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2015 (10) TMI 2425 - ITAT BANGALORE

2015 (10) TMI 2425 - ITAT BANGALORE - TMI - Transfer pricing adjustment - selection of comparable - Held that:- Following the decision of the Mumbai Bench of the ITAT in the case of Tevapharma Pvt. Ltd. (2011 (12) TMI 284 - ITAT MUMBAI) and of the co-ordinate benches of this Tribunal in the case of Millipore India Pvt. Ltd. (2014 (10) TMI 505 - ITAT BANGALORE), Apotex Research Pvt. Ltd. (2012 (11) TMI 1094 - ITAT BANGALORE) and the assessee’s own case for Assessment Year 2007-08 we direct the As .....

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he order of assessment passed under Section 143(3) rws 144C of the Income Tax Act, 1961 (in short 'the Act') dt.15.4.2012 in pursuance of the directions of the Dispute Resolution Panel ( DRP ) issued under Section 144C(5) rws 144C(8) of the Act dt.18.4.2012. The relevant Assessment Year is 2008-09. 2. The facts of the case, briefly, are as under :- 2.1 The assessee company, a subsidiary of FMC Agricultural Product International AG Switzerland, is engaged in the business of manufacture an .....

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tional transactions in excess of ₹ 15 Crores and therefore with the approval of the CIT-I, Bangalore made a reference to the Transfer Pricing Officer ( TPO ) to determine the arms length price ( ALP ) thereof, as per the provisions of section 92CA of the Act. In the year under consideration, the international transactions entered into by the assessee were categorized as - (i) Processing Function, (ii) Research and Development Service; (iii) Import & Processing of Lithium Metals and (iv .....

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s the Most Appropriate Method ( MAM ) and selected 7 companies as comparables. The arithmetic mean of these comparable companies was computed at 12.84%. Since the assessee s profit margin (OR/OC) of 19%, from the provisions of R&D Services, was higher than that of the comparables computed at 12.84 %, the assessee assumed the value of international transactions relating to R&D Services Segment to be at arm s length. The TPO adopted TNMM in the MAM. However, out of the 8 comparable compani .....

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Oil Field Instrumentation (India) Ltd. 45.60 Average Mean Margin 24.33 The TPO vide order under Section 92CA of the Act dt.31.10.2011 has proposed a T.P. Adjustment of ₹ 13,74,069 to the ALP of international transactions entered into by the assessee in the period relevant to Assessment Year 2008-09. The Assessing Officer determined the income of the assessee at ₹ 5,97,36,798 which included the T.P. Adjustment of ₹ 13,74,069 under Section 92CA of the Act vide draft assessment or .....

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der dt.15.6.2012 wherein the income of the assessee was determined at ₹ 5,97,36,798; which included the T.P. Adjustment of ₹ 13,74,069. 3. Aggrieved by the final order of assessment for Assessment Year 2008-09 dt.15.6.2012, the assessee has preferred this appeal raising the following grounds :- A GROUNDS RELATING TO TRANSFER PRICING - LEGAL ISSUES The learned Assessing Officer, (alongwith the learned Transfer Pricing Officer and Honorable Dispute Resolution Panel) have erred in 1. Pa .....

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iness or Profession do not refer to or include the amounts computed under Chapter X and therefore the addition made under Chapter X is bad in law. B GROUNDS RELATING TO TRANSFER PRICING - COMPUTATION OF ALP The learned Assessing Officer, (alongwith the learned Transfer Pricing Officer and Honorable Dispute Resolution Panel) have erred in 6. Making transfer pricing adjustment of ₹ 13,74,069/-. 7. computing the Arm s length price based on the data for the financial year 2007-08 of the compar .....

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nsactional level differences in determining the ALP. 12. not appreciating that the law does not compel adopting many (or any minimum) companies as comparables and that the appellant could justify the price paid/charged on the basis of any one comparable only. 13. not allowing the benefit of the +/-5% range mentioned in the proviso to section 92C (2). The appellant submits that each of the above grounds/ sub-grounds are independent and without prejudice to one another. The appellant craves leave .....

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s submitted that except for pressing ground of appeal at No.9 for exclusion of the above two companies from the list of comparables all other grounds i.e. at S.Nos.1 to 8 and 10 to 13 are not being pressed in this appeal before us. In this view of the matter, the grounds of appeal at S.Nos.1 to 8 and 10 to 13 not being pressed are rendered infructuous and are accordingly dismissed. 5. Oil Field Instrumentation India Ltd. ( Oil Field ) 5.1 This company was chosen as a comparable by the TPO and it .....

