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Travel Security Services (India) Pvt. Ltd. Versus DCIT, Circle 25 (2) , New Delhi

2017 (4) TMI 815 - ITAT DELHI

Addition on account of transfer pricing adjustment - selection of comparable - Held that:- The assessee, in a nutshell, is engaged in providing travel security services, thus companies dissimilar in functinalty with that of assessee need to be De-selected from final list of comparable. - ITA No.6828/Del/2015 - Dated:- 12-4-2017 - SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Assessee : Shri Ajay Vohra, Sr. Advocate, Shri Neeraj Jain, Advocate and Ms Deepika Agarw .....

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that the Travel Security Group (TSS, UK) is a joint venture between Control Risks Group (a UK based security services firm) and Blue Cross Travel Services B.V. (an International SOS group company). TSS UK provides a comprehensive corporate security programme catering to its clients. The corporate security programme involves travel security services for international travelers and expatriates including analysis, assistance and consultancy. TSS UK s clients comprise of multinational corporations, .....

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curity forecasts. 4. The assessee is a subsidiary of TSS UK which was incorporated in India on 03.07.2008. During the year under consideration, the assessee rendered the following support services to TSS UK:- Analysis and advice on any security threats globally; Security information and guides; Analyze shifting political and social situations as well as natural disasters; Weekly regional security forecast; Country and risk ratings; Updates on incidents and developments, including evacuation advi .....

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evel Indicator (PLI) of Operating Profit/Total cost (OP/TC). 13 comparable companies were chosen by the assessee with their average OP/TC at 5.99%, which was less than the assessee s OP/TC at 6.16%. That is how, the assessee claimed that its international transaction was at arm s length price (ALP). The TPO did not dispute the application of TNMM as the most appropriate method and also the PLI. He, however, shortlisted seven companies as comparable and determined their average OP/TC at 26.52%, w .....

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grieved against this transfer pricing addition. 6. We have heard the rival submissions and perused the relevant material on record. There is no dispute as regards the application of TNMM as the most appropriate method and OP/TC as the PLI for the international transaction of Provision of travel security services . In fact, the entire challenge is confined to retaining two companies in the list of comparables, namely, Apitco Ltd. and TSR Darashaw Limited. 7. In order to judge the comparability or .....

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as natural disasters; Weekly regional security forecast; Country and risk ratings; Updates on incidents and developments, including evacuation advisories; and Medical alerts, pandemic information services as well as up-to-date reporting on outbreak of medical diseases. From the above nature of services, it is manifest that the assessee, in a nutshell, is engaged in providing travel security services. With the above understanding of the functional profile of the assessee, let us examine the comp .....

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elief was allowed by the DRP. 9. We have heard both the parties and perused the relevant material available on record. The TPO has reproduced on page 14 of his order the objections raised by the assessee before him on the comparability of this company. It has been recorded that this company earned total revenue of ₹ 1270.74 lacs, which includes: Cluster Development ₹ 494.86 lakhs; Project Related Services ₹ 365.66 lakhs; Entrepreneurship Development & Training ₹ 102.5 .....

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paration, Technical and economic studies, Feasibility studies, Micro enterprise development, Skill development, Project management consulting, Industrial cluster development, Environmental management consulting, Energy management consulting, Market and social research and Asset reconstruction management services. No segment-wise profitability data of these services is available. The TPO has considered this company as comparable on entity level. We find that there is a little resemblance of the r .....

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vices. He submitted that differentiation of functions in the overall Business services' umbrella is taken care of under the TNMM. He harped on the contention that there is no requirement to have identical services for the purpose of making comparison under the TNMM. 12. We are unable to accept this argument in view of the judgment of the Hon'ble jurisdictional High Court in the case of Rampgreen Sales Pvt. Ltd. vs. CIT (2015) 377 ITR 533 (Del) in which it has been held that the comparabl .....

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for its exclusion from the final set of comparables. (ii) TSR Darashaw Limited. 14. The TPO selected this company as comparable. There is no discussion whatsoever about the functional profile of this company in the order of the TPO. The DRP approved the inclusion of this company, against which the assessee has approached us. 15. Having heard the rival submissions and perused the relevant material on record, we find that this company is a broking and investment banking house. As per its website, .....

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regulatory environment. Details of products and services provided by this company, as disclosed on its website, are as under : - "Payroll & Employees' Trust Fund Administration & Management - All the activities normally handled by "Payroll and Retirement Funds" Section in the Organization, including interface with Regulatory Authorities, are taken over by us. Record Management - • Storage. Retention & Retrieval of Physical and/or Electronic Records Registrar & .....

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ull; Information to Client Companies through preferable electronic media • Dematerialization/Rematerialization • Inter-Depository Transfers Registrar to Fixed Deposit schemes • Acceptance and Processing of Applications • Renewals & Repayments • Processing & Distribution of Interest Payments through ECS or Physical Warrants. • Reconciliation of Payment of Interest Registry Related Services: • Registrar to Issues • Public/Rights/Bonus Issues • S .....

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. We, therefore, order for the exclusion of this company from the final set of comparables. 17. To sum up, we set aside the impugned order on the issue of addition towards transfer pricing adjustment and remit the matter to the file of AO/TPO for fresh determination of the ALP of the international transaction in consonance with our above directions. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. 18. Before parting with this appeal .....

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