up the appeal of the revenue in ITA No.39/CTK/2018 filed for the assessment year 2013-2014, wherein the revenue has raised the following grounds :- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is not justified in deleting the entire addition of Rs.3,05,45,593/- made by the AO ignoring report of the TPO determining the arm's length price, which is determined appropriately. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is not justified in deleting the above addition holding that the entire sale proceeds has been transferred ot JV partners and the JV has not done any work when the fact is that the JV is the actual recipient and has to discharge the responsibility arising in difference in ALP determined by the TPO examining the facts and domestic transactions by the JV with its AE, as mentioned in Form No.3CEB filed by the JV. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is not justified in deleting the additions of Rs.16,34,369/- & Rs.1,67,979/- made by the AO towards difference in gross receipt and non-deposit of PPF in due date respectively, in violation of provisions of Rule-46A of Income Tax Rules, 1962. 4. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. 3. The assessee against the above appeal of the revenue, has filed cross objection on the following grounds :- 1. That the order passed by the Transfer Pricing Officer (TPO) and the Assessing Officer (AO) and the additions made therein are illegal, bad in law and without jurisdiction. 2. That on the facts and circumstances of the case, the AO/TPO and Commissioner of Income Tax (Appeals) (CIT(A)) erred in not appreciating that the Assessee is not a taxable entity and as such is not an AOP.

3 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 3. That the AO/TPO/CIT(A) erred in not appreciating that this is a tax neutral exercise. 4. That the Assessee seeks permission to raise additional grounds at the time of hearing. 4. Brief facts of the case are that the assessee is an AOP and was formed as Joint Venture between M/s NCC Limited (NCC), M/s Sainik Mining and Allied Services Limited (SMASL) and M/s Jalram Transport (JRT) to execute the mining works like, OB Removal, loading, transportation and other same kind of related work given by Mahanadi Coalfield Limited (MCL), a subsidiary of Coal India Limited. During the year under appeals, the assessee was awarded a work contract by the Mahanadi Coal Limited (MCL), which was sublet to the JV partners for execution of same on contract basis at the same rate on which it was awarded by the MCL. The return of income was filed on 30.11.2013 declaring Nill income and the refund of TDS was claimed. The case was taken up for scrutiny and during the course of assessment proceedings, the AO observed that the assessee has claimed direct expenses of Rs.25,97,41,438/- i.e. the amount equivalent to the gross receipts of the assessee-JV. The said amount was paid to three Joint Ventures constituents who had executed the work for the assessee-JV as sub- contractor and since all the parties are covered under clause (iv) of Section 40A(2)(b) of the Act, therefore, the transactions are specific specified domestic transactions. Accordingly, the AO made a reference to TPO for computation of Arm's Length Price (ALP) in respect of specified domestic transactions. As per the Form 3CEB available on record, the

4 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 assessee has worked out the ALP equivalent to the amount paid to its AEs by following “the other method as prescribed by Board in terms of Section 92C(i) of the Act” for computing the ALP. The TPO vide its order dated 28.10.2016 has applied Transaction Net Margin Method (TNMM) to work out the domestic transactions price and accordingly an adjustment of Rs.3,05,45,593/- is made by the TPO in view of the comments made in the order which are reproduced as under :- 5:00 TPO's comments: The reply of the assesse is perused, wherein it has stated that the main purpose for formation of JV was not to earn profits but to bring coordination among the JV partners to execute the works given by the MCL. The contention of the assessee is not acceptable. The assessee's objective was to transfer the entire sale proceeds to AE to ensure lowest sale price to MC. The assessee failed to justify the rationality of the approach since, the ultimate sale price to MCL is not linked with the cost of either assessee or AE in the entire scheme of arrangement. Further, the assessee's contention that the income of the assessee had already been taxed in the hands of its constituent partner is not tenable as the tax is not in the hands of the right person. That, the mere fact of the income sought to be taxed as per this assessment proceeding has been taxed earlier in the wrong hands does not preclude the Department to tax the right person in respect to that income. Reliance is placed on the decision of the Hon'ble Supreme Court in ITO v Ch Atchaiah 218 ITR 23 9 where it was held that the Assessing Officer can, and he must tax the right person and the right person alone. By right person '; we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person "is obviously used as the opposite of the expression" right person 'Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue. In our opinion, the language of the relevant provisions of the present Act is quite clear and unambiguous. Section 183 shows that where Parliament intended to provide an option, it provided so expressly. Mere a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law, but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer [Income-tax Officer] has taxed the said income in the hands of another person contrary to law. .... "

5 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 Be that it may, in an arm's length scenario, the assessee should have eared industry standard markup for the job provided by the MCL. In relation to the same, a search was undertaken from the public database to determine the companies engaged in operation similar to the AE. The companies having turnover in excess of Rs.1 crores and related party transaction (RPT) less than 25% of RPT over sales and costs combined were selected. The result of the said search is tabulated below: Name of the company PLI(Sales) Mineral Enterprises Ltd. 41.9 Samruddha Resources Ltd. 8.88 Barmer Lignite Mining Co. Ltd. 1.16 Hi-Tech Rock Products & Aggregates Ltd. 0.61 Oren Mud Chemicals Pulverising Pvt. Ltd. 6.26 Total 58.81 Average-arm’s length margin (ALP) 11.75 6:00 Computation of Adjustment: The quantum of adjustment is computed as under: Particulars Reference Amount(Rs.) Revenue A 25,97,41,438 Cost B 25,97,41,438 Operating Profit(OP) C=A-D 0.00 OP/OC D=C/A 0.00% Arm’s Length operating D 11.76% margin/sales Arm’s length operating profit for E-C*D 3,05,45,593 assessee considering 11.76% OP/OC TP Adjustment L-I*K 3,05,45,593 Thus, the total adjustment to be made to the total income aggregates to Rs.3,05,45,593 for the AY 2013-14. 7:00In view of the above adjustment the assessing officer may explore the feasibility of initiating penalty u/s 2 71AA of the Act for non-reporting of the above detailed transactions. 8:00 It is hereby clarified that the findings and discussions made in this order pertains only to the extent of determination of arm's length price of International and/or Specified Domestic Transaction(s) and are only applicable in respect to reference received for AY 2013-14 and shall apply accordingly. 5. The AO has completed the assessment by making addition of Rs.3,05,45,593/- as adjustment in domestic transactions based on the

6 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 TPO’s order. In first appeal, the ld. CIT(A) after considering the arguments of the assessee and by accepting the assessee's alternative plea has deleted the addition by holding therein that since the services rendered by assessee to associate enterprises were exactly same as, in effect, rendered by associate enterprises to independent parties, the price charged for the same service by associate enterprises from independent end customer was best CUP input for determining arms length pricing. Besides two additions made by the AO were also deleted by the ld. CIT(A) which has been challenged by the department on the ground that the ld. CIT(A) has accepted the additional evidences without following the procedure laid down under Rule 46 of I.T Rules, 1962. 6. Before us, ld. CIT-DR vehemently supported the order of the AO and submitted that in the Form 3CEB, the assessee in point No.22 has categorically stated that it had used "such other method as may be prescribed by the Board" for determination of ALP u/s.92C(i) of the Act, however, neither any details nor any other particulars were filed in regard to the computation of such price. He submitted that it is an undisputed fact that the assessee did not own any asset nor has executed the work awarded to it by MCL and it was its three joint ventures partners who had carried out the entire work as sub-contractors for the assessee JV. The TPO applied TNMM method which is based on the comparison of independent parties in similar trade and work out the Arm’s Length Price Margin at 11.76%. However, ld. CIT(A) without appreciating that the assessee has no internal comparable available with it, has accepted the

7 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 plea of the assessee that CUP method is the best method for computation of arm's length price and without even asking any working under CUP method has deleted the additions in summary manner. Ld. DR submitted that the assessee has not provided any service of any nature to any other party except MCL nor has awarded any work other than to its JV constituents for the execution of work on its behalf. At this juncture, the ld. CIT-DR referred Rule 10B(1)(a) of the I.T.Rules, 1962, which prescribes the computation of ALP under CUP method and submitted that without any internal comparable uncontrolled transaction, it is not understandable how ld. CIT(A) has held that the price determined by TPO under TNMM is excessive and that of declared by assessee is reasonable. 7. He, thus, submitted that when there is no comparable uncontrolled transaction can be identified in the case of the assessee, which is an admitted fact since it had not awarded any work to any other entity other than its AEs, therefore, application of CUP method for computation of ALP in its case cannot be done. 8. Further the ld. CIT-DR placed reliance on the submission made by his predecessor during the course of hearing on earlier occasion, which is reproduced hereunder:- In the ITRs filed for A.Y.2013-14 & A.Y.2014-15, the assessee has itself shown it as an AOP and therefore it is a taxable entity as per provisions of Income Tax Act. The findings of the Id. CIT(Appeals) are erroneous for the following reasons: i.) During the year under reference, the assessee has paid loading and transportation charges to its associated enterprises. The entire contract from MCL (Mahanadi Coalfields Limited) has been sub- contracted to its three associated enterprises. Even in the back to

