HAWORTH (INDIA) PRIVATE LTD.,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,

आदेश/ ORDER

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the assessee against the order of the Assessing Officer/TPO/DRP.

ITA No.520/PUN/2015

both the TPO issues as well as the corporate issues. We shall now take up

the issues for adjudication.

manufacturing and trading activity in office furniture. The assessee filed

the return of income declaring total income of Rs.4,49,84,045/-. The case

was scrutinized u/s 143(3) r.w.s. 92CA(3) of the Act. The TPO in his order

dated 28.01.2014 suggested the additions of Rs.400,52,467/- and

Rs.1,64,46,964/-in connection with international transactions with AEs.

Total of these TP adjustment works out to Rs.5,64,99,431/- Subsequently,

in connection with the proposed additions, the assessee filed objection

before the DRP against the proposals in the draft assessment order of the

Assessing Officer dated 05.03.2014. The DRP passed an order u/s 144C(5)

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of the Act on 26.12.2014. Eventually, the final assessment order dated

27.02.2015 was passed u/s 143(3) r.w.s. 144C(13) of the Act. The total

income was computed at Rs.10,10,95,830/- against the returned income of

Rs.4,49,84,045/-. Assessing Officer added Rs.4,00,52,467/- and

Rs.1,58,59,317/- on account of Market Support Services (MSS) and

Management Services Fee (MSF) respectively. The details of additions are

extracted here as under:

“5. Subject to the above remarks, the total taxable income of the assessee is computed as under:

Particular Amount Total income as per Return of income 4,49,84,045/- Add: Transfer Pricing Adjustment to i. Market Support Services 4,00,52,467/- ii. Management fees 1,58,59,317/- Add : Warranty expenses 2,00,000/- Assessed income 10,10,95,829/- Rounded off to 10,10,95,830/-

4.1 Aggrieved with the said order, assessee filed the present appeal with

the grounds already extracted above.

4.2 Grounds raised at 1 to 7 and 9 to 11 relate to the said TP additions

on account of MSS & MSF. Ground no.8 pertains to a corporate issue

relating to disallowance on account warranty provision. The assessee also

raised additional grounds no.9 to 11 relating TP issues. We shall now take

up ground-wise adjudication in the preceding paragraphs of the order.

A. TP Issues :-

require any separate adjudication. Accordingly, the same is dismissed as

general.

uncomparable company as a comparable. The background facts of this

ITA No.520/PUN/2015

issue includes that the assessee was incorporated in 1997 and is wholly

owned subsidiary of Haworth Inc. USA. The assessee provides marketing

and related support services to Haworth Singapore Pte Ltd. The assessee

also manufactures chairs at its plant at Hinjewadi, Pune. Haworth Inc. is a

global leader in the design and manufacture of organic, workspaces is the

flagship company. The assessee entered into international transactions

worth of Rs.27.69 crores with its AEs. The details of the said transactions

of the most appropriate method adopted by the assessee are tabulated in

para 5 of the order of the TPO and the said para is extracted as follows :-

Sr. Particulars Amount in Rs. Method No. adopted 1 Purchase of Raw Material 2,38,92,792 TNMM 2 Purchase of Display Material/Prototype 6,98,633 TNMM 3 Purchase of Goods for Resale 10,43,71,912 TNMM 4 Sale of Goods 1,27,91,584/- TNMM 5 Commission Income for Marketing Support 7,95,52,855 TNMM Services 6 Allocation of Costs for Management 4,00,52,467 TNMM Services Services 7 Allocation of Software Support Cost 30,42,590 TNMM 8 Reimbursement of Expenses – Paid 56,99,241 Actual 9 Reimbursement of Expenses – Received 68,13,787 Actual

are worth of Rs.27.69 crores. The benchmarking was done by the assessee

using TNMM method as the most appropriate method. The PLI selected is

OP/TC and the same is computed at 11.09%. The PLI of 6 comparables

works out to 11.60%. However, as per the TPO, the average PLI data of the

comparables is computed at 25.76%. The data is tabulated in sub-para 4.2

of para 5.4 of the order of the TPO is relevant and the same is extracted as

follows :-

S.No. Comparable PLI as per TP PLI on FY 2009- report 10 data alone 1 Asian Business Exhibition & 20.97% 57.54% Conferences Ltd. 2 IDC (India) Ltd. 12.79% 14.85% 3 Hansa Vision Pvt. Ltd. 3.62% N.A. 4 Empire Industries Ltd. – Trading 11.60% 22.16%

