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2015 (12) TMI 1548 - ITAT DELHI

2015 (12) TMI 1548 - ITAT DELHI - TMI - Transfer pricing adjustment - comparable selection - Held that:- Comparable companies, performing the same specified support services as that of the assessee company cannot be found, and hence only companies which have broad comparative functional profile of undertaking support services in other fields, have to be taken as comparables. This is for the reason that the assessee is specialized in providing emergency assistance and support services to the memb .....

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MT. BEENA PILLAI, JUDICIAL MEMBER For The Appellant : Shri Ajay Vohra, Sr. Adv. Shri Neeraj Jain, Adv. For The Respondent : Smt. Mitali Madhusmita, CIT-DR ORDER PER J.SUDHAKAR. REDDY, ACCOUNTANT MEMBER: This is an appeal filed by the assessee directed against the order of the AO passed u/s 143(3) read with section 144C of the Income Tax Act, 1961 dated 28/01/2015 for the A.Y. 2009-10. 2. The facts in brief are as under. 2.1. The assessee filed its return of income on 30.09.2009 declaring total i .....

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mergency assistance and support services to its members/clients of the AE. SOS India allows AEs members/clients to access its services through the SOS Singapore Alarm Centre. This enables clients of AE to access strong medical network of doctors, hospitals, clinics, and service providers across India. The assessee provides emergency assistance and support services to clients who are registered with the AE outside India and who are eligible to avail the services of the Group worldwide including I .....

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e assessee selected the following 12 comparables whose average margin was 7.10% as against that of assessee s at 7.66%. S.No. COMPANY NAME 1. A2Z Maintenance & Engineering Services Pvt.Ltd. 2. Access India Advisors Ltd. 3. Besant Raj International Ltd. 4. Capital Trust Ltd. 5. Cyber Media Events Ltd. 6. DLF Services Ltd. 7. Educational Consultants (I) Lid. 8. I C R A Management Consulting Services Ltd. 9. IDC (I) Ltd. 10. India Tourism Development Corporation Ltd. 11. In house Production Ltd .....

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Five fresh comparable selected by TPO are as under: S.No. COMPANY NAME 1. Apitco Ltd. 2. Global Procurement Consultant Ltd. 3. KCCA Business Services Pvt. Ltd. 4. Killick Agencies & Marketing Ltd. 5. Oerient Engineering & Commercial Co.Ltd. 2.6. Thus, the Ld.TPO, in all, selected 7 comparable (2 from assessee s set and 5 new comparable), whose average margin was 27.63% as against that of assessee at 7.66%. They are; S.No. COMPANY NAME 1. Access India Advisors Ltd 2. IDC (I) Ltd. 3. Apitc .....

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ng Ltd. and Orient Engineering & Commercial Co.Ltd. from the comparables. Regarding the other comparable companies, the order of the Ld.TPO, was approved by the DRP. 4. Further aggrieved the assessee is before us on the following grounds: 1. That the AO erred on facts and in law in completing assessment u/s 144C/143(3) of the Income-tax Act, 1961 ( the Act ) at an income of ₹ 3,36,55,607/- as against the income of ₹ 2,00,60,075/- returned by the appellant; 2. That the AO erred on .....

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ourism Development Corporation Limited 2.2 That the TPO/DRP erred on facts and in law in considering following companies in the final set of comparable companies allegedly holding them to be functionally comparable to the appellant: i) Apitco Limited ii) Global Procurement Consultant Limited iii) HCCA Business Services Pvt. Ltd. 2.3 That the TPO/DRP erred on facts and in law in not allowing economic adjustment with respect to the operating profit margin of the comparables/appellant on account of .....

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ared on behalf of the assessee and Smt. Mitali Madhusmita, ld. CIT(DR) represented the Revenue. The ld. Counsel for the assessee submitted that the assessee provides professional support services to its AE. He explained the business operation of the assessee, and contended that certain comparables selected by the assessee were wrongly excluded by the TPO. He advanced detailed arguments on each of the comparables. We would be dealing with their aguments in our findings. 6. The ld. CIT(DR) opposed .....

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was right in rejecting the companies, selected by the assessee as comparable companies for the purpose of bench marking, being: i) Educational Consultant India Limited; ii) ICRA Management & Consulting Services Ltd.; iii) India Tourism Development Corporation Ltd.; b) Whether the DRP was right in upholding the finding of the ld.TPO that the following companies should be taken as comparable companies for the determination for bench marking: i) Apitco Limited; ii) Global Procurement Consultant .....

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mpanies, on which both parties have difference of opinion, we observe that both the assessee as well as the ld.DR have stated that, comparable companies, performing the same specified support services as that of the assessee company cannot be found, and hence only companies which have broad comparative functional profile of undertaking support services in other fields, have to be taken as comparables. This is for the reason that the assessee is specialized in providing emergency assistance and s .....