8 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 back contracts, there has to be mark-up which is absent in the present case. ii.) Before the TPO, no supporting documents were submitted by the Id. AR of the assessee to substantiate the basis on which Arms Length Pricing was determined with respect to its AEs. There is no evidence that it had used CUP method for determining ALP. The TPO therefore followed TNNM as the best method for benchmarking the transactions. He has thus applied mark-up ill.) The Id. CIT(Appeals) has held that in case of back to back contracts, the CUP is the best method relying on the decision of Hon'ble Delhi Tribunal in the case of Calance Software Pvt. Ltd. (B2 taxmann.com 390). However in the cited case, the said company had followed CUP method which is not the case here. Therefore it is a substituted view of Id. CIT (Appeals) which is divorced from the reality. iv.) The Id. CIT (Appeals) has not given any finding to show/demonstrate that how the profile of the assessee is different from that of the comparables chosen by the TPO. Thus the order of CIT(Appeals) is cryptic in this regard. v.) It was held by the Hon'ble Delhi ITAT in the case of DCIT vs. Aithent Technologies (P.) Ltd. (53 taxmann.com 29B) that where no reasoning was given by Commissioner (Appeals) for accepting assessee's claim, it was a non- speaking cryptic order and therefore the matter required re-adjudication. In the absence of any discussion addressing the reason, the finding was open to challenge on the grounds of being arbitrary. In view of that matter, the issue was restored to the file of CIT(Appeals) for re- adjudication. vi.) As regards the difference in gross receipts of Rs.16,34,369/- and non- deposit of employees contribution of Rs.l,67,979/- for A.Y. 2013-14, a fresh evidence (reconciliation statement) were admitted by the Id. CIT(A) without calling for a remand report from the A.O. or confronting the A.O. with such evidences. vii.) These evidences were taken on record by the Id. CIT(A) without recording any reasons for the same. It is a settled law that a litigant has to demonstrate that it was prevented by sufficient cause to lead such evidence before the A.O. i.e. Whether the AO refused to take such evidence or the assessee failed to submit these for sufficient reasons or the AO did not provide him sufficient opportunity. As per sub-rule 1, 2 and 3 of Rule-46A, firstly the CIT(A) has to record his reasons for taking such evidences on record. Secondly reasonable opportunity has to be given to the AO to verify/refute such evidences. In this regard, reliance is placed on following decisions:

9 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 1) Hon'ble Gauhati High Court in the case of CIT vs. Ranjit Kumar Choudhury (288 ITR 179). 2) Hon'ble Kerala High Court in the case of C. Unnikrisnan vs. CIT (233 ITR 485) 3) Hon'ble Mumbai High Court in the case of Prabhavati S. Shah vs. CIT (231 ITRl) viii.) Therefore in the present case, there has been gross violation of principles of Natural Justice as the Id. CIT(A) has not allowed any opportunity to the AO to verify such evidences. Rule-46A(3) is mandatory and indispensable and non- compliance of same will require re-adjudication of the matter by the CIT(A). In this regard, reliance is placed on following decisions: 1) Hon'ble Himachal Pradesh High Court in the case of CIT vs. Shree Kangra Steel (P) Ltd. (320 ITR 691) (para-B) 2) Hon'ble Madras High Court in the case of CIT vs. Subbu Shashank (327 ITR 577) (para-G) 3) Hon'ble Delhi High Court in the case of CIT vs. United Towers (P) Ltd. (296 ITR 106) 4) Hon'ble Delhi High Court in the case of Manish Build Well (P) Ltd. (16 taxmann.com 27) ix.) As regards the late deposit of employee's PF, the same shall constitute income in the hands of the employer as per section 2(24)(x) of the Act. As per section 36(1)(va), employee's PF should be paid with due dates as prescribed under PF Act i.e. 15th of next month plus grace period of 5 days. Amendment to section 43B by Finance Act, 2003 is not applicable to section 36(l)(va) of the Income Tax Act. This is supported by the following judgements: a) Hon'ble Madras HC in the case of Unific Management Securities (India) (P.) Ltd. vs. DCIT (lOO taxmann.com 244) b) Hon'ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (41 taxmann.com 100) c) Hon'ble Kerala HC in the case of CIT vs. Merchem Ltd. (61 taxmann.com 119) d) Hon'ble Gujarat HC in the case of Pr. CIT vs. Suzlon Ltd. (l15 taxmann.com 340) e) Hon'ble Delhi HC in the case of CIT vs. Bharat Hotels Ltd. (410 ITR 417) f) Hon'ble Kerala HC in the case of Popular Vehicles & Services vs. CIT (96 taxmann.com 13) 8

10 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 9. With regard to the other two issues, the ld. CIT-DR submitted that the ld. CIT(A) has deleted the addition by accepting the details which was not filed before the AO nor they have been sent to AO for his remand report which is a clear violation of Rule 46A of IT Rules, 1962, where additional evidence have been admitted by the ld. CIT(A) without providing an opportunity to the AO for making his comment on such evidences. He, therefore, prayed for confirmation of the adjustments/addition made by the AO. 10. On the other hand, ld. AR of the assessee supports the order of the ld. CIT(A) and submitted that though admittedly the assessee has challenged the method of computation of ALP by TPO, however, during the appellate proceeding before the ld. CIT(A), it has alternatively contended that the CUP method is most appropriate method for computation of ALP in the present case which contention was accepted by the ld. CIT(A). He placed reliance on the submissions made on two occasions before the ld. CIT(A) in this regard, which are reproduced as under:- I. Submission dated : 20/09/2017: THAT THE LD. AO/TPO HAS ERRED IN LAW AND FACTS BY ASSUMING JURISDICTION U/S 143(3) WITHOUT CONSIDERING THE FACT THAT CHARGING SECTION (i.e. SECTION 4) OF THE INCOME TAX ACT, 1961 IS NOT APPLICABLE ON THE APPELLANT 10.The td. AO/TPO has also erred in law and facts by assuming jurisdiction u/s 143(3) without considering the fact that charging section (i.e. section 4) of the Income Tax Act, 1961 is not applicable on the appellant

11 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 11. In this regard it is further submitted that Section 4 of the Act provides for charge of tax in respect of the total Income of every person. Section 2(31) of the Act defined a person to, inter alia, include an AOP or BOI whether incorporated or not and if an entity is not a person as per Income Tax Act, 1961 then the entity shall not be exigible to Income Tax, In support of aforesaid argument it pertinent to mention here certain provision of 4 and 5 of the Act: "4. Charge of income- tax (l) Where any Central Act enacts that income- tax shall be charged for any assessment year at any rate or rates, income- tax at that rate or those rates shall be charged for that year in accordance with, and 2 subject to the provisions (including provisions for the levy of additional income- tax) of, this Act} in respect of the total income of the previous year] of every person: Provided that where by virtue of any provision of this Act income- tax is to be charged in respect of the income of a period other than the previous year, income- tax shall be charged accordingly. 5, Scope of total income (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- Therefore from the above it is evident that income tax shall b~ chargeable in respect of total income of a person and if entity sought to taxed is not a person as per section 2(31) of the Income Tax Act, 1961, then charging section i.e. S. 4 of the Act shall not be applicable. Hence it will not be open for revenue to charge tax from the entity (i.e. which is not a person as Income Tax Act). 12. It is further submitted that explanation to section 2(31) of the Act shall not be applicable in the present case because applicability of explanation to section 2(31) of the Act presupposes that AOP/BOI has been "formed or established or incorporated", Whereas in the instant case the, inter-alia, issue before your goodself is that whether the assessee can be treated as AOP for the purpose of section 2(31) of the Act. 13. It is further submitted that in the instant case the ratio of decision of Supreme Court In the matter of ITO v. ChAtchaiah 218 ITR 239 shall not be applicable because in lTO v. ChAtchaiah 218 ITR 239the apex court did not decide the question that "Whether assessee can be regarded as Association of Person or notr 'Whereas in ITO v. ChAtchaiah 218 ITR 239 it was not disputed that the assessee (in ITO v. ChAtchaiah 218 ITR 239) was an AOP. But in the instant case the, inter-alia, issue before your goodself is that

12 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 whether the assessee can be treated as ADP for the purpose of section 2(31) of the Act. From the ratios of the aforesaid judgments mentioned in para-8 it is evident that the constituent members of JV being fully independent in their own sphere, the JV cannot be regarded as ADP hence person for the purpose of section 2(31) of the Income Tax Act, 1961. In this connection kind attention is invited to Article 2.1 and 2.4 of the Joint Venture Agreement which are reproduced herein below at the cost of repetition: 2.1 The percentage of participation of the parties in the Joint Venture shall be as follows 1. NCC : 33.34% 2. SMASL : 33.33% 3. JRT : 33.33% 2.4 All profits/loss and turnover of this joint venture shall be shared/divided among the said parties according to percentage of business participation as mentioned herein above. During the Assessment Year 2013-14 irrespective of clause 2.1 & 2.4 of the JV agreement, the revenue of the relevant assessment year was shared between the JV constituent as per details herein below: Name of party Amount in Rs. %of share in Revenue NCC 4,65,74,163/- 17.93 SMASL 13,46,23,119/- 51.83 JRT 7,85,44,157/- 30.24 Total 25,97,41,439/- 100 The aforesaid distribution was possible only because there was clear understanding amongst the parties that they joined the joint venture only for the purpose of securing the contract by pooling their expertise and do the works independently. The JV in fact acted only as a facilitator in securing the contract as the work awarded by the Principal Employer. All the constituents joined in pre-tendering process only to secure the project work by showing their respective expertise and capabilities. This understanding between the constituents of the JV enabled and strengthened the JV for pre- qualification of the tender. Further the aforesaid fact, of distribution of income, clearly shows that: i. the members of the JV did not join together for the purpose of producing a common income

