Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

Eli Lilly & Co. (India) Pvt. Ltd. Versus ACIT, Circle 1 (1) , Gurgaon

2015 (12) TMI 1172 - ITAT DELHI

Disallowance under section 37(1) - expenditure incurred towards distribution of free samples to doctors/medical practitioners - whether the same to be incurred in contravention of the guidelines issued by Indian Medical Council read with circular 05/2012 issued by the CBDT - whether the free samples were neither ‘freebies’ not ‘gifts’ and were distributed by the appellant to doctors/medical practitioners on the specific written request of the latter? - Held that:- As held by the Hon’ble Supreme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the hands of the Pharma companies distributing such free samples to doctors. In the light of the details discussion made above, the Panel holds that the free samples are not covered by the IMC regulations of 2002 (as amended in 2009) read with CBDT circular no. 5/2012, UCPMP and the Drugs and Cosmetic Act and regulations made there under. Accordingly the O is directed to delete the proposed addition on this account.- Decided against assessee

Transfer Pricing Adjustment on account of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nsultants Limited.’ and HCCA Business Services (P) Ltd., and the objection of the assessee in respect of these two companies are kept open. The grounds are allowed to the extent discussed above. - ITA No.788/Del./2015 - Dated:- 24-11-2015 - SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER and SHRI A.T. VARKEY, JUDICIAL MEMBER For The Assessee : Shri Ajay Vohra, Senior Advocate, Shri Neeraj Jain, Advocate, Shri Abhishek Agarwal, CA & Ms Nitya Gupta CA For The Revenue : Shri Syed Nasir Ali, CIT DR ORDER P .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

That the assessing officer erred on facts and in law in completing assessment under section 144C/143(3) of the Income-tax Act, 1961( the Act ) at an income of ₹ 23,06,18,730 as against the income of ₹ 16,75,13,196 returned by the appellant. 2.1 That the assessing officer/ DRP erred on facts and in law in not appreciating that the free samples were neither freebies not gifts and were distributed by the appellant to doctors/medical practitioners on the specific written request of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ractitioners were deleted. 3 That the assessing officer erred on facts and in law in making an addition of ₹ 88,85,591 on account of transfer pricing adjustment in respect of the international transaction of business support services. On the basis of the order passed under section 92CA(3) of the Act by the TPO. 3.1 That the DRP/TPO erred on facts and in law in excluding the following companies from the set of comparables companies allegedly holding that these companies were not functionall .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

appellant: Sr. No. Name of the company Comparable segment 1. Educational Consultant India Limited Technical assistance and human resource development 2. ITDC Limited Event management segment 3. In House Production Limited Healthcare division 3.3 That the assessing officer/DRP erred on facts and in law in rejecting the above companies from the set of comparable companies not appreciating that the relevant business segments of these companies were considered by the DRP for undertaking the benchmar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ecord by the appellant during the course of proceedings before the DRP: (i) Microgenetics Systems Limited( MGS ) (ii) CG-VAK Software & Exports Limited ( CG-VAK ) (iii) R Systems International 3.6 That the DRP/TPO erred on facts in law in not allowing comparability adjustment ton account of difference in working capital employed by the appellant vis-a- vis comparable companies considered by TPO, allegedly holding that the onus in this regard was on the appellant to demonstrate the reasons an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

3.9 That on the facts and in the circumstances of the case and in law, the assessing officer/TPO erred in rejecting the contention of the appellant regarding risk adjustment, allegedly holding that in absence of robust and reliable data, both for the appellant and for the comparables, risk adjustment cannot be considered for enhancing comparability 4 That the assessing officer erred on facts and in law in levying interest under Section 234B and Section 234C of the Act. 3. The assessee is a wholl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

which came to be assessed at an income of ₹ 23,06,18,730/- in an order dated 12.1.2015 u/s 144C/143(3) of the Act and hence this appeal by appellant company 4. Ground No. 1 is general and is therefore rejected. 5. Ground 2 to 2.3 relates to disallowance under section 37(1) of the Act of ₹ 5,42,19,943/- being expenditure incurred towards distribution of free samples to doctors/medical practitioners, holding the same to be incurred in contravention of the guidelines issued by Indian M .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uct, Etiquette and Ethics) Regulations, 2002 observing that above free samples of medicines distributed by the appellant to doctors/ medical practitioners and others constituted gifts or freebies, which are not allowable in terms of Explanation to section 37(1) of the Act. The relevant portion of the order reads as under: A bare reading of this extract clarifies that a) receiving of any gift by medical practitioner from a pharmaceutical company is violative of the regulations, whether that gift .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