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f medical assistance, health care, security and risk management services to corporations, governments, and individuals. Founded in 1985 as AEA International, the Group focuses specifically on providing medical care and consulting services to employees and employers. It offers assistance in setting up and managing healthcare facilities. It also provides a range of occupational health services. International SOS offers medical and emergency support services to those living and travelling outside t .....

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is and risk management services. It offers emergency response planning and security evacuation solutions. The clients of SOS Singapore include banks, universities, pharmaceutical companies, and government and non-profit organizations. International SOS Services (India) Private Limited Background SOS India is a wholly owned Indian subsidiary of SOS Singapore. SOS India primarily acts as a support centre to the SOS Singapore location. SOS India provides emergency assistance and support services to .....

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ss corporations. Further, during the financial year ending March 31, 2009, SOS India has also provided administrative support services to two of its associated enterprises. 10. The ld. Counsel for the assessee, submitted that under the given facts and circumstances, companies providing specialized support services, in different fields, have to be accepted as comparable companies, for the purpose of bench marking, as their functions are broadly comparable with the functions of the assessee cpmpan .....

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rvices should be adopted as a comparable company. Similarly in the case of M/s.IDC (I)Limited is a company providing marketing intelligence, advisory services for the information technology, telecommunication and consumer technology markets. This company has been accepted by both parties as comparable. Hence, companies rendering specialized services, though in functionally different areas, are accepted by both parties as comparable companies. 12. With this background, we now examine each of the .....

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dertakings. Many Government undertaking operate on losses in furtherance of social obligations of the government. It is also a matter of common knowledge that works are allotted by the Government to P.S.U on a preferential basis or on different considerations. Respectfully following the proposition laid down by the co-ordinate Bench of the Tribunal in the case of M/s. ThyssenKrupp Industries India Pvt.Ltd(supra), we direct the TPO to exclude this company from the list of comparable companies whi .....

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ilar functional profile have been accepted by the Revenue as a comparable. He cited the case of M/s.Access India Advisory Limited.The Ld.DR relied on the orders of the DRP. 12.2 On the issue of functional profile we agree with the submission of the ld.AR. When M/s.Access India Advisors Ltd., having a functional profile of management consultancy, business advisory etc., is agreed as a comparable by the TPO, the question of excluding ICRA Management Consulting Services Limited, which is having ide .....

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owning intangible asset of ₹ 3,90,00,000/- in the form of technical knowhow and whereas ICRA has no intangible assets. 12.5 The ld. Counsel for the assessee submitted that the related party transaction actually does not exceed 14%, and hence the DRP is factually wrong. In any event ld. Counsel could not controvert the findings of the DRP, on the fact of ICRA not being in possession of intangible assets. When one company own intangible assets and when the other company does not own intangib .....

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should not be included in the list of comparables for the reasons that, profit motive is not the only relevant consideration in case of Government undertakings. Many Government undertaking operate on losses in furtherance of social obligations of the government. Educational Consultants India was directed to be excluded for the same reason. Respectfully following the proposition laid down by the co-ordinate bench of the ITAT in the case of M/s. ThyssenKrupp Industries India Pvt.Ltd(supra), we di .....

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ronment, InfoTech etc. The pith and substance of the submission are that the areas in which this company provides support services is totally different from the type of support services provided by the assessee. He placed reliance on the decision of the Hon ble Delhi High Court in the case of Rampgreen Solutions Pvt. Limited vs. CIT, ITA No. 102/2015 judgment dated 10/08/2015 for the proposition that functionally dissimilar companies cannot be taken as comparables. He pointed out that decision o .....

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rs Ltd. etc. She submitted that the functional profile is that of specialized support services, which required high profile skill and timely delivery of quality services, which is comparable with the functional profile of the assessee. 12.8 On a careful consideration of these arguments, we are of the considered opinion that this company should be taken as a comparable for the following reasons: a) This is not a 100% Government owned company as claimed by the assessee. Under the head corporate sy .....

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rable companies rendering services in the same field as that of the assessee company cannot be found, companies rendering support services in other fields have to be taken as comparables. c) We have also perused the decision of the Hon ble Jurisdictional High Court in the case of Rampgreen Solutions Pvt. Ltd.(supra). The claim of the ld. Counsel for the assessee is based on the propositions laid down in this case law. If on such an argument, the comparable Global Procurement Consulting Limited i .....

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e applied to the facts of the case on hand. In view of the above discussion we are of the considered opinion that Global Procurement Consulting Limited has rightly be taken as the comparable by the TPO. Hence we dismiss this argument of the assessee. 5. HCCA Business Services Pvt. Ltd. 12.9. The ld. Counsel for the assessee submits that this company is engaged in the business of providing pay roll processing services and hence is not functionally comparable. The sum and substance of his argument .....

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