ITA No.520/PUN/2015

& Indenting Segment 5 Entertainment Network (India) 0.22% -1.53% Ltd. – Events segment. 6 Priya International Ltd. – 20.39% 35.74% Indenting Segment Mean 11.60% 25.75%

above, as comparable by the TPO is matter of dispute raised in ground no.2

by the assessee. On the decision of TPO in inclusion of the said

comparable, the case of the assessee is that the same is not functionally

comparable. Therefore, this needs to be excluded. With the function of

event management relating to exhibition and events, sponsorship, delegates

attending conference etc. the same distinctly different from that of the

assessee. The assessee is engaged in manufacturing of furniture on one

side and providing support services on the other to Haworth Singapore Pte

Ltd.

Business Exhibition & Conferences Ltd., ld. Counsel for the assessee

submitted that the said company was held to be uncomparable by the Pune

Bench of the Tribunal in the case of TIBCO Software India Pvt. Ltd. (ITA

No.276/PUN/2015). In this regard, the assessee made following written

submissions :-

“Functional Comparability : Asian Business Exhibition and Conferences Limited is functionally different from the Appellant as it is primarily engaged in event management, relating to exhibition and events, sponsorship, delegates attending conference etc. The Appellant would like to place reliance on the following precedents wherein it is held that Asian Business cannot be accepted as a comparable for the year under consideration: • TIBCO Software India Pvt. Ltd., (ITA No.276/PUN/2015) AY 2010-11 Para 20 to 25 @ 25. • M/s Alcon Laboratories Pvt. Ltd. (IT(TP)A No.391/Bang/2015), AY 2010-11 Para 4 & 5. • Electronics for Imaging India (P.) Ltd. (IT(TP)A No.212/Bang/2015, AY 2010-11 Para 53 to 55. • RGA Services India (P.) Ltd. (ITA No.22 and 244/MUM/2015), AY 2010-11 Para 11 & 12.

ITA No.520/PUN/2015

Abnormal Margins : Asian Business cannot be considered as a comparable on the basis of the single year data because of significant fluctuations in the profitability during the previous four years: Financial Year Turnover Margins 2007-08 27.48 15.50% 2008-09 45.19 24.55% 2009-10 53.18 57.48% 2010-11 74.10 19.51% The abnormal increase in profit during the FY 2009-10 is due to existence of the following abnormal factors or economic circumstances: • It is not known as to how, for an increase in turnover of 18% for FY 2009-10, there is an abnormal increase in profits of 152% during the year. However, for immediately succeeding FY 2010-11, when there was an increase in turnover of 39% the margins have dropped by 38%. • It is unsure by other expense amounting to INR 1.5 crores incurred during FY 2008-09 was nil during FY 2009-10. • Also, it is unsure why an additional income “entry charges” amounting to INR 1.27 crores earned during FY 2009-10 was not present in the financials of FY 2008-09. • The company has also made Initial Public Offer of its equity shares during the year. Also, the Appellant cannot be estopped from taking a stand different from the one adopted in the transfer pricing document. The Appellant would like to place reliance on the following decisions wherein it is held that the Appellant can reject comparables selected in the transfer pricing documents based on the details available later on: • RGA Services India (P.) Ltd. (ITA No.22 and 244/MUM/2015), AY 2010-11 Para 12. • TIBCO Software India Pvt. Ltd., (ITA No.276/PUN/2015) AY 2010-11 Para 24.”

cited decisions of the Tribunal in various cases. It is evident from above

that apart from functional differences the Asian Business Exhibition and

Conferences Ltd. suffers from the problem of abnormal margins. Therefore,

it cannot be considered as a good comparable. Relying on the data

mentioned above, ld. Counsel read out the fluctuating margins varying from

15.50% to 57.48%. On this reasoning, the said case is held as not

comparable by the Tribunal and read out the relevant paragraphs from the

order of the Tribunal.

order of the Assessing Officer.

