Income-tax Officer, Ward-11(2), New Delhi v. E Value Serve.Com
[Citation -2016-LL-0930-177]

Citation 2016-LL-0930-177
Appellant Name Income-tax Officer, Ward-11(2), New Delhi
Respondent Name E Value Serve.Com
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 30/09/2016
Assessment Year 2005-06
Judgment View Judgment
Keyword Tags international transaction • intellectual property • determination of alp • software development • additional ground • technical support • foreign exchange • operating income • data processing • profit margin • total cost • book value
Bot Summary: Brief facts of the case are that as per TP report of assessee, in the relevant assessment year, the assessee was engaged in the business of providing high end IT enabled services to its Associated Enterprise. Further the assessee had no direct interaction with the market due to the fact that work was outsourced to the Indian entity from its AE. The assessee had entered into the following international transactions: 3 S.No. The assessee had adopted upper filter of Rs. 50 crores turnover for selection, which resulted into the above seven comparables. The average operating margin of these comparables was 7.22 whereas that of the assessee was 6.50 and, accordingly, assessee concluded that the international transaction entered into with AE was at arm s length. Ld. TPO increased the upper sales filter to Rs. 150 crores and also directed for using current year data on the basis of which the assessee found 4 21 comparables. CIT(A) has taken into consideration all comparables which were BPO. He further pointed out that margins were recomputed for all comparables without affording any opportunity to assessee. Ld. counsel pointed out that assessee is only in data calculation and there is no value addition at assessee s end.


IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI KULDIP SINGH : JUDICIAL MEMBER ITA no. 393/Del/2010 U/s 2005-06 Income Tax Officer, Vs. E Value Serve.Com Ward-11(2), New Delhi. 701, Guru Apartments, Sector-14, Rohini, New Delhi. PAN: AAACE 8014 F AND C.O. No. 85/Del/2010 ( ITA no. 393/Del/2010 ) U/s 2005-06 E Value Serve.Com Vs. Income Tax Officer, 701, Guru Apartments, Ward-11(2), New Delhi. Sector-14, Rohini, New Delhi. (Appellant) ( Respondent) Department by : Shri Neeraj Kumar Sr. DR Assessee by : Shri Salil Kapoor, Adv. Shri Sanat Kapoor Adv. Ms. Ananya Kapoor Adv. Shri Sumit Lal Chandani Adv. Date of hearing : 22/08/2016. Date of order : 30/09/2016. ORDER PER S.V. MEHROTRA, A.M: appeal by Revenue and cross-objection by assessee are directed against order dated 27.11.2009 passed by ld. CIT(Appeals)-XX, New Delhi in appeal no. 10/2008-09/CIT(A)-XX, relating to AY 2005-06. Both 2 matters were heard together and are being disposed of by this common order for sake of convenience. 2. Brief facts of case are that as per TP report of assessee, in relevant assessment year, assessee was engaged in business of providing high end IT enabled services to its Associated Enterprise. company was registered with Software technology Park of Government of India. assessee conducted research activities and provided knowledge management services to its associated enterprise. assessee derived business from following major segments: - Business Information - Intellectual Property - Investment Research and financial analytics - Market Research (Primary) 3. In business information segment, assessee primarily rendered research service to its AE. Evalueserve analysts covered range of industries, including banking, insurance, telecommunications, pharma & bio-tech, chemicals, energy, consumer goods. It had performed research in around 200 countries. assessee utilized primary and secondary sources to conduct its research and analysis in this segment. 4. In Market Research (Primary) segment, assessee acted as back office research centre (mainly captive unit) and did not have any direct competition in India as it provided services mainly to its AE. 5. Further assessee had no direct interaction with market due to fact that work was outsourced to Indian entity from its AE. assessee had entered into following international transactions: 3 S.No. Nature of Value Transaction 1. Income from Rs. 297,157,913 Back Office Operations (Research Services) Total Rs. 297,157,913 6. assessee had selected TNMM as most appropriate method for bench marking this transaction. It had also selected OP/TC as most appropriate profit level indicator for bench marking of international transactions. In TP report assessee had selected following seven comparable companies: S. No. Name of comparable 1 Ace Software Exp 2 Alphageo (India ) Ltd. 3 Brels Infotech 4 C S S Technergy Ltd. 5 KLG Systel 6 Online Media Sol 7 Vaman Technology 7. assessee had adopted upper filter of Rs. 50 crores turnover for selection, which resulted into above seven comparables. average operating margin of these comparables was 7.22% whereas that of assessee was 6.50% and, accordingly, assessee concluded that international transaction entered into with AE was at arm s length. 