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that its products and services while include 90% of mud logging services, rig instrumentation, gas detection, MWD/ directional / drilling, LOG/MAT digitizing, horizontal drilling/river crossing etc. cannot be treated as comparable to the Research and Development activity carried out by the assessee in the Agro Chemical Industry. The learned Authorised Representative for the assessee submitted that even for the immediately preceding year i.e. Assessment Year 2007-08 in the assessee's own cas .....

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007-08 had upheld the order of the learned CIT (Appeals) in excluding this company i.e. Oil Field from the list of comparables to the assessee and dismissed Revenue s appeal. The learned Authorised Representative prays that in view of the factual matrix brought out above, this company ought to be excluded from the list of comparables to the assessee. 5.2 Per contra, the learned Departmental Representative supported the orders of the authorities below in including / retaining this company in the .....

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l dis-similarity and difference from the assessee's operation which is of a R&D service provider in the Agro Chemical Industry. We find that the ITAT, Mumbai Bench in the case of Tevapharma India Pvt. Ltd. in ITA No.6623/Mum/2011 and co-ordinate benches of this Tribunal in the case of Apotex Research Pvt. Ltd. in ITA No.918/Bang/2011 and Millipore India Pt. ltd., in IT(TP)A No.689/Bang/2011 after considering the functional profile of this company i.e. Oil Field Instrumentation India Ltd. .....

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o 5.2.6 of order while excluding this company i.e. Oil Field :- 5.2.4 The learned CIT(A) has rejected the aforesaid three companies from the list of comparables based on functional differences vis-a-vis the assessee also relying on the decision of the ITAT, Mumbai Bench in the case of Tevapharm India Pvt. Ltd. in ITA No.6623/Mum/2011 for Assessment Year 2007-08 wherein these three companies were rejected as comparables in respect of an R&D Service Provider. Before us, no material evidence ha .....

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Labs Ltd. held that these two companies cannot be treated as comparables for an R&D Service Provider. 5.2.6 In this view of the matter, following the findings in the decision of the Tribunal Benches in the cases of Tevapharm India Pvt. Ltd. (supra), Apotex Research Pvt. Ltd. (supra) and Millipore India Pvt. Ltd. (supra), we hold that these three companies viz. Oil Field Instrumentation India Ltd., Celestial Bio Labs, Ltd., and Agile Electric Technologies Pvt. Ltd. are functionally different .....

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ibunal in the case of Millipore India Pvt. Ltd. (supra), Apotex Research Pvt. Ltd. (supra) and the assessee s own case for Assessment Year 2007-08 (supra), we direct the Assessing Officer / TPO to exclude this company i.e. Oil Field Instrumentation India Ltd., from the list of comparables to the assessee in the case on hand. 6. Additional Grounds of Appeal. Celestial Biolabs Ltd. 6.1 In the course of proceedings before us, the assessee filed the following additional grounds of appeal seeking the .....

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nterest of justice and equity and also since all the necessary facts for adjudicating this ground are already a part of the record, we are of the view that this additional ground raised by the assessee is to be admitted for adjudication. 6.3 According to the assessee from the details in the public domain, Celestial Labs Ltd. is a diversified company apart from software development services operating in diverse field such as rendering IT Services, ITES encompassing application, development and ma .....

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ich is only an R&D service provider in the Agro Chemical Industry. The learned Authorised Representative submitted that even in the assessee's own case for Assessment Year 2007-08, a coordinate bench of this Tribunal in its order in IT(TP)A No.431/Bang/2012 dt.10.4.2015, following the decision of the Mumbai ITAT in the case of Tevapharma Ltd. (supra), had directed and upheld exclusion of this company i.e. Celestial Biolabs Ltd. from the list of comparables to the assessee in the case on .....

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ssessee. From the factual matrix laid out above, it is abundantly clear that Celestial Biolabs Ltd. is engaged in diverse activities like development and sale of software products, data warehousing, bioinformatics, apart from software development services rendering it functionally different and dis-similar to the assessee in the case on hand who is merely a R&D provider in the Agro Chemical Industry. We find that the co-ordinate bench of this Tribunal in the assessee's own case for Asses .....

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ld as under at paras 5.2.4 to 5.2.6 of its order as under :- 5.2.4 The learned CIT(A) has rejected the aforesaid three companies from the list of comparables based on functional differences vis-a-vis the assessee also relying on the decision of the ITAT, Mumbai Bench in the case of Tevapharm India Pvt. Ltd. in ITA No.6623/Mum/2011 for Assessment Year 2007-08 wherein these three companies were rejected as comparables in respect of an R&D Service Provider. Before us, no material evidence has b .....

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