etc, which would result in influencing the discretion of such doctors/hospitals in favour of assessee s medicines while recommending medicine to a patient. Thus, free sample are distributed to doctors so that they prescribe more and more of the assessee s products in preference to other manufacturers products. This amounts to soliciting endorsement of the assessee s products by the doctor. As per clause (h) of Regulation 6.8 of IMC Regulations, 2002, which has been reproduced above, endorsement .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng his/her medical practice by generating goodwill. Lure of getting free medicine attracts more patents towards the doctor, thus benefiting his medical practice. Based on the observations above, expenses incurred towards free sample to doctors or medical practitioners are treated as disallowable. Disallowance of ₹ 5,42,19,943/- being expenses towards free sample to doctors is hereby made. 7. Being aggrieved, the assessee has come up in appeal before us and brought to our notice the Standar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

6.8 of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, (as amended in 2009), which reads as under: 6.8.1 in dealing with pharmaceutical and allied health sector industry a medical practitioner shall follow and adhere to the stipulations given below: a) Gifts: A medical practitioner shall not receive any gift from any pharmaceutical or allied health care industry and their sales people or representatives. b) Travel Facilities: A medical practitioner shal .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Monetary Grants: A medical practitioner shall not receive any cash or monetary grants from any pharmaceutical and allied healthcare industry for individual purpose in individual capacity under any pretext. Funding from medical research study etc. can only be received through approved institutions by modalities laid down by law/rules/guidelines adopted by such approved institutions in a transparent manner. It shall always be fully disclosed. e) Medical Research: A medical practitioner may carry .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(ii) Ensure that such a research project(s) has the clearance of national/state/institutional ethics committee/bodies. (iii)Ensure that it fulfills all the legal requirements prescribed for medical research; (iv) Ensure that the source and amount of funding is publically disclosed at the beginning itself; (v) Ensure that proper care and facilities are provided to human volunteers, if they are necessary for the research project(s). (vi) Ensure that undue animal experimentations are not done and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ll never by any compromise either with his/her own professional autonomy and/or with the autonomy and freedom of the medical institution. g) Affiliation: A medical practitioner may work for pharmaceutical and allied healthcare industries in advisory capacities, as consultants, as researchers, as treating doctors or in any other professional capacity. In doing so, a medical practitioner shall always: (i) Ensure that his professional integrity and freedom are maintained; (ii) Ensure that patients .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the aforesaid regulations, it was contended that doctors/medical practitioners are prohibited from receiving, inter-alia, any gift or cash or monetary grants or travel facility from any pharmaceutical or any allied healthcare industry. It was submitted that as per Medical Council guidelines only those freebies which confer personal benefit to the medical practitioner directly could only be considered to be in violation of the Medical Council s guidelines. It was submitted that in the present c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lified to prescribe such product subject to certain conditions is permitted. A reference was drawn to the following extract from the aforesaid code: 5. Samples 5.1 Free samples of drugs shall not be supplied to any person who is not qualified to prescribe such product. 5.2 Where samples of products are distributed by a medical representative, the sample must be handed directly to a person qualified to prescribe such product or to a person authorized to receive the sample on their behalf. 5.3 The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

An adequate system of control and accountability must be maintained in respect of the supply of such samples; (v) Each sample pack shall not be larger than the smallest pack present in the market; (vi) Each sample shall be marked "free medical sample- not for sale" or bear another legend of analogous meaning; (vii) Each sample shall be accompanied by a copy of the most up-todate version of the Product information (As required in Drug and Cosmetic Act. 1940) relating to that product. 5 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s agents i.e. distributors, wholesalers, retailers etc. 6.2 Gifts for the personal benefit of healthcare professionals and family members (both immediate and extended) (such as tickets to entertainment events) also are not be offered or provided. 9. Further, reference was also made to the provisions of Drugs and Cosmetics Act, 1945 wherein the distribution of free samples had been held to be permissible, i.e. not against the public policy, subject to certain conditions. The relevant extracts of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the drug or on the label affixed to the container thereof indicating this purpose shall be sold or stocked by the licensee on his premises. 10. On the basis of above, it was submitted that assessee had, as per the terms of the SOP(supra), provided free samples only on the specific written requests of doctors/medical practitioners. In other words, there is no voluntary act on behalf of the assessee in distributing such samples to the doctors/medical practitioners. Moreover, such samples are used .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

