TMI Blog2014 (11) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... om comparables on the plea that these companies are functionally different from that of assessee company - In respect of ICRA Management and Rockman Advertising &Marketing (India) Ltd., the DRP found that since the two companies were loss making companies, hence, these two comparables were also excluded and DRP directed to recompute the appropriate adjustment and find out if the same is + 5% margin - ICRA Management and Rockman Advertising & Marketing (India) Ltd., which were selected as comparables by assessee, was rejected by TPO - Since the DRP has confirmed the action of TPO, there is no reason for the exclusion – there is no merit in the appeal of the Revenue – Decided against revenue. - ITA No.1384/Mum/2014, Cross Objection No. 70/Mum/2014 - - - Dated:- 18-7-2014 - SHRI R.C.SHARMA And SHRI VIJAY PAL RAO, JJ. For The Revenue : Mr. Pritam Singh For The Assessee : Mr. Ajeet Kumar Jain ORDER PER R.C.SHARMA (A.M.) : This is an appeal filed by the Revenue and Cross Objection by the assessee against the order passed under Section 143(3) read with Section 144C(13) of the I.T. Act, 1961, giving effect to the order of DRP passed u/s.144C(5) of the I.T. Act, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue is not maintainable and deserves to be dismissed on the ground of low tax effect only. He further contended that the DRP has selected three comparable of TPO and brought back 9 comparable of assessee as against 11 comprables originally proposed by the assessee. By reading grounds of appeal filed by the Revenue, learned AR contended that the Revenue has come in appeal for exclusion of comparables by the DRP, which is not justified. 3. In the cross objection the assessee has taken the ground to the effect that the DRP has erred in directing the AO/TPO to exclude 2 comparable companies i.e. ICRA Management Consulting Services Ltd. and Rockman Advertising Marketing (India) Ltd. selected by the assessee. The assessee has also taken the ground with regard to the direction of DRP to retain two comparable companies i.e. HCCA Business Services Pvt. Ltd. and TSR Darashaw Ltd. selected by the TPO. 4. Rival contentions have been heard and record perused. Facts in brief are that assessee M/s Rolls-Royce Group (Marine Division) (in short RRM ) is a global leader in power propulsion and motion control systems. It offers a product portfolio ranging from vessel design and ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and the assessee's submission are analyzed vis-a-vis each of the comparables under dispute and the ORP's directions are also given in the following paras. 1. Basiz Fund Service Private Limited (referred to as Basiz Fund ) As per Schedule 13 on 'Revenue from Operations' to the Profit Loss A/c, Basiz Fund is into different streams of operations such as Preparation of Financial statements, Liquidity Monitoring Services, NAV Accounting for International funds, Consulting Charges, US Taxation, Domestic PMS Accounting . The different streams of business operations are apparent from Accounting Policies and Notes to Accounts, which states the objective of the company. It can also be inferred from the Revenue recognition policy mentioned. Further, the extracts from the website of Basiz Funds, it is very clear that the current line of services rendered by the company are towards financial reporting, NAV support services, investment accounting, etc. Basiz Fund is into developing its own intellectual property/process etc. Accordingly, since Basiz Fund is functionally different from RRM India, it cannot be said to be comparable to RRM India's business operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an also be inferred from the information available on its website. The earning in foreign exchange of Cyber Media is only about 36% of its total service income and hence, this company is predominantly earning from domestic sources and not from exports. Table for calculation of ratio of export income: Particulars Amount in Rs. Total Sales 168,532,370 Export Sales 61,357,000 % of Export sales to Total sales 36.41% As per the Director's Report, it is clear that Cyber Media has its own brand. The extract from the Director's Report is as under: Recognitions: The IDC brand was ranked amongst the top ten firms in consultancy space in year 2009 in a survey conducted by Business Today-Cirrus. Accordingly, since Cyber Media is functionally different from RRM India, it cannot be said to be comparable to RRM India's business operations. Discussion and directions of DRP: - The DRP has considered the comparability of the assessee with this company. The assessee has not been able to demonstrate ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial statements of TSR discloses the segmental information as required by AS 17 for the above stated 3 categories of services i.e., Share Registry and Transfer Services, Payroll services and Records management services. The fact that TSR is a Business Process Outsourcing organization is also inferred from the information available on its website. As per the website, TSR offers services such as payroll processing, record management, registrar . share agency services, etc. Schedule L on Notes to Accounts of the Financials of TSR clearly mentions that its operations are primarily in India. Also, there is no mention about the foreign exchange earnings in the Notes to Accounts to the Financials. Therefore, it is clear that TSR is predominantly. earning its revenues from domestic sources. This company is part of the TAT A Group. Therefore, it enjoys the brand name and in a position to leverage on the corporate reputation / brand name of Tata group in the market. Accordingly, since TSR is functionally different from RRM India, it cannot be said to be comparable to RRM India's business operations. Discussion and directions of DRP: - The DRP has considered the compara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has excluded Basiz Fund Services Pvt. Ltd., Cameo Corporate Services Ltd., Cyber Media Research Ltd., ICRA Management Consulting Services Ltd. And Rockman Advertising Marketing India Ltd. as comparables for determining ALP. The DRP also directed for exclusion of ICRA Management Consulting Services Ltd. and Rockman Advertising Marketing (India) Ltd. since these were loss making companies. The DRP directed the TPO to exclude these comparables from the list and work out + 5% margin and appropriate adjustment should be made only if the assessee remained beyond the range after giving effect to the directions given at paras 4 to 8 of his order. 8. The Revenue is in appeal before us against the direction of DRP for exclusion of these comparables. We found that DRP has excluded these companies from comparables on the plea that these companies are functionally different from that of assessee company. The DRP has recorded finding with regard to functions of each and every company and thereafter reached to the conclusion that functionally assessee company RRM is different from these companies. In respect of ICRA Management and Rockman Advertising Marketing (India) Ltd., the DRP found ..... X X X X Extracts X X X X X X X X Extracts X X X X
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