8. Ld. TPO increased upper sales filter to Rs. 150 crores and also directed for using current year data on basis of which assessee found 4 21 comparables. Since 12 comparables were having RPT more than 15%, therefore, they were rejected by assessee and only 9 were lifted, which were as under: S. No. Name of comparable 1 Ace Software Exp 2 Alphageo (India) Ltd. 3 Brels Infotech 4 C S S Technergy Ltd. 5 KLG Systel 6 Allsec Technology Ltd. 7 BT TechNet Ltd. 8 Transworks Information Services Ltd. 9 Tutis Technology Ltd. 9. Out of above nine comparables, TPO rejected two comparables on ground of different year endings: (i) M/s BT TechNet Ltd. for which year ended March 2004; and (ii) M/s Brels Infotch, for which year ended was June 2004. 10. M/s BT TechNet Ltd. was also rejected on ground that it had no foreign exchange earnings. Ld. TPO also scrutinized comparables rejected by assessee on ground that related party transactions were more than 15% and pointed out that following two comparables were to be included as they performed similar functions: (i) ICRA Techno Analytics Ltd.; and (ii) Tech Mahindra (R&D Services Ltd.) 5 Accordingly, Ld. TPO proposed to use following comparables for benchmarking of international transaction: S. Financial Head Year End OP/TC No. % 1 Ace Software Exports 2005 14.92% March 2 Allsec Technologies Ltd. 2005 27.24% March 3 Alphageo (India) Ltd. 2005 23.78% March 4 C S S Technergy Ltd. 2005 11.15% March 5 K L G Systel Ltd. 2005 7.95% March 6 Transworks Information 2005 2.71% Services March 7 Tutis Technologies Ltd. 2005 7.28% March 8 Tech Mahindra (R&D) 2005 19.8% March 9 ICRA Techno Analytics 2005 27.65% Ltd March Average 15.83% 11. Before ld. TPO assessee had, inter alia, submitted that margin of these two additional comparables had to be recomputed. Ld. TPO accepted assessee s contention as per his finding on pages 47 & 48 of his order in regard to Tech Mahindra (R&D Services Ltd.) and also in regard to ICRA Techno Analytics Ltd., findings of which are contained at pages 49 & 50 of his order. He further pointed out that margins of remaining seven comparables, on lines of computation of these two comparables, is to be done again. He, accordingly, recomputed margins 6 of all other seven comparables, details of which are contained from pages 51 to 55 of his order and, accordingly, final selection of comparables was done as under: S. Financial Head Year End OP/TC No. % 1 Ace Software Exports 2005 21.72% March 2 Allsec Technologies Ltd. 2005 28.03% March 3 Alphageo (India) Ltd. 2005 34.07% March 4 C S S Technergy Ltd. 2005 12.14% March 5 K L G Systel Ltd. 2005 8.53% March 6 Transworks Information 2005 12.19% Services March 7 Tutis Technologies Ltd. 2005 9.59% March 8 Tech Mahindra (R&D) 2005 10.43% March 9 ICRA Techno Analytics 2005 21.11% Ltd March Average 17.53% 12. Ld. TPO also rejected working capital adjustment as claimed by assessee observing at page 50 of his order that assessee had not demonstrated that there was need for extra working capital to carry out international transaction during FY 2004-05. He pointed out that in last two years assessee had carried out substantial expansion activity within India and outside India. This company also opened centre in Chile. He pointed out that it was not clear whether working capital adjustment 7 sought by assessee was for expansion activity or for execution of international transaction carried out by assessee. He observed that working capital adjustment could only be provided if assessee could demonstrate that working capital was not adequate for normal business activities relating to international transactions. He, accordingly, rejected assessee s claim for working capital adjustment. 13. Ld. TPO determined ALP as under: Determination of arm s length price OP/TC = 17.53% Total cost = 29,00,37,918 Arm s Length Revenue = 17.53% x 29,00,37,918 = Rs. 34,08,81,565 Book value of revenue = Rs. 30,86,86,545 Difference = Rs. 3,21,95,020/- 14. Ld. CIT(A) upheld ld. TPO s finding regarding applying upper limit of sales filter of Rs. 150 crores. However, he rejected following four comparables out of nine selected by ld. TPO: - Ace Software Exp - C S S Technergy Ltd. - KLG Systel - Tech Mahindra (R&D Services Ltd.) 15. Further, he allowed working capital adjustment only in regard to interest on loans taken by both comparables as well as assessee. 16. Ld. CIT(A) further examined TPO s computation of operating profit and held that stock adjustment and misc. income is to be treated as 8 operating income and finance charges and misc. expenses were to be treated as operating expenses for both tested party as well as comparables. 17. Ld. CIT(A) computed ALP on basis of recomputed margins as under: S.No. Name of Company OP/TC 1 Alphageo (India) Ltd. 14.22% 2 Allsec Technologies Ltd. 23.34% 3 Transworks Information Serviecs Ltd. 1.41% 4 Tutis Technologies Ltd. 4.34% 5 I C R Techno Analytics Ltd. 13.60% Average 11.38% 18. Accordingly, he held that since OP/TC margin earned by assessee was within 5% range permissible under proviso to section 92C(2) of Arm s length margin, therefore, international transactions of assessee were held to be at arm s length. After adjudicating corporate issues, ld. CIT(A) finally partly allowed assessee s appeal. Being aggrieved with order of ld. CIT(A), department is in appeal before us and assessee has filed cross objection. 