ITA No.520/PUN/2015

this issue with regard to the inclusion of Asian Business Exhibition and

Conferences Limited as not a good comparable functionally as well as on

the basis of abnormal margins too. There is no dispute on the fact that the

functions of the Asian Business Exhibition and Conferences Limited is

included conducting the “event management relating to exhibition and

events, sponsorship, delegates attending conference etc.” unlike the

case of the assessee where it is engaged in manufacturing and trading of

furniture as well as “providing support services.” These services

rendered by the assessee are entirely different from Asian Business

Exhibition and Conferences Limited. For the sake of completeness of this

order, we proceed to extract the contents of para 25 of the order of Pune

Bench of the Tribunal in the case of TIBCO Software India Pvt. Ltd. (supra),

copy of which is placed at page 23 of the Paper Book. The said para reads

as under :-

“25. The TPO in order to benchmark the segment of marketing support services undertaken by the assessee had selected Asian Business Exhibition and Conferences Ltd. The assessee also in the TP study report had included the said concern as comparable on the basis of average margins of preceding years. However, during TP proceedings, the TPO directed the assessee to apply the margins of instant assessment year and the assessee in this regard, furnished current margins of selected companies. In respect of Asian Business Exhibition and Conferences Ltd., it was pointed out by the assessee before the TPO and the DRP that the said concern was functionally not similar in view of revenue earned by the said concern during the year. Another point which is raised by the assessee is that similar concern i.e. Sporting and Outdoor Ad Agency Pvt. Ltd. was rejected by the TPO himself that the activities of the said concern were not comparable to the assessee. While selecting the comparable companies, functional comparability of the concerns is the first step which has to be taken note of. In case the concern is engaged in a business other than the business of tested party, then such concern cannot be picked up as comparable. Admittedly, the assessee in its TP study report had selected Asian Business Exhibition and Conferences Ltd. as comparable. However, when it analyzed the profile of the said concern for the accounting period, then it has found that the revenue earned by the said concern was from exhibition and events i.e. from sale / lease of stalls space in exhibition and events. The assessee on the other hand, is providing marketing support services to its associate enterprises and the concern engaged in sale / leasing out the stalls space in exhibition and events is earning income in the nature of rent and the same could not be compared with the services undertaken by the assessee. The TPO had also excluded another concern i.e. Sporting and Outdoor Ad Agency Pvt. Ltd. on the ground that its income from hoarding and mounting charges. Another aspect of the

ITA No.520/PUN/2015

comparability to be considered is the drastic fluctuations in the operating margins of said concern. The said concern was showing lower operating margins in earlier as well as later years as against the operating margins of 57.48% shown during the year. On such ground, the said concern is to be rejected from the final set of comparables on the basis of ratio laid down by the Special Bench of Tribunal in Maersk Global Centres (India) Pvt. Ltd. Vs. ACIT (supra). Another aspect was raised by both the TPO and the DRP was the selection of said concern by the assessee. However, since the assessee has pointed out that differences in the said concern which are material itself, then even if the said concern was originally picked up as comparable but the assessee could not be stopped from pointing out that the said concern was wrongly taken as comparable. Accordingly, we direct the TPO to exclude Asian Business Exhibition and Conferences Ltd. from the final set of comparables.”

by the Tribunal of Bangalore Bench. We also perused the decision of the

Bangalore Bench of the Tribunal in the case of ITO vs. M/s Alcon

Laboratories Pvt. Ltd. vide IT(TP)A No.391/Bang/2015 dated 21.11.2017,

copy of which is placed at page 55 of the Paper Book and find the contents

of para 5 are relevant and the same are extracted as under :-

“5. “5. We have considered the rival submissions. We find that the issue in We have considered the rival submissions. We find that the issue in dispute is squarely covered in favour of the assessee by these two tribunal orders cited by the learned AR of the assessee for same assessment year. We find that in Para 8 of the tribunal order rendered in the case of DCIT vs. Electronics for imaging India Pvt. Ltd. (Supra), the profile of that assessee was noted and as per the same, that assessee was engaged in Software Development services and sales & Marketing Support Services. Both were benchmarked separately and the paras of the tribunal order referred to before us are in respect of Marketing Support Services. In the present case also, the dispute is regarding Marketing Support Services provided by the assessee. Hence, the profile of the present assessee and Electronics for imaging India Pvt. Ltd. is same. Hence, we respectfully follow this tribunal order and hold that in the present case also, this comparable i.e. Asian Business Exhibition & Conferences Ltd. should be excluded from the final list of comparable.”

assessee’s request for exclusion of Asian Business Exhibition and

Conference Limited with the functions of event management cum event

conferences, is fair and reasonable. Accordingly, ground no.2 raised by

the assessee stands allowed.