DRP vide order dated 05.09.2013, inter alia, deleted the said disallowance. It was thus prayed that issue relating to allowance of expenses on sample distribution is squarely covered in favour of appellant by the order of DRP for the assessment year 2009-10 and therefore disallowance made may be deleted. 12. The ld. DR supported the action of the authorities below. 13. Having considered the rival submissions we find that in the immediately preceding assessment year DRP by an order dated 5.9.201 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f implemented effectively by the Pharma Association/companies, the Government would consider making it a statutory code. 1…… 2…… 3…… 4……. 5 Samples 5.1 Free sample of drugs shall not be supplied to any person who is not qualified to prescribe such product. 5.2 Where sample of products re distributed by a medical representative, the sample must be handed directly to a person qualified to prescribe such product or to a person authorized to re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed request for the recipient iv) An adequate system of control and accountability must be maintained in respect of the supply of such samples v) Each sample pack shall not be larger than the smallest pack present in the market vi) Each sample shall be marked free medical sample-not for sale or bear another legend of analogous meaning vii) Each sample shall be accompanied by a copy of the most up to date version of the product information (As required in Drug and Cosmetic Act; 1940) relating to t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ality……. 7.3 Cash or monetary grants…… Where there is any item missing, the code of MCI as per Indian Medical Council (professional conduct, etiquette and ethics) Regulation, 2002 as amended time to time will prevail 6.11.4 Thus it is evident from the above that a clear distinction has been made between the free samples, gifts, travel facilities, hospitality and cash or monetary grants. It would accordingly be incorrect to put samples in the definition of gifts being .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mples also. 6.11.5 Moreover a medical practitioner is bound by the IMC Regulations 2002. Para 7.8 of the said regulations read as under: 7.8 A registered medical practitioner shall not contravene the provisions of the Drugs and Cosmetics Act and regulations made there under. Accordingly 1 Prescribing steroids/psychotropic drugs when there is no absolute medical indications; 2 Selling schedule H and L drugs and poisions to the public except to his patient In contravention of the above provisions .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

-rule () of rule 96 and no drug meant for consumption by the Employees State Insurance Corporation. The Central Government Health Scheme, the Government Medical Stores Depots, the Armed Forces Medical Stores or other Government institutions, which bears a distinguishing mark or any inscription on the drug or on the label affixed to the container thereof indicating this purpose shall be sold or stocked by the licensee on his premises 95 Prohibition of sale or distribution unless labeled-subject t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ider definition of Gift . 6.11.7 Moreover, as held by the Hon ble Supreme Court in the case of Eskayef Pharmaceuticals (245 ITR 116), the object of distribution of the samples of the drugs to the doctors is to make them aware that such drugs are available in the market in relation to the cure of a particular affliction and, therefore, to persuade them to prescribe the same in appropriate cases and this is tantamount to publicity and sales promotion. Accordingly, such expenditure cannot be said t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s directed to delete the proposed addition on this account. (Emphasis supplied) 14. The above order has acquired finality and no appeal there from has been preferred by the revenue. In light of the above and in accordance with principle of consistency the disallowance is held to be legally untenable. In support of the above conclusion reliance is placed on the judgment of Apex Court in the case of CIT vs. Excel Industries 358 ITR 295 wherein it has been held as under: 29. In Radhasoami Satsang S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.9 relates to Transfer Pricing Adjustment of ₹ 88,85,591/- on account of provision of business support services. 18. That during the relevant assessment year, the assessee had undertaken the following international transactions: Sr. No. Types of International Transaction Method selected Total Value of Transaction 1 Purchase of Formulations TNMM 150,21,21,570 2 Co-ordination of Clinical Trials in India TNMM 9,87,41,111 3 Provision of Business Support Services TNMM 7,57,78,032 4 Payment of i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