19. ITA no. 393/Del/2010 ( Departmental appeal): 20. department has filed additional ground of appeal, which is reproduced hereunder: 1. On facts and in circumstances of case whether Ld. CIT(A) erred in law and on facts in allowing working capital adjustments to assessee without considering detailed finding of Transfer Pricing officer in his order u/s 92CA(3) dated 30.09.2008. 9 2. appellant craves leave to add, alter or amend any ground of appeal raised above at time of hearing. 21. Ld. counsel submitted that additional ground raised by department should not be entertained because AO has not filed this additional ground. He further submitted that no reason has been given as to why this ground was not taken earlier. 22. We have considered objections raised by ld. counsel for assessee, but do not find much substance in same because covering letter dated 30.1.2014 by which additional ground has been raised was signed by AO. He has annexed copy of authorization of CIT, Delhi-IV, New Delhi dated 24.1.2014 in original and, therefore, same forms part of ITO s letter. Further, as regards no reasons being given for not taking this ground earlier, we find that this issue has been considered by TPO as well as by ld. CIT(A) and all facts are on record and this being legal issue, has to be considered in order to impart substantial justice to department. We, accordingly, admit this additional ground. 23. Ld. DR submitted that ld. CIT(A) has not taken into consideration objections raised by ld. TPO in not allowing working capital adjustment. He pointed out that ld. TPO clearly observed that working capital adjustment could only be provided if assessee could demonstrate that working capital was inadequate for normal business activities relating to international transactions. However, ld. CIT(A) completely disregarded this aspect and held that interest on loans, taken by both comparables as well as assessee, should be treated as part of operating expense. 10 24. Ld. counsel referred to para 15.4 of CIT(A) s order wherein he has observed that for purpose of computing reasonable accurate adjustment on account of working capital need for adjustment arises only if elements of working capital i.e. debtors and creditors are affected by international transactions, which tested party undertakes with its AEs. He further observed that as first step if international transactions with AE do not impact any of elements of working capital there should be no need for working capital adjustment. 25. Ld. counsel pointed out that basic premise on which working capital adjustment has been considered by ld. CIT(A) is not correct because working capital adjustment is always in respect of comparables and not in respect of tested party. He pointed out that opening and closing working capital data is sufficient to allow adjustment, as has been held in following orders of ITAT: - New River Software Services Pvt. Ltd. Vs. ACIT ITA no. 451/Del/13 dated 27.3.2015. - Navisite India Pvt. Ltd. Vs. ITO ITA no. 5329/Del/12 dated 31.5.2013. 26. assessee has also filed cross objection on this issue. 27. We have considered submissions of both parties and have perused record of case. We are not in agreement with findings of ld. CIT(A) that working capital adjustment cannot be computed on basis of year end figures. We find that in case of Navisite India Pvt. Ltd. (supra), it has been held that opening working capital deployed and closing working capital deployed has to be taken into consideration for meeting any adjustment to working capital deployed in case of 11 comparable. If we accept contention of ld. CIT(A), then it will become impossible to allow any working capital adjustment to assessee, because it is impossible to arrive at working capital requirement on day to day basis. In TP analysis there is always element of estimation because it is not exact science. One has to see that reasonable adjustment is being made so as to bring both comparable and tested party on same footing. Accordingly, additional ground raised by department is rejected. 28. Ld. DR submitted that assessee is KPO. In this regard he referred to para 2.3 of TPO s order and also referred to page 66 of TPO s order, wherein ld. TPO has observed as under: It is seen from self declaration of company on its website that this company is engaged in high end activities of KPO segment and this company is leader in K,PO Segment. Ideally speaking there are no comparables for this company in Indian business environment which is evident from contents of company website. Therefore, comparability analysis which assessee had carried out @ in transfer pricing documentation is inadequate to bench mark international transactions. Therefore, in comparability analysis, comparables which have been identified are in disadvantageous position in comparison to assessee. 