ITA No.520/PUN/2015

namely (i) Empire Industries Limited, (ii) Entertainment Network (India)

Limited and (iii) Hansa Vision Private Limited.

exclusion of M/s. Entertainment Network (India) Limited. Accordingly, the

same is dismissed as not pressed.

M/s.Empire Industries Limited on one side and M/s. Hansa Vision Private

Limited on the other, before us, ld. Counsel for the assessee submitted that

the Empire Industries Limited is engaged in “providing indenting services”

and, therefore, the said company is comparable to function of the assessee.

These services became similar and comparable to each other. Therefore, it

becomes a good comparable. On the above stated akinness of services, ld. becomes a good comparable. On the above stated akinness of services, ld.

Counsel for the assessee relied on the decision of Pune Bench of the

Tribunal in assessee’s own case for assessment year 2009-10. Bringing

our attention to the said decision of the Tribunal, which is placed at page 1

of the Paper Book, ld. Counsel read out the contents of para 13 of the said

order and the same is extracted here under :-

“13. The assessee in ground No.5 has prayed for including Empire Industries Limited in the final list of comparables. The TPO has excluded the said company from the list of comparables after segregation of trading/distribution activities of the assessee from MSS segment. Since, we have already held that distribution activities are not to be excluded from MSS segment, the exclusion of Empire Industries Limited from the final set of comparables has to be reversed.”

Limited is held comparable to the supporting services rendered by the

assessee. Therefore, the same construed by the Tribunal in own case as a

good comparable. The order of the TPO stands reversed and the same is

ITA No.520/PUN/2015

held to be relevant for the year under consideration. Accordingly, this part

of the ground is allowed in favour of the assessee.

Hansa Vision Private Limited, the case of the Revenue is that the same

could not be a good comparable when the relevant data is not available on

record. In this regard, bringing our attention to the order of the DRP, ld.

Counsel for the assessee mentioned that relevant data was made available

before the DRP. Consequently, the DRP in para 2.4.1 to 2.4.3 directing the

Assessing Officer/TPO to accept the company subject to the satisfaction of

the conditions/filters said by the TPO. On perusal of the contents of para

2.4.3, we find the said para is relevant for extraction, which read as

under :-

“2.4.3 We have considered the facts. We find that the assessee did not include this company in the list of the comparable companies because its Annual Report was not available at the time of conducting of TP Annual Report was not available at the time of conducting of TP Study. It is not selected by conducting fresh search. Now its Annual Report is available. Therefore, we direct the learned AO to accept this company if it satisfies all the filters used by the learned TPO including that of its functional comparability because its Annual Report has become available now and the learned TPO has not examined comparability of this company. If the company fails any single filter used by the learned TPO, then it will be excluded from the list of the comparable companies.”

reasonable. The Assessing Officer was already directed to accept the Hansa

Visiion Private Limited as a good comparable subject to the conditions

specified therein. Assessing Officer is directed to give effect to the orders of

the DRP. For this purpose of giving effect, this part of the issues stands

remanded to the file of the Assessing Officer for appropriate action after

giving opportunity to the assessee. Accordingly, this part of ground is

allowed for statistical purposes.

ITA No.520/PUN/2015

assessee for its MSS segment. In this regard, ld. Counsel for the assessee

submitted that the said issue becomes academic if relief is granted on the

issues mentioned in ground no.2 and 3 above. Considering the relief

already specified in the preceding paragraphs of this order, we find the said

ground needs to be dismissed as not pressed.

risk adjustment. The DRP/Assessing Officer rejected the assessee’s request

for economic adjustments pertaining to risk borne by the assessee vis-à-vis

comparables. Ld. Counsel mentioned that the claim of risk adjustment

arises for the first time in this assessment year. This claim was not made

in the earlier assessment years before the revenue authorities. In this

regard, ld. AR vehemently argued that the assessee is a ‘risk-free entity’

whereas the comparables are not. Hence, there is requirement for grant of whereas the comparables are not. Hence, there is requirement for grant of

risk adjustment to the comparables for them to become good comparables.

In this regard, ld. Counsel relied on the contents of Rule 10B of the Income

Tax Rules, 1962 one side and various decisions such as Hellosoft India Pvt.

Ltd. (ITA No.645/Hyd/2009 and 1411 of 2010) and Sony India Private

Limited vs. Addl. CIT (ITA No.4008, 4994/Del/2010) on the other. Ld.