13 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 ii. each member is independently responsible for executing its part of work through its own resources and also bears the risk of its scope of work iii, each member earns profit or incurs losses, based on performance of the contract falling strictly within its scope of work and; iv. the control and management of the JV is not unified and common management is only for the inter-se coordination between the consortium members for administrative convenience 1~ That the JV did not execute any work except that it had sub- contracted the whole work on back-to-back basis to its constituents. In such a situation, no income had accrued or had arisen in the hands of the assessee. The aforesaid outsourcing of contract was tax neutral because JV being an association of person having maximum tax rate and the JV parties being companies and firm also taxed at the same rate which is evident from the Income Tax Return, Balance Sheet and Tax Audit Report of JV partners are attached herewith. Further the share of JV partners in the profits of JV are be exempt in the hands of its constituent partners in terms of clause (a) of first proviso of Section 86 and Section 110 of the Income Tax Act, 1961. Therefore there was no loss to the revenue in this transaction. The aforesaid argument is having authority from M/s. Limak Soma Joint Venture V. Department of Income Tax wherein Hon'ble ITAT-Hyderabad bench observed inter-alia in para-s of their judgment, which is reproduced herein below for your ready reference, that: "We find force in the argument of the learned counsel for the assessee that it could not be a case of tax evasion as the rate of taxation of the members of the Joint Venture was higher than the rate of taxation applicable to the assessee, as the members of the Joint Venture are foreign concerns. The similar issues came up for consideration before Hon'ble ITAT- Hyderabad bench in the case of M/s Limak Soma Joint Venture, Hyderabad in ITA Nos. 498 to 500/Hyd/2006 (supra) for the assessment years 2002-03 to 2004-05 vide its order dated 4.11.2011.The Tribunal in Para NO.6 has held as follows: We find that the CIT(A) has given a finding that the appellant AOP did not execute any contract work in question and therefore, did not derive any income during the year and the additions made by the assessing officer could not be sustained. In the facts of the case, we hold that there is no mistake in the order of the CIT(A) in holding that the question of estimating profit does not arises and in deleting the addition made in the hands of the assessee. We hold that no

14 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 case for disallowance/addition could be made under S.40A(2) by the Revenue and accordingly, there being no merit in the grounds of appeal of the Revenue, the same are rejected for all the three assessment years in appeal before us". Further, the Hon'ble ITAT Hyderabad Bench in the case of PCL SUNCON JV & PLL STlTCO JV vide order dated 11th April 2012 in ITA No. 149- 160/Hyd/2008 and in M/S. Ivrcl-Kbl (Jv), Hyderabad vs Department Of Income Tax on 14 May, 2012 ITA Nos. 1197, 1198, 1199/Hyd/2011 has followed the earlier order of the Tribunal dated 4.11.2011 in the case of M/s. Limak Soma Joint Venture (cited supra). It is further submitted that the Income Tax' Department accepted the above position and not made any addition in Assessment Year 2012-13 of M/s. Ivrcl-Kbl (Jv) which is evident from para-2 of W.P. (e) No-31680 of 2015M/S. Ivrcl-Kbl (Jv) Hyderabad V. Department Of Income Tax before Hon'ble Andhra Pradesh High Court it was inter alia submitted that: …….The assessment order dated 26.02.2015, passed in respect of M/s.IVRCl-KBL (JV) for the assessment year 2012-13, records that the assessee was a joint-venture executing civil contract works; they had filed their return of income, for the assessment year 2012- 13, electronically declaring their total income as Rs.Nil; they had claimed refund of Rs.23,39,240/-; their case was selected for scrutiny, and subsequently a notice under Section 143(2) of the Income Tax Act, 1961 (for short the Act) was issued and served on the assessee; later a notice under Section 142(1) of the Act was issued along with a questionnaire; in response thereto, the authorized representative of the assessee appeared and furnished the information; the assessee-JV was awarded contracts by the Irrigation Department of the Government of Andhra Pradesh; later these contracts were given by the assessee on sub-contract, to one of its constituents, on a back to back basis without any margin; during the assessment year under consideration, the assessee had declared gross receipts of Rs.1,07,55,16,904/-, and the same was passed on to the sub-contractor; and, in view of the above, the income of Rs.NiI, as returned by the assessee, was accepted." 20. It is further submitted that the judgments relied by the assessee although relates to Section 40A(2) of the Income Tax Act, 1961 but these judgments are equally applicable in the present case because section 40A(2) and provisions of chapter X of the Income Tax Act, 1961 have common jurisprudence (i.e. To avoid Income Tax evasion from related party transactions), therefore principles emanating from section 40A(2) are equally applicable in Chapter X of the Income Tax Act, 1961. 21. In view of the position explained herein above, we wish to submit that:

15 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 a. The appellant is not an Association of Person (AOP) hence not a person u/s 2(31) of the Act; b. The charging section i.e. section 4 of the Act is not applicable on the appellant, therefore appellant is not chargeable under Income Tax Act c. No income has accrued in the hands of appellant d. the income of the assessee had already been taxed in the hands of its constituent partner; e. the transaction of contracting further is completely tax neutral; therefore the additions made by making arm length adjustment in the assessment order should be deleted on the aforesaid grounds. II. Submission dated 12/10/2017 : The Commissioner of Income Tax Appeal-2, Bhubaneswar,Odisha PAN :AABAN3785B A.Y.: 2013-14 Ref: Appeal us 250 of the Income Tax Act, 1961 against Assessment Order u/s 143{3} r.w.s. 144C of the Income Tax Act, 1961 in the case of M/s NCC SMASl JRT (JV) for the AY 2013-14 Sub: submission for Part Grounds of Appeal taken before your good self. Respected Sir, In continuation to our earlier submissions dated 20.09.2017 we would like to press our remaining grounds and submit as under:- Brief Background / modus operandi followed the assessee: Functionality/Business profile of JV 1. At the cost of repetition it is stated that the assessee (i.e. Joint Venture) was formed between M/s. NCC Limited (NCe), M/s. Sainik Mining and Allied Services Limited (SMASL) and M/s. Jalram Transport (JRT) to execute the mining works like, OB Removal, loading, transportation and other same kind of related work given by Mahanadi Coalfield Limited (MCL), a subsidiary of Coal India limited. A copy of Notice inviting tender-639 (NIT-639) issued by MCL dearly stating the scope of aforesaid work and Letter of Acceptance for NIT-639 is attached herewith as Annexure-t. A bare perusal of NIT-639 and Letter of Acceptance of NIT-639 clearly

16 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 shows that the assessee was contracted by MCL for Machenical Transfer of Coal into Tippers at proposed stock yard and Transportation of Coal from Stock Yard No. 8 to Jagannath Siding-I, Ill, IV and VI. In this connection it also pertinent to mention here that the during the relevant assessment year the JV has not either carried out on its own or outsourced any business activity other than activities mentioned in NIT-639. 2. In other words from the NIT-639 it can be said the main business activity carried out by JV partners on behalf of JV was Loading and Transportation of Coal. Further the activity of Loading and Transportation of Coal can be labeled mining activity or ancillary to the mining activity. It is further submitted that the JV was never engaged into the business of mining of Iron Ore or pulverizing & processing of oil or business of sale of boulders or aggregators etc. Assets 3. The work awarded by Mel was outsourced to the JV partners at the same rate at which it was awarded by the MCL to the JV because the main purpose behind the formation of JV was not to earn profits but to bring coordination among the JV partners to execute the works given by MCL. Therefore, the JV did not own any assets. All the assets used in discharging of aforesaid NIT-639 were owned by the respective JV partners. Accounting/Billing 4. The JV has been since acting as a facilitator had to account for the entire gross receipts received by it from the Principal Employer in its books while transferring the same to the account of the Sub-Contractors as the same is only a debt due to them for the project work already executed by them. In reality, the Principal Employer releases the payment of gross receipts in parts on completion of work and also on the basis of the bills raised by the contractor by withholding a portion for operating and maintenance of such work depending upon the contract works. In the case on hand, the entire work having been executed by the constituents of the JV and claimed for the same through bills, the JV had to account for the same and pass on the gross receipts to them. 5. Risk profile of JV: During the relevant assessment year the risk profile of the JV was as under Customer Credit Risk a. Since the contract Le. NIT-639 was awarded by MCL (being a subsidiary of Coal India Limited i.e. Public Sector Undertaking (PSU)}, therefore MCL is also a PSU, therefore the JV did not have risk that MCL will not make payments or fail to make payments. Hence the JV was not exposed to customer credit risk.