its to the total cost as its profit level indicator (hereafter PLI ) for the transfer pricing study. The assessee applied the transactional net margin method (hereafter 'TNMM'), which was considered to be the most appropriate method for the purposes of benchmarking the international transactions. The assessee's operating profit margin (i.e. operating profit/total cost) was computed at 9.26% and the assessee claimed that the same was comparable with other companies rendering business .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d Limited (Segment) (Technical assistance & HRD) 4.37% 4 ICRA Management Consulting Services Limited 0.06% 5 IDC (India) Limited 12.30% 6 In House Production Limited (Segment) (Healthcare division) 1.51% 7 ITDC Limited 5.31% 8 Ma Foi Global Services -0.54% 9 Ma Foi Management Consultants Limited 3.61% 10 Overseas Manpower Corpn. Limited 3.23% 11 Times Innovative Media Limited -2.21% Average 7.23% 20. It was submitted that since arithmetic average of the operating profit margin of the said co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cepted the method adopted by the assessee (i.e. TNMM), but rejected the benchmarking report after having been found the defects in the TP analysis carried on by the taxpayer and holding that the data used in computation of the arms length price is not reliable and correct. The TPO also rejected the assessee's claim for any adjustment on account of working capital provided to the assessee and/or risks borne by the AE. 22. Further, TPO applied the following filters for selection of comparable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rent financial year ending (i.e. not March 31, 2010) or data of the company does not fall within 12 month period i.e. 01.04.2009 to 31.03.2010, are rejected vi) Reject companies that have employee cost less than 25% of total cost. vii) Companies that are having peculiar economic circumstances are excluded. viii) Companies that are functionally different from the taxpayer are excluded. 23. During the course of proceedings, the assessee submitted updated margin of comparable companies identified i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onal Consultant Ind Limited (Segment) (Technical assistance & HRD) Functionally not comparable 4 HT Music & Entertainment Co. Ltd. Functionally not comparable 5 Ma Foi Global Search Services Ltd. Different year ending and it also fails positive networth filter 6 ICRA Management Consulting Services Limited Functionally not comparable 7 ITDC Limited (Segment) Functionally not comparable 8 In House Production Limited (Segment) (Healthcare division) Functionally not comparable 9 Overseas Man .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.26% 25. In pursuance thereof, the final set of 8 comparable companies considered by the TPO in the impugned order, having an average operating profits of 22.08% is as under: Sr. No. Name of the Company OP/TC (%) (without Forex) 1 Cyber Media India Online Limited formerly IDC (India) Limited 14.85% 2 Aptico Limited 40.09% 3 Global Procurement Consultants Limited 37.19% 4 HCCA Business Services Pvt. Ltd. 20.05% 5 Quadrant communications Limited 13.11% 6 TSR Darashaw Limited 41.15% 7 Cameo Corpora .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Adjustment 88,85,591 27. Upon receiving the Draft Assessment Order forwarded by the Assessing Officer to assessee on 31.03.2014 under section 143(3) of the Act read with section 144C(1) of the Act, the assessee filed its objections to the same before the Dispute Resolution (hereafter DRP ) against the adjustment proposed by the Assessing Officer in its draft order. The DRP vide its order dated 16.12.2014, rejected the objections raised by the assessee in its order and confirmed the above adjust .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on, we take up the comparable Educational Consultant India Limited (EDCIL) (Technical assistance & HRD) (Segment). The TPO/DRP has excluded the above comparable on the ground that the company is involved in educational consultancy business and is not providing any services, hence it is functionally different and cannot be accepted. 30. Having considered the rival submissions we find that the aforesaid company was held to be valid comparable in our own order for Assessment year 2009-10 by hol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee has remained unchanged from preceding years, EDCIL continues to be comparable to the assessee and there exists no legitimate reason to reject the company in the year under consideration. The assessee placed his reliance on the judgment of Hon ble Supreme Court in the case of CIT vs. Excel Industries Limited 358 ITR 295, wherein their Lordships reiterated the law laid down in Radhasoami Satsang vs. CIT 193 ITR 321 to hold that, where a fundamental aspect permeating through the different as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llowing areas: Student placement Secondment of experts Technical assistance Procurement services Testing and recruitment services Technical support group Training and Management Services The company operates in three segments: Technical Assistance, Institutional Development and Human Resources Development. The services provided under Technical Assistance and Human Resource Development have been considered as comparable to the nature of services provided by the assessee to its AE. Further, we wis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arables for computation of ALP 21 For the foregoing reason and there being no change in the facts for the instant assessment year, the AO/DRP is directed to include EDCIL in the final set of comparable companies. Reliance in this regard is placed on the following observation of the Mumbai Bench of the Tribunal in the case of ACIT vs. NGC Network India (P) Ltd. 10 taxmann.com 140 wherein it has been held as under: These comparables and the method of computation of arm s length price has been acce .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