Counsel submitted that the risk adjustments are required to be given when

the comparables are risk bearing entities unlike the assessee. Bringing our

attention to the contents of page 32 of the order of the DRP where the DRP

discussed this issue before denying the risk adjustments, ld. Counsel finds

fault with the order of the DRP/TPO and submitted that the order of the

DRP/TPO/Assessing Officer on this issue needs reversed.

ITA No.520/PUN/2015

we are of the opinion that the said Rule 10B of the Rules provides the law

for grant of risk adjustment. This issue was decided by the Tribunal and

the decision in the case of Sony India Private Limited (supra) is relevant

and provide needful guidance in such matters. We also considered the

assessee’s request for granting some adjustment on ad-hoc basis.

Considering the above, in principle, we are of the opinion that the assessee

is entitled to risk adjustments. A quantum of such adjustments has to be

decided by the Assessing Officer/TPO/DRP after considering the facts of

the present case and also in the light of judgemental law in existence. The

assessee is directed to provide the requisite data before the Assessing

Officer/TPO for adjusting the reasonable inference to the extent of risk

adjustment. Accordingly, this part of ground is allowed for statistical

purposes.

MSF charges . The Assessing Officer/TPO made adjustment on account of

management service fees amounting to Rs.4,00,52,467/-. This amount

was paid to Haworth Hong Kong Limited pursuant to a contract. This

company provides certain support services in the nature of administrative

and marketing support, coordinating strategies, help in financing etc. This

service fees was charged by it comprising of only cost without any mark-up.

The case of the Revenue is that the assessee is not position to furnish the

details for helping the TPO to conduct the benchmarking of the

transactions. Considering the non-submission of details, the Assessing

Officer denied the claim of MS charges paid and treated the allowable

expenditure is Nil on this count. The DRP dealt with this issue in para

ITA No.520/PUN/2015

2.2.6 of its order. Number of decisions were relied by the DRP before

confirming the order of the TPO/Assessing Officer.

submissions. The same are extracted hereunder :-

“The Appellant has availed certain support services such as Global sourcing, product development, marketing, human resource services, Information Technology, etc. from its group companies. The AEs charge all the group companies for providing such services on cost to cost basis without any markup. The Appellant has benchmarked the international transactions including management charges on an aggregate basis under Transactional Net Margin Method (‘TNMM’) under the manufacturing and trading segment. The margin of the Appellant in the manufacturing and trading segments were higher than the margin of the comparable companies. Hence, the payment is at arm’s length. The TPO has accepted TNMM for benchmarking the other international transactions. However in respect of management charges, the TPO proposed to benchmark the same separately. The TPO has benchmarked the management charges separately, purportedly using CUP and determined the ALP to be Nil without conducting any independent CUP analysis to determine the price charged by independent third parties under comparable uncontrolled situation. Further, in absence of comparable companies, CUP cannot be considered as the most appropriate method. method. Also, the management services rendered by the AEs are intricately interconnected with the overall manufacturing and trading operations, and it is not possible to disaggregate them into independent transaction and determine the ALP of each such transactions under CUP separately. Also, the TPO stated that the Appellant did not submit any evidences to receipt of services, costs incurred and its need and benefit. The Appellant has now submitted evidences such as email evidences, third party invoices and cost allocation workings to prove the receipt of services, its need and benefits. Also, it is to be noted that these costs are allocated to all the group companies on a scientific basis. In the Appellant’s own case for AY 2009-10 in ITA No.281/PUN/2014 at Para 15 and for AY 2011-12 in ITA No.109/PUN/2016 Para this Hon’ble ITAT has remanded the matter relating to management charges back to the TPO to determine the matter afresh in the light of the additional evidences filed.”

matter of the adjudication by the Tribunal in assessee’s own case for

assessment year 2009-10. The Tribunal passed the order vide ITA

No.281/PUN/2014 for assessment year 2009-10 and ITA

No.109/PUN/2016 for assessment year 2011-12. We have perused the

said order of the Tribunal and find the Tribunal remanded this issue for

ITA No.520/PUN/2015

both the assessment years to the file of the TPO to determine the matter

afresh in the light of the additional evidences filed before him.