17 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 Foreign Exchange Risk b. Since all MCL is situated in India and no other overseas party was involved in the contract therefore all the payments were sought be received in INR only, hence the JV was not exposed to foreign exchange risk. Contract Rate/Pricing Risk c. Prices of the activity to be performed by the JV were duly mentioned in the letter of acceptance of NIT-639, hence the JV was not exposed to contract rate risk. Operational Risk d. As all the Prices of the activity to be performed by the JV were duly mentioned in the letter of acceptance of NIT-639 therefore JV was having no bargaining power and the prices were locked. However in future the cost of inputs may fluctuate but as the prices of services were fixed therefore the JV was not subject to operational risk which may arises due to fluctuation in prices of inputs such as cost of diesel, wages of drivers, cost of spare parts etc as the same will be borne by the respective JV partners. 6. That during the relevant assessment year the JV outsourced the contract to the JV partners details of which are as under: Name of party Amount in Rs. %of share in Revenue NCC 4,65,74,163/- 17.93 SMASL 13,46,23,119/- 51.83 JRT 7,85,44,157/- 30.24 Total 25,97,41,439/- As the above transaction fall within the purview of section 40A(2)(b) and the aggregate of such transactions was more than Rs. 20.00 Crore, therefore it is submitted that the JV entered into Specified Domestic Transaction (i.e. SOT) within the meaning of section 92BA. During the assessment proceedings, reference u/s 92CA was made by the ld. AO to the jurisdictional Transfer Pricing Officer (TPO). The Ld. TPO after calling various information and documents determined the Arm length Adjustment of Rs.3,05,45,593/- through Transaction Net Margin Method (TNMM). A copy of the TPO's order dated 28.10.2016 passed u/s 92CA(3) of the Income Tax Act, 1961 is annexed as Annexure-2. 8. With regard to above Arm Length Price Adjustment it is submitted that the aforesaid Arm Length Price Adjustment was bad and devoid of merits because for determination of aforesaid Arm Length

18 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 Price Adjustment the Ld, TPO followed the TNM Method and whereas the JV followed the any other method as mentioned in Section 92C (l)(f) of the Act. A copy of the transfer pricing study which shows that the JV that the any other method is annexed as Annexure-3. It is further submitted that section 92C(1) of the Income Tax Act, 1961 provides five method for computation of Arm Length Price and the details of aforesaid five methods are mentioned in Rule-10B of the Income Tax Rules, 1962. Further, the tone and tenor of Section 92F, 92C and Rule-10B suggests that the realm of the determination of Arm Length Price lies in identification and comparability of uncontrolled transaction vis-a-vis controlled transaction and application difference arises due to such comparison in controlled transactions. All the method listed in section 92C (1) (a) to (d) r.w.r.10 (1)(a) to (e) are fettered with technicalities which appellant JV may not fulfill, therefore, the appellant JV selected "any other method" as provided by Section 92C(1)(f) r.w.r.10B (1)(f) and 10AB. 9. With regard to applicability of "any other method" as mentioned in Section 92C (l)(f) of the Act, in case of appellant JV, it is pertinent to note the meaning of Arm length Price as mentioned in clause (ii) of section 92F which is reproduced herein below: 92F. In sections 92,92A, 928, 92C, 920 and 92£, unless the cornea otherwise requires- (ii) "Arm Length Price" means a price which is applied or proposed to be applied in a transaction between the persons other than associated enterprises, in uncontrolled conditions; In this connection it is pertinent to mention here certain provisions of Rule-10A and 10AB of Income Tax Rules, 1962. Rule 10A(ab) provides the meaning of uncontrolled transaction which is reproduced herein below: Rule 10A(ab) "Uncontrolled Transaction" means a transaction between the enterprises other than associated enterprises, whether resident or non-resident. Rule 10AB. For the purposes of clause (f) of sub-section (1) of section 92(, the other method for determination of the arm's length price in relation to an international transaction or a specified domestic transaction shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts.

19 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 Thus from above the "any other method" for the purpose of section 92C(1)(f) would be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts, In this connection it is submitted that the exercise of determining the ALP in respect of SOT between the related enterprises is aimed to determine the price, which would have been charged for products and services, as nearly as possible, in case such SOT were not controlled by virtue of them being executed between related parties. The object of the exercise is, thus, to remove the effect of any influence on the prices or costs that may have been exerted on account of the SOT being entered into between related parties. It is, at once, clear that for the exercise of determining ALP to be reliable, it is necessary that the controlled transactions be compared with uncontrolled transactions which are similar in all material aspects. In light of aforesaid background behind the SOTs, it is submitted that the contract was awarded by the Mahanadi Coalfield limited (MCL), a subsidiary of Coal India limited. Further the contract was awarded through tender process and the prices of the contract were locked through Letter of Acceptance of NIT-639. Therefore the appellant JV has no say in case of prices determined by MCL, being MCL an independent government body and subsidiary of Coal India Limited which acts as regulator in the coal industry. Therefore MCL being an independent government body, the appellant JV has no control over the pricing policy determined by MCL and moreover the relationship between the MCL and appellant JV is not governed by section 40A(2)(b). Hence, MCL cannot be termed as "associated enterprise" of the appellant JV for the purpose of Rule 10A of the "Income Tax Rules, 1962. Therefore from the above it is evident that the transactions between the appellant JV and Mahanadi Coalfield limited (MCL) were independent transactions (l.e. being transactions between two non associated enterprises) and the prices determined by Mahanadi Coalfield limited (MCL) can' act as benchmark for comparison as contemplated in Rule 10AB of the Income Tax Rules, 1962. In this connection it is also pertinent to mention here that the JV had outsourced entire work awarded by Mahanadi Coalfield Limited (MCL) on back to back basis to its constituents at price which determined by the Mahanadi Coalfield limited (MCL). Therefore as per "any other method" as mentioned in Section 92C (l)(f) of the Act, the transactions are at Arm Length Price and no impugned arm length price adjustment as proposed by Ld. TPQ and made by Ld.

20 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 AO was required. Hence, the Arm Length Price adjustment was bad and devoid of any merits and is liable to be deleted. 10. Without prejudice to above, as the realm of the determination of Arm Length Price lies in identification and comparability of uncontrolled transaction vis-a-vis controlled transaction, therefore in the case of the appellant JV, the "Comparable Uncontrolled Price Method" (CUP) as mentioned in Section 92C(1)(a) t.w.r. 10B(1)(a) would be the most appropriate method because of the following reasons: (a) The transactions between the appellant JV and Mahanadi Coalfield Limited (MCL) were independent transactions (Le. being transactions between two non associated enterprises); (b) The prices were determined by Mahanadi Coalfield Limited (MCL) an independent government body; (c) The work was awarded through tendering process, therefore the appellant JV has no say in pricing policy determined by the Mahanadi Coalfield Limited (MCL); (d) The price charged for services provided in a comparable uncontrolled transaction was readily available; (e) Therefore the price charged for services provided to Mahanadi Coalfield Limited (MCL) should act as benchmark for comparison as contemplated in Rule 10B(l)(a) of the Income Tax Rules, 1962. Now since the appellant JV had outsourced entire work awarded by Mahanadi Coalfield Limited (MCL) on back to back basis the entire work to its constituents at price which determined by the Mahanadi Coalfield limited (MCL), therefore "Comparable Uncontrolled Price Method" (CUP) method would be the most appropriate method as the CUP Inputs are available. It is most humbly submitted that when perfect CUP inputs are available as in this case in respect of back to back transaction, CUP method Is the best and inherently most suitable method, as it is a direct method and It hardly leaves any scope for distortion of results by extraneous factors. Further for the aforesaid proposition of law reliance is placed on the recent judgment of Hon'ble ITAT Delhi Bench in the matter of Dy. CIT.Ahmedabad v. (lance Software Private Limited (20171 82 taxmann.com 390 IDelhi- Trib) wherein it was held: 3. The assessee is engaged, inter alia, engaged in providing services such as software development. During the relevant previous year, the assessee rendered software development

21 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 services to its associated enterprises. There were three different transactions, values of which aggregated to Rs 3,01,19,496, and all these transactions were with Calance Corporation, United States. Two of these three transactions, as noted by the Transfer Pricing Officer, were back to back transactions in respect of contracts that Calance US had entered into independent entities by the name of Adjoined Consulting (US $ 4,25,320) and Heritage Valley Health System (US $ 85,000). There is no dispute that "these contracts were passed on to the assessee company (by Calance US) and the entire amount of US $ 5,10,320 was passed 011 to the assessee". The stand of the assessee was that since these are back to back transactions, these transactions are required to be taken as having been entered into at an arm's length price " [Para 3] 5. We find that, so far as the back to back transactions are concerned, the services rendered by the assessee to the AE are exactly the same as, In effect, rendered by the AE to the independent transaction. The price charged for the same service by the AE to the independent end customer is thus the best CUP input in respect of such a back to back transaction. If a unit sells a product to its AE for INR 100 and the AE sells the same product to an independent enterprise for INR 100. the intra AE transaction cannot but be termed as the arm's length transaction. It is also incorrect to proceed on the basis, as has been done by the TPO, that when TNMM in puts are available, the application of CUP can be rejected. CUP is not a residuary method. As a matter of fact, when perfect CUP inputs are available- as in this case in respect of back to back transaction. that Is the best and inherently most suitable method, as it is a direct method and it hardly leaves any scope for distortion of results by extraneous factors. We reject the plea of the learned Departmental Representative on this point. [Para 5] 11 . Without prejudice to above, the comparables taken by the Ld. TPO in para 5:00 of the order passed u/s 92CA(3) are not as per the various requirements of the Income Tax Act, 1961 and Income Tax Rules, 1962. It is pertinent to mention here Rule 108(2) which reads as under: (2) For the purposes of sub-rule (I), the comparability of an international transaction or a specified domestic transaction with an uncontrolled transaction shall be judged with reference to the following, namely:- (a) the specific characteristics of the property transferred or services provided in either transaction;