8.3. It may be mentioned that associated enterprises with which assessee had undertaken international transaction are located in low-tax jurisdictions or tax heaven country namely Bermuda. There exists marked difference in tax structure in India and Bermuda. This leads to opportunity for tax arbitrage for any assessee who is carrying out business in circumstances identical of assessee is operating . 12 29. He submitted that assessee was first KPO established in country and was high-end service provider. Ld. DR further submitted that ld. CIT(A) has taken into consideration all comparables which were BPO. He further pointed out that margins were recomputed for all comparables without affording any opportunity to assessee. He submitted that no reason has been given by ld. CIT(A) for rejecting three comparables on ground that foreign exchange earnings was less than 50%. Further, he rejected Tech Mahindra n(R&D), on ground that same was functionally not comparable to assessee. He referred to page 57 of CIT(A) s order where ld. CIT(A) has given findings on various items in regard to determination of operating profit. He pointed out that ld. TPO had never opportunity for considering adjustments allowed by ld. CIT(A). He pointed out that ld. CIT(A) had arrived at margins lesser than arrived at by assessee after working capital adjustment. He pointed out that margins arrived at by ld. CIT(A) were 14.22% against margins arrived at 21.88% by assessee itself after allowing working capital adjustment. Ld. DR further referred to page 6 of CIT(A) s order wherein ground raised before ld. CIT(A) are concerned, in which ground no. 4.1 reads as under: 4.1. Ld. AO/Ld. TPO erred in interpreting that IT Enabled Services activities of appellant can e categorized as high end service and can be placed high in value chain of IT enabled services industry in India and that Appellant is engaged in software development and call centre activities. 30. Ld. DR submitted that ld. CIT(A) has not adjudicated this ground and there is no challenge in CO on this count. Therefore, fact that assessee is KPO, rendering high end services, is not disputed. 13 31. Ld. counsel for assessee submitted that Tech Mahindra (R&D) has been rejected by ld. CIT(A), which was ITES and, therefore, now this ground cannot be taken by department. He further pointed out that none of companies selected by ld. TPO were engaged in any KPO activities and, therefore, now this issue cannot be agitated. He pointed out that assessee was primarily rendering call centre. 32. Ld. counsel further pointed out that at page 47 of TPO s order, wherein he has considered issue regarding BT TechNet Ltd. and had rejected this company because it had almost nil foreign exchange revenue earned in FY 2004-05, whereas in case of assessee entire revenue was in foreign exchange. On same footing ld. CIT(A) rejected other three comparables noted earlier. 33. As regards Tech Mahindra (R&D) is concerned, ld. counsel referred to page 40 of ld. CIT(A) s order, wherein he has observed, how this comparable was functionally different from assessee as it was providing software development services. He submitted that nothing has been brought on record by revenue to dislodge this finding of ld. CIT(A). 34. As regards ld. DR s submission regarding computation of operating margins by ld. CIT(A), he submitted that main issue was whether certain expenses were operating or non-operating in nature. He referred to page 268 of PB, wherein computation of operating profit margins wss filed before AO on 7.7.2008. Ld. counsel submitted that Rule 46A is not applicable because no fresh evidence was filed before ld. CIT(A). He further submitted that ld. DR has not pointed out any fresh evidence being filed before ld. CIT(A). As 14 there was no additional evidence filed before ld. CIT(A) there is no question of applicability of rule 46A. 35. Ld. counsel referred to PB II, filed on 22.8.2016, wherein show cause notice received from TPO dated 25.7.2008 is contained from pages 1 to 26. Ld. counsel referred to page 285 of PB, wherein assessee s reply dated 11.8.2008 is contained wherein at page 289, chart was filed for determining operating profit margins. Ld. counsel referred to page 55 of TPO s order and pointed out that after considering these mistakes, ld. TPO determined PLI at 17.53% as against 15.83% in show cause notice. Ld. counsel referred to PB II, filed on 22.8.2016 and referred to page 72 of same wherein in regard to ground no. 4.6 raised before ld. CIT(A) in regard to computation of operating profit/ total cost earned by comparable company for making TP additions was mentioned. 36. Ld. CIT(A) considered these submissions and, thereafter, arrived at profit margin of 11.38% for which details were furnished at pages 122 to 122A of submissions. He, therefore, submitted that only computational errors were corrected by ld. CIT(A). 