We perused the order of the Tribunal and find the issue of

adjustments on account of management service fees was dealt with in para

6 of the order of the Tribunal for assessment year 2011-12 (supra). We

proceed to extract the relevant para 6 of the said order, which reads as

under :-

“6. The TPO has made adjustment in respect of management service fees on the ground that the assessee has failed to show „need for services‟ and „benefit received‟. The TPO and the DRP have categorically observed that the assessee has not furnished any supporting documents to substantiate any services rendered by the AE and the benefits derived by the has filed a paper book assessee from such services. The assessee containing 182 pages as additional evidence in the form of third party invoices, e-mail correspondence, report on management charges and cost allocation workings in support of the services received and to substantiate the benefits derived by the assessee/appellant. The ld. AR of the assessee has also filed an affidavit of the Finance Director of the assessee company citing reasons for non-furnishing of supporting documents before the authorities below. The relevant extract of the affidavit reads as under : under : “6. I understand that the details/evidences could not be furnished during the assessment proceedings for the following reasons: a. During the year 2012, there was labour unrest and protest by the labour union in the Pune factory of the Appellant. b. Owing to the above and also due to other business reasons, the Appellant decided to move the factory from Pune to Chennai. c. During the middle of year 2013, post identifying the place in Chennai, the Appellant announced the closure of the factory at Pune and also announced Voluntary Retirement Scheme for its employees. d. Post announcement of the closure of the factory at Pune, the then Finance Director and certain other employees resigned from the office of the Appellant. e. Subsequently, the Appellant appointed another Director, Mr. Aravind Devarakonda, during July 2013 in place of erstwhile Director. However, since he was new to the organisation and also there were no relevant support staff in Pune office, was not in a position to collate the necessary information. Further, due to labour unrest and union issues, entry of people into the factory was often interrupted. f. By December 2014, the Appellant entirely shifted its factory from Pune to Chennai. It is also understood that several documents were misplaced during the process of shifting the office from Pune to Chennai. g. In fact the statutory audit for the financial year 2013-14 and financial year 2014-15 was delayed and was concluded only in September, 2016. 7. In the meanwhile, DRP proceedings took place during December 2015 and for the aforesaid reasons the evidences could not be furnished even at that stage as well. Hence, the DRP confirmed the addition made by the TPO and upheld the disallowance made with respect to the MSF charges vide its direction dated 09.12.2015.

ITA No.520/PUN/2015

25.07.2018 and new evidences for deciding the issue in the year too and

ITA No.520/PUN/2015

requested for remanding this issue too to the file of the Assessing

Officer/TPO. From the above, it is evident that the Tribunal remanded the

matter to the file of the TPO/Assessing Officer after considering the

contents of the affidavit and additional evidences filed before the Tribunal.

With the similar direction, we remand this issue to the file of the Assessing

Officer/TPO. TPO/Assessing Officer shall make use of them during the

remand proceedings after granting reasonable opportunity of being heard to

the assessee. Therefore, the ground no.6 stands allowed for statistical

purposes.

At the time of hearing, ld. Counsel for the assessee did not press this

ground for which ld. DR has no objection. Considering the same, we are of

the opinion that this ground should be dismissed as not pressed.

B. Corporate Issue :-

2 Lakhs. The DRP/Assessing Officer disallowed the claim of the warranty

provision debited to Profit and Loss Account amounting to Rs.2,00,000/-

for want of compliance of the assessee to the ratio of the judgment of the

Hon’ble Supreme Court in the case of Bharat Earth Movers Vs. CIT, 245

ITR 428 qua the ascertainment of liability by way of actuarial/scientific

method.

submissions :-

“The Appellant provides warranty services such as free replacement of parts and repairs for a period of 10 years after sales. Following the matching concept principle, provision for warranty is made in the relevant year in which sales is recorded. Also, recording of warranty in the year in which it is claimed would violate the principles of mercantile accounting.

ITA No.520/PUN/2015

Therefore, as the provision was made on a scientific basis, after considering the historical trend and experiences, the same should be allowed as a deduction while computing the taxable income. The Appellant would like to place reliance on the following judicial precedent in this favour: • Rotork Controls India Pvt. Ltd. vs. CIT 314 ITR 62 (SC). This Hon’ble ITAT in Assessee’s own case for AY 2011-12 in ITA No.109/PUN/2016 Para 8 wherein the issue was remanded back to AO for fresh consideration.”