22 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions: (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail." Thus from the above it is evident that in order for the benchmarking studies to be reliable for the purposes of determining the ALP, it would be essential that the entitles selected as comparables are functionally similar and are subject to the similar business environment and risks as the tested party. Further for the aforesaid proposition of law reliance is placed on the judgment of Hon'ble ITAT Delhi Bench in the matter of Rampgreen Solutions Private Umited v. (IT [2015] 60 taxmann.com 355 (Delhi) wherein it was held: "20. In order for the benchmarking studies to be reliable for the purposes of determining the ALP, it would be essential that the entities selected as comparables are functionally similar and are subject to the similar business environment and risks as the tested party. In order to impute an ALP to a controlled transaction, it would be essential to ensure that the instances of uncontrolled entities/transactions selected as comparables are similar in all material aspects that have any bearing on the value or the profitability, as the case may be, of the transaction. Any factor, which has an influence on the PLI, would be material and it would be necessary to ensure that the comparables are also equally subjected to the influence of such factors as the tested party. This would, obviously, include business environment; the nature and functions performed by' the tested party and the comparable entities; the value addition in respect of products and services provided by parties; the business model; and the assets and resources employed. It cannot be disputed that the functions performed by an entity would have a material bearing on the value and profitability of the entity. It is, therefore, obvious that the comparables selected and the tested party must be functionally similar for ascertaining a reliable ALP by TNMM. Rule 1OB(2) of the Income Tax Rules, 1962 also clearly indicates that the comparability of controlled transactions would be judged with reference to the factors as indicated therein. Clause (a) and (b) of Rule 10B(2) expressly indicate that the specific characteristics of

23 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 the services provided and the functions performed would be factors for considering the comparability of uncontrolled transactions with controlled transactions" [Para 20] 12. The comparables selected by the ld. TPO are challenged as under: MINERAL ENTERPRISES LIMITED (i.e. 1s1 Comparable Company) hereinafter referred to as "Comparable-1" i. The Comparable-1 Company was engaged in the multiple business activities such as mineral products, Vessel loading & Unloading and Wind Power Generation. The above fact can be verified from the Financial Statements and Board Report of the Comparable- 1 downloaded from the web site of Registrar of Companies. A copy of the financials of Comparable-l downloaded from the website of ROC is annexed herewith as Annexure- 4. Whereas the Appellant JV is engaged in loading & transportation of coal, therefore the business activity of this comparable-l is different from the business activity of Appellant JV In this connection it is submitted that if the functional profile of the comparable-1 is different from appellant N, then the comparable is liable to be excluded. The Hon'ble ITAT Delhi Bench in the matter of McKinsey Knowledge Centre India (P.) Ltd. v. Dy. CIT, Circle 16(2), Delhi (2017) 82 taxmann.com 25 (Delhi-Trib) held as under: ......... According to us, though comparable is not engaged in business of raising of funds and deploying same, but it is engaged in advising functions of raising of funds and deploying same. Based on work profile of assessee and details of services provided as stated in Para No. 17 above. it cannot be stated that functions performed by assessee in research and information services are anywhere similar to functions of a fund manager. In view of decision of coordinate bench in assessee's own case for assessment year 2011 - 12 and also on basis of our analysis of functions of assessee vis - a -vis comparable, we direct ld. Transfer Pricing Officer/AD to exclude Aditya Birla capital advisors private limited for comparability analysis. [Para 20] It is further submitted that for the purpose of comparability analysis, it is essential that the characteristics and the functions are by and large similar as that of the Comparable- 1 and appellant JV, whereas ld. TPO/AO had failed to differentiate and appreciate that the functional profile of the Comparable-l and appellant N are totally different. ii. It is further submitted that the ld. TPO/AO has applied a lower turnover filter of Rs. 1 crore, but has not chosen to apply any upper turnover limit. In this regard, it is further submitted that under rule 10B(3) to the Income-tax Rules, it is necessary for comparing an uncontrolled transaction with an international transaction that there

24 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 should not be any difference between the transactions compared or the enterprises entering into such transaction, which are likely to materially affect the price or cost charged or paid or profit arising from such transaction in the open market. Further it is also necessary to see that wherever there are some differences and such differences should be capable of reasonable accurate adjustment in monetary terms to eliminate the effect of such differences. During the relevant Assessment Year the turnover of the comparable-l from the mining activity was Rs. 492 crores. whereas the turnover of the appellant JV was Rs. 25.97 Crore. hence the turnover of the comparable-I from the mining activity 19.68 times more than of the turnover of the Appellant N. The Hon'ble ITAT Banglore Bench 'C' in the matter of Misys Software Solutions (India) (Private) Limited v. DV. CIT, Cirde-4(1H2}, Bangalore [2017] 83 taxmann.com 121 (Bangalore-Tribl held as under: " From the above Para re-produced from the Tribunal order, it is seen that; in that case, the turnover filter applied was different Le. Rs.1.00 crore to 200 Crores. The Tribunal has noted another Tribunal order rendered in the case of Willis Processing Services (I) P. Ltd. v, Oy. ClT [2013J 57 SOT 34/32 taxmann.com 18 (Mum .• Trib.l wherein it was held that the turnover filter hand of Rs. 1 to 200 Crores is bereft of any rationality as the application of this rule does not enable comparison of a company having turnover of RS.200 Crores with any company having the turnover of Rs. I to 200 Crores. In our considered opinion, this turnover filter of Rs. 1 to Rs. 200 Crores is having this lacunae and therefore, the same is rightly held to be not a proper filter but nowadays the Tribunal is applying different turnover filter i.e. if the turnover of a comparable is less than 1/10th of the turnover of the tested party or is more than 10 times of the turnover of the tested party, 'than it is not a good comparable. In our considered opinion, this modified turnover has removed the vital lacunae of the earlier turnover filter from 1 to 200 Crores considered, in those cases and therefore, in our considered opinion, these Tribunal orders as per which it was held that the earlier turnover filter of Rs. 1 to 200 Crores is not a proper filter are not application in the present case. We are proceeding to apply the turnover filter of less than Ijl0th of the assessee company's turnover or more than 10 times of the turnover of the assessee company. Regarding this observation of the Tribunal that the turnover cannot be relevant criteria in a service sector, we would like to observe that as per the recent amendment in IT Act, as per which 'Rule of safe Harbour' is introduced, it is admitted by revenue also that the provision of Software Development Services is also an eligible international transaction as per Rule 10TC and as per Rule 10TD, it has been prescribed that where the turnover in respect of Software Development Services is not in excess of Rs.SDO Crores, rate of 20% should be applied and where the turnover is in excess of Rs.500 Crores, rate of 22% should be applied. From these provisions of the 'Rule of Safe Harbour', it becomes clear that it is

25 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 now accepted position of the department also that size of the turnover has an impact on the profit margin even in respect, of service sector which may be not on account of difference in fixed overhead but may be on account of capacity to charge higher price from customers because the size of the company is big. In this view of the matter, we are of the considered opinion that earlier Tribunal order cited by Id. DR of the revenue does not lay down a binding precedence. [Para-8} 9. In view of above discussion,we hold that the turnover filter of less than 1/10th of the assessee company's turnover or more than 10 times of the turnover of the assessee-company is a good filter and by applying the same, we direct the AO/TPO to exclude two companies i.e. Infosys BPC ltd and M/s l & T Infotech Ltd from the list of final comparables by applying higher turnover filter because. the turnover of these two companies is more than 10 times of the turnover of Software Development Segment of the assessee- company. Similarly, in respect of ITES Segment, we direct: the AO/TPO to exclude two companies, i.e., Infosys BOPO ltd and TCS E-Serve Ltd. by applying turnover filter because, the turnover of these two companies is more than 10 times of the turnover of ITES segment of the assessee-company." [Para-9] iii. The market size for the comparable-I is infinite, therefore the revenue and profits of the company can grow up to any limit. whereas the market size 'of the appellant JV is restricted to the work contract awarded by MCL, which is limited to 1095 days. Therefore, it is submitted that size is an important facet of the comparability exercise. It is further submitted that significant differences in size of the companies would impact comparability. iv. It is further submitted that the Comparable-l also exports and sale its good and services on credit, therefore the company accept currency risk, foreign exchange fluctuation risk, credit risk etc, whereas the Appellant JV outsourced the contract on back to back basis to JV partners. Therefore the Appellant JV assumes very minimum risk, hence the risk profile of the comparable-l is totally different from the JV company, further the comparable company assumed greater risk and have all the potentiaIs and means to mitigate the risks taken by the comparable company due to diversification in the business operations, owned funds employed in the company which are closed to Rs. 655. 83 crores, asset block of Rs. 486 crores and other income of Rs. 83.00 crores, which are not available to the Appellant JV. In this connection the Hon'ble ITAT Banglore Bench 'B' in the matter of DV. CIT. Clrcle-ll, Bengaluru v. AOl Online India (PI limited [2017] 84 taxmann.com 70 (Bangalore- Tribl held as under: "17. From the above, we find that Infosys Ltd, is a giant company In the area of software and it assumed all risks leading to higher profits, whereas the assessee company was a captive unit of the parent company and assumed only a limited risk. In the present case also, the assessee company is providing services to the