37. As regards issue raised by ld. DR regarding KPO/BPO, ld. counsel submitted that ld. CIT(A) rightly treated assessee as ITES. He pointed out that on this count there was no show cause issued by ld. TPO and there is no ground of appeal. He further pointed out that concept of BPO and KPO is always overlapping. He referred to page 43 of PB-II dated 22.8.2016, wherein submissions made before ld. CIT(A) are contained and pointed out that specific ground was taken before ld. CIT(A) that ld. AO/ TPO erred in interpreting that IT enabled service activities of 15 assessee could be categorized as high end service and could be placed high in value chain of ITES industry. He pointed out that in this regard assessee had referred to TP documentation and had pointed out that assessee derived business from 4 major segments, which included business information and market research (primary). This aspect has been referred to earlier also. 38. Ld. counsel pointed out that assessee is only in data calculation and there is no value addition at assessee s end. Assessee actually acts as support service provider. Ld. counsel relied on decision of Hon ble Delhi High Court in case of Rampgreen Solution Pvt. Ltd. Vs. CIT (ITA no. 102/2015 dated 10.08.2015) 377 ITR 533, wherein Hon ble Delhi High Court has noted with reference to decision of Special Bench of Tribunal in Maersk Global Centers (India ) Pvt. Ltd. (ITA 7466/Mum/2012), that there might be case where entity may be rendering mix of services, some of which may be functionally comparable to KPO while other services may not. In such case, classification of BPO and KPO may not be feasible. Accordingly, it was held that no strait jacket formula can be applied. Further, it was held that in case where categorization of services rendered cannot be defined with certainty, it would be apposite to employ broad functionality test and then exclude uncontrolled entities, who were found to be materially dis-similar in aspects and features that have bearing on profitability of those entities. 39. It was further held that where controlled transactions were clearly in nature of low-end ITES such as call centres etc., for rendering data 16 processing not involving domain knowledge, inclusion of any KPO service provider as comparable would not be warranted. 40. We have considered submissions of both parties and have perused record of case. We may point out that department has not specifically objected to rejection/ inclusion of comparables by ld. CIT(A). However, since selection of comparables has bearing on determination of ALP, therefore, we proceed to consider inclusion/ exclusions of comparables done by ld. CIT(A). 41. Now coming to issue of comparables, we find that as far as rejection of three comparables viz. Ace Software Exp., C S S Technergy Ltd. and KLG Systel is concerned, ld. CIT(A) has rejected these comparables for reason that it had no foreign exchange earnings. This has been done because BT TechNet Ltd. was rejected by ld. TPO on ground that it had no foreign exchange earnings. We do not find any reason to interfere with order of ld. CIT(A) on this count because ld. TPO was required to be consistent in his approach in rejection/ selection of comparables. Tech Mahindra (R&D): 42. As far as this comparable is concerned, we find that ld. CIT(A) has observed at page 40 as under: Tech Mahindra (R&D): 17 I have perused annual report and website of Tech Mahindra (R&D). notes to accounts clearly states that company is engaged in software development services while Evalue Serve India is engaged in provision of IT enabled research services. Nasscom has distinguished between these two different set of service providers. I IT services or software services consist of applications software (enterprise, technical and entertainment software aimed at businesses and home users) and systems/database management software. On other hand IT enabled services essentially includes back office services in nature of Customer Support, Technical Support, Telemarketing, Insurance Processing, Data Processing, Internet / Online / Web Research and so on. Thus, it is evident that functional profile of company engaged in IT services and IT enabled services is different. Accordingly, based on above, I reject Tech Mahindra (R&D) as comparable company for appellant. 43. Nothing has been brought on record to controvert findings recorded by ld. CIT(A). It is not disputed that assessee is not in software development services and is primarily providing IT enabled services to its AEs. In TP study it has been described as high end IT enabled service because assessee conducts research activity and provide knowledge management services to its AEs. But this could not be compared with company which was engaged in software development services. assessee s essential service were IT enabled services only. We, accordingly, confirm order of ld. CIT(A) on this count. 