matter of adjudication before the Tribunal in assessee’s own case for

assessment year 2011-12 vide ITA No.109/PUN/2016. Para 8 of this order

was perused and find the Tribunal remanded this issue to the file of the

Assessing Officer with certain directions. The contents of para 8 are

relevant and the same are extracted hereunder :-

“8. While passing draft assessment order the Assessing Officer made addition of the entire closing balance of the provision Rs.39,05,668/- on the ground that the assessee has not utilized provision in the past years and even in the period relevant to the assessment year under appeal provision has not been utilized. The provision cannot be allowed till the time it is actually utilized. The DRP granted part relief to the assessee by restricting actually utilized. The DRP granted part relief to the assessee by restricting the disallowance to the extent of provision created during the period relevant to the assessment year under appeal i.e. Rs.11,82,576/-. The ld. AR has pointed that the provision for warranty has been utilized to the extent of Rs.24,66,660/- during the Financial Year 2011-12. We find that similar submissions were made by the assessee before the DRP. However, the contentions of the assessee have not been verified. We further observe that though the assessee has been consistently creating provision in the past and the same (unutilized amount) has been allowed to carry forward in the next financial year. We find that the Assessing Officer has not given any cogent reason for deviating from the principle of consistency in allowing such provision in the past. In the backdrop of these facts we deem it appropriate to remit this issue back to the file of Assessing Officer to decide this issue afresh. Accordingly, ground No. 2 raised in the appeal by the assessee is allowed for statistical purpose.”

Assessing Officer failed to give cogent reason for deviating from the

principles of consistency and the same was not approved. For the sake of

principle of consistency, we also remand this issue to the file of the

Assessing Officer with similar direction. Accordingly, ground no.8 is

allowed for statistical purposes.

ITA No.520/PUN/2015

Solutions (India) Limited as a good comparable. This comparable was

identified by the assessee and requested for inclusion for the first time

before the DRP. DRP accepted the request of the assessee. However, while

finalizing the assessment order, the Assessing Officer/TPO did not consider

the direction of the DRP. In this background of the facts, ld. Counsel for

the assessee submitted that the direction needs to be given effect by the

Assessing Officer/TPO while finalizing the assessment order on the

adjustments to be made to the assessment. We find no reason as to why

the Assessing Officer/TPO failed to comply with the said direction of the

DRP. Therefore, we direct the Assessing Officer/TPO to consider the

Alternate Brand Solutions (India) Limited as a good comparable while

determined the adjustments. During the remand proceedings, Assessing

Officer shall grant reasonable opportunity of being heard to the assessee in

accordance with set principle of natural justice. Accordingly, ground no.9 is

allowed for statistical purposes.

Limited as a good comparable. In this regard, ld. Counsel for the assessee

brought our attention to the arguments made by him while dealing with the

ground no.3 above where we directed the Assessing Officer to comply with

the direction of the DRP in inclusion of the Hansa Vision Private Limited for

benchmarking the transactions. Considering our decision in the contents

of ground no.3, the ground no.10 becomes academic and the same is

allowed in favour of the assessee.

a good comparable. As pronounced in the open Court, we do not

appreciate the assessee’s manner of continuously bringing new comparable

19 ITA No.520/PUN/2015

before the TPO/ DRP and Income Tax Appellate Tribunal etc. This attempt of the assessee is continuously raising new comparable before the DRP and before us is not appreciable attempt of the assessee. The assessee failed to give any reason for not raising the same before the DRP/TPO. Such attempt of assessee is invalid, in principles as the reasons for not raising such new comparables before the TPO/DRP is not submitted before us. Therefore, we proceed to reject the assessee’s attempt in this regard. Accordingly, ground no.11 is dismissed.

Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �या�यकसद�य/ JUDICIAL MEMBER लेखासद�य/ ACCOUNTANT MEMBER �या�यकसद�य/ JUDICIAL MEMBER लेखासद�य/ ACCOUNTANT MEMBER पुणे/ Pune; �दनांकDated : 12th December, 2018. Sujeet आदेशक���त�ल�पअ�े�षत/Copy of the Order is forwarded to : अपीलाथ�/ The Appellant; 1. ��यथ�/ The Respondent; 2. 3. The DRP, Pune; 4. The Addl. CIT (TP)-I, Pune; �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, पुणे“A” / DR ‘A’, 5. ITAT, Pune; गाड�फाईल/ Guard file.// 6.

आदेशानुसार/ BY ORDER,

स�या�पत ��त//True Copy// Senior Private Secretary आयकरअपील�यअ�धकरण ,पुणे/ ITAT, Pune.