26 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 parent company and therefore, assuming only limited risk and hence, following the above decision of the coordinate bench of the Tribunal, we direct the AO/TPO to exclude this company also from the list. of final comparables. [Para-17] Further, the Hon'ble ITAT Delhi Bench '1-2' in the matter of Haidor Topsoe India (P.) Ltd. V. DCIT, Circle l2(l) [2017] 82 taxmann.com 365 IDelhi-Tribl held as under: "6.3.5 Therefore, in view of the cited precedents and on the facts of the case, IT is our considered opinion that the risk taken by an independent entity and the captive service provider are different and since the remuneration of the captive service provider is not linked with the performance, it is not a significant risk and, therefore, a suitable adjustment should be allowed. Accordingly, we restore the matter to the file of the Ld. TPO/AO for examination of the issue and provide suitable adjustment towards risk in accordance to the law. The assessee is directed to extend cooperation to the Ld. TPQ in quantification of risk adjustment. Accordingly, this ground stands allowed for statistical purposes. ( [Para 6.3.5] v, Therefore from the above it can be said that the comparable-l is functionally different, have high turnover, profits, assets and capital employed and have different risk profile Le. capacity to take or bear more risk in compare to the Appellant JV. Therefore for the purpose of Transfer Pricing study of the appellant JV, the comparable-, does not deserve to be considered as benchmark and liable to be deleted from the list of comparables and should not be consider while calculating the Profit level Indicator (PLI) as per TNM method. SAMRUDDHA RESOURCES LIMITED (i.e. 2nd Comparable Company) hereinafter referred to as "Comparable-2 vi. The company-2 is engaged in the business activity of mining and trading of iron ore fines and lumps. The above fact can be verified from the Financial Statements and Board Report of the Comparable-2 downloaded from the website of Registrar of Companies. A copy of the financials of Comparable-2 downloaded from the website of ROC is annexed herewith as Annexure-5. Whereas the Appellant JV is engaged in loading & transportation of coal, therefore the business activity of comparable-2 is different from the business activity of Appellant N. In this connection it is again submitted that if the functional profile of the comparable-3- is different from appellant N, then the comparable is liable to be excluded. For the aforesaid proposition, the decision of Hon'ble ITAT, Delhi Bench as mentioned in para-12{i) (supra)is also relied here, however the same is not reproduced for the sake of brevity.

27 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 vll. The turnover of comparable-2 from the is Rs. 421.68 crores, therefore the turnover of comparable-z is more than 16.81 times of the turnover of the Appellant JV. In this connection all the contents, averments and decision mentioned in para-12(ii)(supra) are also relied here, however the same are not repeated for the sake of brevity. viii. The trend of the turnover of the comparable company for 5 years was as under:- From the above it is evident that the market size for the comparable company is infinite as shown by the trend in the aforesaid table, therefore the revenue and profits of the company were in growing stage, whereas the market size of the appellant JV is restricted to the work contract awarded by MCL, which is limited to 1095 days. lx. The main turnover of the Comparabe-2 arises from exports of goods and during the relevant assessment year the Cornparabe-2 exported goods of Rs. 421.68 Crores. Therefore the Comparabe-2 sale its good and services to the outsiders hence the company accept currency risk, foreign exchange fluctuation risk, credit risk etc, whereas the Appellant JV outsourced the contract on back to back basis. Therefore the Appellant JV assumes very minimum risk, hence the risk profile of the comparable company is totally different from the JV company, further the comparable company assumed greater risk and have all the potentials and means to mitigate the risks taken by the comparable company due to owned funds employed in the company which are closed to Rs. 107.92 crores. In this connection all the contents, averments and decision mentioned in para-12(iv) (supra) are also relied here; however the same are not repeated for the sake of brevity. x. Therefore from the above it can be said that the comparable-2 is functionally different. have high turnover, profits and capital employed, have different risk profile i.e. capacity to take or bear more risk in compare to the Appellant JV. Therefore for the purpose of Transfer Pricing study of the appellant N, the comparable-z does not deserve to be considered as benchmark and liable to be deleted from the list of comparables and should not be consider while calculating the Profit Level Indicator (PLO as per TNM method. BARMER LIGNITE MINING CO. LIMITED (i.e. 3·d Comparable Company) hereinafter referred to as "Comparable-3" x. The Comparable-3 is a Joint Venture company between Rajasthan State Mines and Mineral Limited (RSMML) a Government of Rajasthan Enterprises and Raj West Power Limited (RWPL) a subsidiary of JSW Energy Limited with equity participation of 51% and 49% respectively. During the relevant assessment year the Comparable-3 was engaged in the business of lignite whether or not agglomerated, excluding jet. The above fact

28 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 can be verified from the Financial Statements and Board Report of the Comparable-3 down loaded from the website of Registrar of Companies. A copy of the financials of Comparable-3 downloaded from the website of ROC is annexed herewith as Annexure-6. Whereas the Appellant JV was engaged in loading & transportation of coal, therefore the business activity of comparable-3 is different from the business activity of Appellant N. In this connection it is again submitted that if the functional profile of the comparable-3 is different from appellant JV, then the comparable is liable to be excluded. For the aforesaid proposition, the decision of Hon'ble ITAT, Delhi Bench as mentioned in para-12fi} (supra}is also relied here, however the same is not reproduced for the sake of brevity. xi. The comparable-3 have fixed assets base of Rs. 636.17 crore, which include both Tangible & Intangible Assets. Further the company has invested in R & D activities and has applied to MOEF for increase in mining capacity by 25% which means the company has potential to grow with same fixed cost structure leading to higher turnover and profit. xii. During the relevant assessment years the company has recognized the revenue on sale of lignite on the basis of adhoc interim price orders of RE RC dated 02.04.2012 and 15.10.2012, wherein the adhoc interim transfer price inter-alia arrived by considering 65% or 75% of the transfer price claimed by the company in its petition. Based on these orders and in accordance with the views expressed by the Comptroller and Auditor General of India (CAG), the company has booked the lignite extraction charges payable to Mine Developer cum Operator (MOO) in the same proportion as approved in the adhoc interim tariff order. The company in the disclosures of accounting policies, change in accounting policies and change in estimates has given Note-23, wherein it is stated that as and when the final RERC order determining the lignite transfer price is received, the impact of finalized tariff, MOO charges payable and turning the for relevant period will be provided in the books of accounts. Further it is also stated that based on adhoc interim transfer price and adhoc interim MDO fees the profit & loss account of the company reflect a profit after tax of Rs. 5.76 crores for F.Y. 2012-13. Therefore from the above it is evident that the final statements of the company do not reflect the true and fair position of the revenue reallzed and expenses incurred under the head of MDO fees. Therefore the financial data of the company is not reliable because the company itself has admitted that they will take the Impact of transfer price and MOO fees in the books of account. Hence, in the absence of reliable data the comparable is liable to be deleted. xi. It is further submitted that comparable-3 is a Government owned Company- Rajasthan State Mines & Minerals Ltd. (RSMML, a Rajasthan Government Enterprise) owns 51% shares. Government Companies cannot be taken as comparables because they have a