44. Ground nos. 4 & 5: Now coming to issue regarding computation of operating profit margin of comparables: In this regard department in ground no. 4 has assailed findings of ld. CIT(A) for accepting 18 assessee s contention that stock adjustment should be treated as part of operating expense whereas TPO had treated same as part of operating income. We find that ld. CIT(A) has observed in this regard as under: a) Stock Adjustment- appellant in its above submissions has stated that stock adjustment has been treated as operating income while calculating PLI. appellant further states since it pertains to raw material, in entory therefore it should be considered as part of operating expense. As stock adjustments pertain to purchases made, therefore it should be treated as cost item. I have considered above submission of appellant, and it is observed that Schedule VI of Companies Act, 1956 does not specify any format for Profit and Loss account. Accordingly, companies, in general practice, either follow 'T' format or Vertical" format for preparation of Profit and Loss account. Further, in both formats, 'Change in Stock' is disclosed either in 'Income' side or adjusted in 'Expenditure' side. Different companies adopt varying presentations for disclosing 'Change in Stock'. Difference in disclosure/ presentation should not lead to different PLI calculations of companies. Accordingly, it is necessary to adopt consistent way of treating change in stocks for PLI computation purposes. Based on various accounting principles and standards, I am of view that 'Change in Stock' should ideally be adjusted in expenditure so that one can have better view of cost incurred for making sales during particular period. Therefore, in my view for calculating operating profit from TP perspective, one must arrive at cost of goods sold and following formulae gives true and correct picture of cost of goods sold. Cost of goods sold Opening stock + Purchases + Direct expenses - Closing Stock 19 Whereas, Revenue is gross inflow from sale of goo s or from rendering services and other revenue stream, which is linked with business operations. Based on above, I agree with contention of appellant that stock adjustments should be treated as part of operating expenses. 45. aforementioned reasoning given by ld. CIT(A) cannot be disputed because change in stock has been considered as expenditure since this essentially refers to cost of goods sold. It is not disputed that consistent method has been adopted for all comparables under consideration in this regard. We do not find any reason to interfere with these findings of ld. CIT(A) ground no. 4 is dismissed. 46. As regards ground no. 5, seeking invocation of rule 46A, we find that computation of operating profit margin was considered by ld. TPO also and before ld. CIT(A) assessee had given correct mode of computation, but no additional evidence was filed. Therefore, there was no violation of Rule 46A. Accordingly, we do not find any reason to interfere with order of ld. CIT(A) ground no. 5 is dismissed. 47. Ground no. 6: main contention of department is that ld. CIT(A) had concluded that misc. income and misc. expenses were operating profits without verifying their nature. We find that ld. CIT(A) has observed in regard to misc. income that same pertained to income from other sources and misc. income was included as part of operating profit in 20 case of comparable company. Therefore, there could not be any prejudice to revenue on this count. As regards misc. expenses, ld. CIT(A) has observed that same included multitude of expenses that were too small in value. But since they pertained to operations of company, they were treated as operating expenses for both tested party as well as comparable companies. TP analysis, as we have earlier observed, is not exact science and we have to arrive at reasonable conclusions which would not materially affect profit margins. Therefore, we do not find any reason to interfere with finding of ld. CIT(A) on this count. In result ground no. 6 is dismissed. 48. Ground no. 7: department has assailed finding of ld. CIT(A) in considering finance charges for computation of operating profits and in not quantifying finance charges brought in as operating expense and providing line by line calculation of operating margin. We find that ld. CIT(A) has observed that finance charges were in nature of bank charges which pertained to business operations of company. He further referred to this observation in regard to working capital adjustment wherein he had held that interest on loans taken by both comparables as well as assessee should be treated as part of operating expense. These findings have not at all been controverted. Therefore, we do not find any reason to interfere with finding of ld. CIT(A). Ground no. 7 is dismissed. 49. In result department s appeal is dismissed. 21 50. As we have dismissed revenue s appeal by upholding ld. CIT(A) s order, cross-objection filed by assessee has become infructuous because after CIT(A) s order there is no adjustment left to be made. 51. In result, departmental appeal as well as assessee s cross objection are dismissed. Order pronouncement in open court on 30/09/2016. Sd/- Sd/- (KULDIP SINGH) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/09/2016. *MP* Copy of order to: 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi. Income-tax Officer, Ward-11(2), New Delhi v. E Value Serve.Com
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