91% 2 IDC (India) Ltd. 10.46% 3 Basiz Fund Services Pvt. Ltd. 46.75% 4 Indus Technical & Financial Consultants Ltd. 6.45% 5 Immacs Management Services Ltd. 14.54% 6 Shristi Urban Infrastructure Development Ltd. 8.66% 7 Choksi Laboratories Ltd. 23.19% 8 In House Productions (Segment) 2.51% 9 WAPCOS Ltd. (Segment) 23.60% 10 Educational Consultant India Limited (Technical assistance & HRD Segment) 3.80% Average 14.98% 23 Since, the operating profit to cost of the appellant at 9.82% is withi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lant and therefore included in the final set of comparable companies. 32. Now taking up M/s ITDC Ltd., the TPO/DRP has rejected the said comparable by holding that the event management segment as considered by the assessee as comparable does not match to the profile of the assessee. It was held that ITDC owns hotels, motels, inns, resorts providing short term lodging faculties including accommodation in house boats and hence this is not a suitable comparable. 33. The counsel for the assessee tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e appellant s business. 35. The DR argued for the exclusion of the said comparable. 36. Having considered the rival submission we find that ITDC operates in the various segments, and for the purpose of the comparability analysis, the SEL & ARMS & Misc Operations segment has been considered comparable to assessee s business. The relevant segment provides event management services, which identifies and coordinates with various service agencies for its clients and the same is comparable to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

; Preparation of cost-benefit analysis and budgetary support • Operation of hotels, business centres, convention halls, banqueting, etc. • Preparation of Master Plans for development of tourism. 37. In view of the above ITDC is directed to be included in the final set of comparables. 38. So far as M/s In House Production Ltd., it is noted that TPO/DR excluded the said comparable on the ground that such company is an ITES company engaged in medical transcription. He has held that during .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ealthcare delivery institutions and health professionals in India, which is similar to the information/knowledge being provided by the appellant to its associated enterprises on the market conditions in India and accordingly for the purposes of comparability analysis, the Healthcare segment of the company has been considered comparable to the appellant. Having considered the rival submission, we notice that the said company has also been considered comparable by the DRP in AY 2008-09 and AY 2009 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al in India. This is similar to information/knowledge being provided by the assessee to its AEs on industrial products related to automotive electronics and factory automation in India. Hence, this division is comparable to the assessee. DRP has examined the above contentions and submission of the assessee. We find that functionally it is comparable and TPO is directed to include it as a comparable for computing ALP. Relevant extract from DRP order of AY 2009-10 is as follows: 2 In House Product .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

imilar to information/knowledge being provided by the assessee to its AEs. Hence, this division is comparable to the assessee. DRP has examined the above contentions and submission of the assessee. We find that functionally it is comparable for computing ALP. 40. Having regard to the above we find force in the submission of assessee and as such direct the inclusion of M/s In House Production Ltd. 41. Further so far as M/s TSR Darashaw Ltd. is concerned, the TPO/DRP have held that the said compan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ustomers. It was further submitted that during the year under consideration, the company has selected a new global payroll ERP application called RAMCO for its fast growing payroll business. Further, the company in its annual report has clearly provided that it is deriving its income from the following business segments, namely, share registry and transfer services, depository services, record management and fund management, corporate and fixed deposit management services. Moreover, it was submi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee, in this regard, has also placed reliance on the of the Hon ble Delhi Bench of Tribunal in the case of Microsoft Corporation India Pvt. Ltd. vs. DCIT in ITA No. 5766/Del/2011 wherein it was held that TSR Darashaw is not functionally comparable to the company providing marketing support services and was directed to be excluded from the final set of comparable companies. The learned DR supported the inclusion of said comparable. 43. Having considered the rival submissions it is seen that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ompany was wrongly included in the list of comparables and the same should be excluded. The ld. DR objected to the exclusion of this company on the ground that since the assessee voluntarily included it in the final set of comparables, now it cannot turn around to contend its incomparability. 17. We are not inclined to uphold the objection taken by the ld. DR on the inclusion of this company as comparable merely on the fact that the assessee treated it as comparable in its TP study report. It go .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

company so agitated as functionally incomparable, is comparable, then there can be no reason to exclude the same. If, however, the company turns out to be functionally dissimilar from the assessee, then, there can be no rationale in continuing to treat it as comparable despite the functional variation. The crux is that what really matters is the actual comparability and not the wrong view canvassed by the assessee in the original reporting. What is true for the assessee is equally true for the R .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he first time before the tribunal even through an additional ground that a company was wrongly included in the list of comparables. In view of the foregoing discussion, we are of the considered opinion that the objection taken by the ld. DR in outrightly rejecting the assessee s contention, is untenable. 18. Coming to the merits of comparability, we find that this company has three segments, which inter alia include: Pay Roll and Trust Fund activity (Pay Roll). It is this segment which has been .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

roll activity undertaken by this company with the marketing support services rendered by the assessee to its AEs, we find that both are way apart from each other. There can be no logical comparison between a specific pay roll services rendered by a company to its clients with the marketing support services rendered by the assessee to its AEs. This company is, therefore, directed to be excluded from the final set of comparables. 44. Following the above decision M/s TSR Darashaw is held to be not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version