29 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 social welfare purpose and are not determined by business motives such as profit maximization. In this connection reliance is placed on the judgment of Bombay High Court in ITA No. 2218 of 2013 in the matter of (IT v. ThyssenKrupp Industries India Pvt. Ltd. and judgment of Delhi High Court in the matter of PClT vs. INTERNATIONAL SOS SERVICES INDIA P. LTD. ITA NO. 454/2016 dated 30.05.2017. xii. The Ld. TPO in his filter has chosen the companies having turnover in excess of Rs. 1 crore and related party transaction less than 25% of RPT over sales and cost combined. In nutshell it is submitted that the td. TPO selected the company having RPTs less than 25%, whereas the comparable company in disclosure of related' party I related party transactions has shown the revenue from sale of goods to related party 403.99 crores has against the total turnover of Rs. 403.99 crores to MI5 Raj West Power Limited. Since the comparable-3 has undertaken RPT closed to 100%, therefore comparable-3 cannot be regarded as an independent enterprise .. In this connection reliance is placed on decision of Hon'ble ITAT Bangalore Bench 'e' in the matter of Biesse Manufacturing Company (P.) Ltd. v. DelT. Cirdel(1)(2) [2017] 84 taxmann.com 153 (Banglore-Trib) wherein it was held: {Ill. We have considered the rival submissions. Regarding the request of the assessee for exclusion of 6 comparables, we find that in the case of Lakshmi Precision Tools Ltd., the RPT percentage is 74.41% and therefore, this company is not a uncontrolled comparable and hence. we direct the AO/TPO to exclude this company from the list of final comparable." [Para-Ll] Furthermore, as the comparable company has, undertaken RPT closed to 100%, therefore this comparable company does not full fill the filter chosen by the Ld. TPO. xlil, Therefore from the above it can be said that the comparable-3 is functionally different, have high turnover, prepared financials on adhoc interim transfer price determined by RERC and have RPT more than 25% therefore did not fulfill the filter criteria used by the Ld. TPO. Hence, the purpose of Transfer Pricing study the comparable-4 does not deserve to be considered as benchmark and liable to be deleted from the list of comparables and should not be consider while calculating the Profit Level Indicator (PLI) as per TNM method. HI-TECH ROCK PRODUCTS & AGGREGATES LIMITED (i.e. 4th Comparable Company) hereinafter referred to as IIcomparable-411 xiv. The comparable-4 was engaged in the business of quarry and mining operations. During the relevant assessment year the turnover of the company was derived from sale of boulders and aggregates. The above fact can be verified from the Financial

30 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 Statements and Board Report of the Comparable-4 down loaded from the website of Registrar of Companies. A copy of the financials of Comparable-4 downloaded from the website of RaC is annexed herewith as Annexure-7. Whereas the Appellant N is engaged in loading & transportation of coal, therefore the business activity of this comparable is different from the business activity of Appellant JV. In this connection it is again submitted that if the functional profile of the comparable-4 is different from appellant JV, then the comparable-4 is liable to be excluded. For the aforesaid proposition, the decision of Hon'ble ITAT, Delhi Bench as mentioned in para- 12{i) (supra)is also relied here, however the same is not reproduced for the sake of brevity. Further the turnover of the company was Rs. 111.50 crores, which is very high in comparison to the turnover of the Appellant JV. xv. The company is subsidiary of well known and famous company Le. Mls larsen And Turbo limited. Therefore the company will get the benefit of the goodwill and image of its holding company. This submission can be verified from the fact that the company does not have any employee. A company being an artificial person, therefore it is very natural and obvious that no business can run without human resources. xvi. The Ld. TPO in his filter has chosen the companies having turnover in excess of Rs. 1 crore and related party transaction less than 25% of RPT over sales and cost combined. In nutshell it is submitted that the ld. TPO selected the company having RPTs less than 25%, whereas the comparable-4 in disclosure of related party / related party transactions has shown the sale of boulders / aggregates of Rs. 111.50 crores to the holding company Le. M/s larsen And Turbo Limited which is close to 100%. Since the comparable-4 has undertaken RPT closed to 100%, therefore comparable-4 cannot be regarded as an independent enterprise. in this connection reliance is placed on decision of Hon'ble ITAT Bangalore Bench 'c' in the matter of Biesse Manufacturing Company (P.) Ltd. v. DCIT. Circlel(1}(2) [2017] 84 taxmann.com 153 (Banglore-Trib) wherein it was held: "11. We have considered the rival submissions. Regarding the request of the assessee for exclusion of 6 comparables, we find that in the case of lakshmi Precision Tools Ltd., the RPT percentage is 74.41% and therefore, this company Is not a uncontrolled comparable and hence, we direct the AO/TPO to exclude this company from the list of final compatable." [Para-11] Furthermore, as the comparable-4 does not full fill the criteria/filter chosen by the ld. TPO, therefore Comparable-4 should be excluded on this sole ground alone. xvii. Therefore from the above it can be said that the comparable-4 is functionally different, have high turnover and have RPT more

31 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 than 25% therefore did not fulfiil the filter criteria used by the ld. TPO. Hence, the purpose of Transfer Pricing study the comparable company does not fit in compare to the appellant JV. Hence, it is requested that this company should be deleted from the list of comparables and should not be consider while calculating the Profit level Indicator {PLI) as per TNM method. OREN MUD CHEMICALS PULVERISING PRIVATE LIMITED (I.e. 5th Comparable Company) hereinafter referred to as "Comparable·;" xviii. During the relevant assessment year the comparable-S was engaged in the business of pulverizing & processing of oil. The above fact can be verified from the Financial Statements and Board Report of the Comparable-S downloaded from the website of Registrar of Companies. A copy of the financials of Comparable-5 downloaded from the website of ROC is annexed herewith as Armexure-8, Whereas the Appellant N was engaged in loading & transportation of coal, therefore the business activity of this comparable is different from the business activity of Appellant N. In this connection it is again submitted that if the functional profile of the comparable-5 is different from appellant JV, then the comparable-5 is liable to be excluded. For the aforesaid proposition, the decision of Hon'ble ITAT, Delhi Bench as mentioned in para- 12O) (supralls also relied here, however the same is not reproduced for the sake of brevity. xlx, The profit & loss account of the aforesaid company was not available on the website of the Registrar of Companies. In the absence of Profit & Loss Account of the aforesaid company it is difficult to compare the comparable-5 with the Appellant JV. Further the main source of revenue of the company was from sale of goods therefore the company is not engaged in the service sector as is the case of Appellant JV. In any case, a company engaged in sale of products cannot be compared with a company engaged in providing services. Reliance is placed on the following judgments:- • Weatherford Drilling & Production Services (India) (P.) ttd.vs. DCIT [2017] 77 taxrnann.corn 109 (Ahmedabad - Trib.) ( • DClT vs. ACI Worldwide Solutions (P.) ltd [2017] 84 taxmann.com 216 (Bengaluru - Trib) • ACIT vs. Curam Software International (P.) Ltd[2.017} 82 taxrnann.com 465 (Bangalore - Trib.}, • Netscout Systems Software India {P.} Ltd. vs. DCIT [2017] 80 taxmann.com 177 (Bangalore - Trib.) xx, The Ld. TPO in his filter has chosen the companies having turnover in excess of Rs. 1 crore and related party transaction less than 25% of RPT over sales and cost combined. In nutshell it is submitted that the td, TPO selected the company having RPTs less than 25%, whereas the comparable company in disclosure of related party / related party transactions has shown the has shown

32 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 the revenue from sale of goods to related party Rs. 7.39 crores has against the total turnover of Rs. 7.50crores to M/s Oren Hydrocarbons Private Limited. Since the comparable company has undertaken RPT closed to 98.5%. Since the comparable-5 has undertaken RPT closed to 98.5%, therefore comparable-5 cannot be regarded as an independent enterprise. In this connection reliance is placed on decision of Hon'ble ITAT Bangalore Bench 'c' in tile matter of Biesse Manufacturing Company {P.} Ltd. v. DCIT, Circle 1(1)(2) [2017] 84 taxmann.com 153 (Banglore-Trib) wherein it was held; "11. We have considered the rival submissions. Regarding the request of the assessee for exclusion of 6 comparables, we find that in the case of lakshmi Precision Tools ltd the RPT percentage is 14.41% and therefore. this company Is not a uncontrolled comparable and hence. we direct the AO/TPO to exclude this company from the list of final comparable/' [Para-ll] Furthermore, as the comparable-S does not full fill the criteria/filter chosen by the ld. TPO, therefore Comparable-5 should be excluded on this sole ground alone. xxi. Therefore from the above it can be said that the comparable-5is functionally different! have RPT more than 25% and profit & loss account of the comparable-5 is not available on the website of the ROC. Hence, the purpose of Transfer Pricing study the comparable company does not fit in compare to the appellant JV. Hence, it is requested that this company should be deleted from the list of comparables and should not be consider while calculating the Profit level Indicator (PLI) as per TNM method. In view of the position explained herein above your goodself is requested to kindly delete the addition made by Ld. AO in the assessment order. We hope that your good self will find the above in order and do justice to appellant JV. Thanking You, Yours faithfully, For Nagar Gael & Chawla Chartered Accountants Raman Chawla (Partner) 11. Ld. AR further submitted that all the AEs which are joint ventures partners of assessee-appellant are filing their income tax return and the amounts received from the appellant was included in their total receipts

33 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 and due taxes were paid on the net profit earned on each receipt. Since these AEs are assessed to tax in India and are subject to tax at the same rate of tax, there is no loss to revenue and the entire exercise of domestic transaction adjustment is revenue neutral exercise. He, therefore, submitted that the ld. CIT(A) has rightly deleted the addition by applying the CUP method for computation of ALP and he prayed for confirmation of the order of the ld. CIT(A) in this regard. With regard to the other additions made and deleted by the ld. CIT(A), he supports the order of the ld. CIT(A) and requested for confirmation of the order of the ld. CIT(A). 12. We have heard the rival submissions and perused the material available on record. The assessee is a joint venture which came into existence in terms of Joint Venture Agreement dated 08.10.2011 made and executed between three parties, namely, M/s NCC Limited (NCC), M/s Sainik Mining and Allied Services Limited (SMASL) and M/s Jalram Transport (JRT) to bid and execute the tendered work under the name and style of NCC-SMASL-JRT(JV). As per the Article 4 of the Joint Venture Agreement the responsibility of execution of contract was determined between the parties which is as under :- Article-4 : Responsibility for Execution of Contract : 4.1 The Parties shall be jointly and severally liable to the Employer for all obligations arising from and in connection with the performance of the project in terms of the Agreement with Employer. 4.2 The work shall be executed by the Parties as an integrated Joint Venture.

34 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 13. The Joint Venture-assessee was awarded contract of transportation from MCL and during the year under appeal total amount of Rs.25,97,41,438/- was received against the execution of the work. The entire work was executed by three joint ventures constituents on behalf of the assessee-joint venture on sub-contract basis and the amount received by each constituent against the work executed by it, is tabulated as under:- Name of party Amount in Rs. %of share in Revenue NCC 4,65,74,163/- 17.93 SMASL 13,46,23,119/- 51.83 JRT 7,85,44,157/- 30.24 Total 25,97,41,439/- 100 14. Here it is relevant to state that from the perusal of the same it can be noted that the work executed is not in equal ratio by all the constituents and it is also contrary to Article 4.2 of the Joint Venture agreement which clearly provide that work shall be executed by the parties as Integrated Joint Ventures. 15. Since this transaction is covered under the specified domestic transaction, therefore, the AO has made a reference u/s.92CA of the Act to the TPO for determination of the ALP. The TPO vide order passed u/s.92CA(3) of the Act, dated 28.10.2016 has made an adjustment of Rs.3,05,45,593/- on such domestic transactions by applying Transaction Net Margin Method (TNMM). The AO passed on the order and made the addition of the adjustment made by the TPO on such specified domestic

35 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 transaction which stood deleted by the ld. CIT(A) by observing in para 5.2 to 5.13 as under :- 5.2 On the issue of comparables, the appellant has distinguished its profile with Mineral Enterprises Pvt. Ltd, Samruddha Resources Ltd, Barmer Lignite Mining Co. Ltd, Hi-tech Rock Products & Aggregates Ltd and Oren Mud Chemicals Pulverising Pvt. Ltd, which were relied upon by transfer pricing officer (TPO).The appellant has relied upon several judgments in his written submission in particular the decision of Income Tax Appellate Tribunal, Delhi, in the case of DCIT vs Calance' Software Pvt Ltd reported in (2017) 82 taxmann.com 390 (Delhi) whose ratio is as below: "Section 92C of the Income-tax Act, 1961- Transfer Pricing- Computation of arm's length price (Comparables and adjustments/Methods for determination - CUP method) - Assessment year 2007-08 - During relevant previous year, assessee rendered software development services to its associated enterprise - Transactions entered into with AE were back to back transactions in respect of contracts that AE had entered into with independent entities - It was undisputed that contracts were passed on to assessee company and entire amount was also passed on to assessee - On basis of internal. CUP method, assessee claimed that back to back transactions were required to be taken as having been entered into at an arm's length. price - TP-O, however, applied TNMM and made certain addition to assessee's ALP - Whether so far as back to back transactions were concerned, since services rendered by assessee to AE were exactly same as, in effect, rendered by AE to independent parties, price charged for same service by AE from independent end customer was best CUP input for determining ALP - Held, yes – whether, therefore, impugned addition made by TPO was to be set aside – Held yess [Para-5 {in favour of assessee]. 5.3 I have carefully examined the submissions of the appellant and report of TPO. It is undisputed that the JV has not done any work. The entire contract has been transferred to JV partners in totality. The JV has neither the employee nor plant and machinery to execute the work. The comparables used by TPO do not match with the profile of the appellant. In the decision of Calance Software Pvt. Ltd (Supra), Hon'ble Tribunal has held that so far as back to back transactions were concerned, since services rendered by assessee to associate enterprises were exactly same as, in effect, rendered by associate enterprises to independent parties, the price charged for the same service by associate enterprises from independent end customer was best CUP input for determining arms length pricing. Considering the above, the addition made by the assessing officer of Rs 3,05,45,593/- is directed to be deleted. The grounds of appeal are allowed.

36 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 16. From the perusal of the observation of ld. CIT(A), we find that the ld. CIT(A) has based his findings of the judgment of the coordinate Delhi Bench of the Tribunal in the case of DCIT Vs. Calance Software Pvt. Ltd., reported in (2017) 82 taxmann.com 390 (Delhi) and held that CUP method is the most suitable method under the given circumstances of the case. However, from the perusal of the submission of the assessee as reproduced above, as well as from the order of the ld. CIT(A), we find that detailed working of the CUP method had neither been provided by the assessee to the ld. CIT(A) nor any such working was done at the end of the ld. CIT(A). It is surprising that without considering the ALP as per CUP method, how the ld. CIT(A) had reached to the conclusion that the adjustment made by the AO, towards specified domestic transaction is unreasonable/excessive. 17. During the course of hearing, when a specific query was put forth by the Bench to the ld. AR, he was unable to point out any such calculation for determination of the ALP under CUP method which was submitted before ld. CIT(A). Under these circumstances, we are not able to comment as to whether the addition deleted by the ld. CIT(A) is correct. Further we find force in the argument of the ld. CIT-DR that the assessee has not executed any work for other party nor has awarded any sub- contract to any independent entity, so there no internal comparable available with the assessee for working the ALP under the CUP method. The computation of ALP under CUP method is provided in Rule 10B(1)(a) of the I.T.Rules, 1962 which reads as under :-

37 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 Determination of arm's length price under section 92C . 10B . (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction [or a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely :— (a) comparable uncontrolled price method, by which,— (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified; (ii) such price is adjusted to account for differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions or between the enterprises entering into such transactions, which could materially affect the price in the open market; (iii) the adjusted price arrived at under sub-clause (ii) is taken to be an arm's length price in respect of the property transferred or services provided in the international transaction [or the specified domestic transaction] ;

38 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 which was not accepted and allegedly TNMM method was adopted by TPO and thereafter the assessee has changed its stand in the appellate proceedings and admitted the CUP method as the most appropriate method. But at no stage any precise working was provided for any of the two methods adopted by the assessee. Under these circumstances, we are left with no other alternative but to send back the matter to the file of AO to re-examine the issue and refer the matter back to the TPO for determination of ALP based on the best suitable method. Needless to say, while doing so, the assessee shall be provided reasonable opportunity of being heard. The AO shall also examine whether the assessee has duly complied with the other provisions of the Act such as TDS etc. while making the payments to its AEs and claiming expenses in its financial statements. As requested for by the ld. AR, all issues are left open before the AO in the course of readjudication. 20. With regard to the other issues, the same are also sent back to the file of AO for making proper verification of the evidences submitted by the assessee during the course of appellant proceedings and decide the matter afresh after providing a reasonable opportunity of being heard to the assessee. 21. In the result, appeal of the revenue in ITA No.39/CTK/2018 is allowed for statistical purposes and the cross objection of the assessee is dismissed. 22. In appeal in ITA No.99/CTK/2019 filed for the assessment year 2013-2014, the revenue has raised the following grounds :-

39 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 1. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in rejecting the comparables selected by the TPO for benchmarking and subcontracting of work without mentioning any specific difference in the FAR analysis between the assessee and comparable companies. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in not appreciating the fact that, comparable are taken by the TPO on the basis of broadly functionally similar under the TNMM method, unlike in the case of CUP method wherein produce and functional comparability are to be strictly matched. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in holding CUP as best method for determining the arm's length price in the instant case whereas the assessee had not applied CUP and accordingly no such details were available in record before the TPO during the TP audit. 4. On the fact and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in deleting the addition of Rs.2,86,174/- made by the AO for not depositing the employees' contribution within the due date relying on the decision which pertains to employers' contribution which is not squarely applicable to the facts of the case. ' 5. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. 23. Since the issues raised in the present appeal are identical to the issues decided by us in appeal of the revenue in ITA No.39/CTK/2018 and this fact has been fairly admitted by both the parties during the course of hearing, therefore, this appeal is also set aside to the file of AO for fresh adjudication on the direction as given in the appeal of the revenue for A.Y.2013-2014 (ITA No.39/CTK/2018). Consequently appeal of the revenue for A.Y.2014-2015 (ITA No.99/CTK/2019) is allowed for statistical purposes.

40 ITA Nos.39/CTK/2018 & 99/CTK/19 Co. No.27/CTK/2018 24. In the result, both appeals of the revenue are allowed for statistical purposes and the cross objection of the assessee is dismissed. Order dictated and pronounced in the open court on 25/07/2024. Sd/- Sd/- (GEORGE MATHAN) (MANISH AGARWAL) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य/ ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 25/07/2024 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : 1. अऩीऱाथी / The Appellant- प्रत्यथी / The Respondent- 2. आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. 4. आयकर आयुक्त / CIT ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, 5. ITAT, Cuttack गार्ड पाईऱ / Guard file. 6. सत्यावऩत प्रतत //True Copy// आदेशानुसार/ BY ORDER,

(Assistant Registrar) आयकर अऩीऱीय अधधकरण, कटक/ITAT, Cuttack