9911796707
TMI Blog2015 (11) TMI 1683X X X X Extracts X X X X X X X X Extracts X X X X ..... th the transacted value of Rs. 15,34,24,161/- and 'Services received' with the transacted value of Rs. 1,07,15,985/-.' The AO referred the determination of the arm's length price (ALP) of the international transactions reported by the assessee to the Transfer Pricing Officer (TPO). The TPO accepted other international transactions at ALP except 'Rendering of services'. The assessee employed Cost plus method as the most appropriate method for demonstrating that the international transaction of `Rendering of services' was at ALP. The TPO rejected the application of the Cost plus method and also the use of multiple year data. He applied the Transactional Net Margin Method (TNMM) as the most appropriate method with the use of current year data alone. The assessee has not challenged either the application of TNMM as the most appropriate method or the use of current year data alone. In so far as this transaction is concerned, the assessee had selected four companies as comparables in its transfer pricing study report. The TPO rejected all these companies and selected nine new companies as comparables, which have been listed on page 63 of his order. The TPO used Profit Level Indicator (PL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a liaison between its AEs and the third party distributors in India. The activities undertaken by the Assessee are as follows:- - Pre-sales and post sales services consist of understanding customer IT set up and requirement, product presentation, proposal/technical specification preparation, lead generation, etc. - Marketing support services consist of communication with prospects and current customers at each stage of the buyer's journey via events, cold calling, telemarketing and e-mailers to generate potential business and manage inbound response from campaigns, etc. - Technical support services consist of direct supporting to customers facing technical issues, provide guidance, technical support, product technical training and problem resolution for customers and assist in handling product technical issues/demos." 6. An overview of the Agreement, the TP study report and the assessee's reply to the TPO about the nature of services divulges that it is basically engaged in providing pre-sales and post-sales services to its AE which include understanding the requirements of the proposed customers, forwarding the same to its AE, communication with the customers and prospectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable on entity level. We find that there is a tiny resemblance of `Market and social research' functions performed by this company with the overall activities undertaken by the assessee. All other services are entirely different. We fail to appreciate as to how all the above listed services can be considered as comparable with the services provided by the assessee, which are restricted to identifying customers of antivirus products in India, sending such input to its AE, finalizing sales and, thereafter, rendering basic technical assistance in resolving the use of such products, if any, which are eventually made and sold by the AE. 7.4. The ld. DR strenuously argued that all the activities done by this company are basically `Business services' and the assessee is also rendering business services. 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. 7.5. We are unable to accept this argument in view of the judgment of the Hon'ble jurisdictional High Court in the case of Rampg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or example, in Georgia, it provided advice on procurement and contract related services to Municipal Development Fund (MDF), Republic of Georgia. In Iran, this company provided procurement advisory services to international forums, such as, Bam Reconstruction Office of Ministry of Housing, Tehran. In Guyana, this company was selected through an international competitive process in assisting the Government of Guyana in 'strengthening of its procurement administration' under Technical Assistance Credit from the World Bank. In India, it provided Procurement Advisory Services to IIT, Baramathy, Pune, India in the implementation of World Bank administered 'Empowering Poor: A pilot ICT programme for rural areas of Pune District' funded by Japan Social Development Fund Grant. It has also carried out review of Procurement Systems and Organisation in the State of Madhya Pradesh, particularly, covering the health, public health, engineering and women and child development departments. When we go through the nature of services provided by this company, which basically aim at providing advice on procurement and also carrying out procurement audit, it becomes palpable that there is an absolute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of comparison meaningless. Finding striking dissimilarities between this company and the assessee, we order to exclude this company from the final set of comparables. 10. Having dealt with the comparability of the above referred three companies, we consider it significant to deal with a contention raised on behalf of the Revenue with great vehemence. In all, total nine companies were taken by the TPO as comparable. Initially, the assessee objected to the inclusion of five companies out of such nine, but later on, such claim was restricted to three companies, which we have discussed hereinbefore. The ld. DR contended that if the five/three companies challenged by the assessee having higher profit rate are to be excluded for any reason, then the remaining four companies having low profit rate should also be eliminated due to their functional dissimilarities. He tried to accentuate on the functional dissimilarities of the remaining four companies. 11. In this regard, the primary question which falls for our consideration is : `Can the DR argue for the exclusion of some companies, which were treated by the AO/TPO as comparable'? In our considered opinion, the answer to this questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and during the hearing of such an appeal, an argument was taken by the assessee about the inadvertent inclusion of a company as comparable. On the other hand, we are confronted with a situation in which the Department, without having any right to file an appeal (as would be seen infra) against the intentional action of the AO/TPO in considering some companies as comparable, is contesting such inclusion and asking for their exclusion to the prejudice of the assessee. 13. Now we espouse the question if the Department has any right to file appeal against the independent free decision of the AO/TPO in wrongly deciding a point against the Revenue or by considering some companies as comparable in the transfer pricing analysis, which are in fact not comparable. At this stage, it is relevant to mention that the institution of the DRP came into being by means of insertion of section 144C by the Finance (No. 2) Act, 2009 w.r.e.f. 1.4.2009. As per this section, an assessee who is dissatisfied with a draft order can approach the DRP for necessary relief. Such a relief can be allowed by giving direction under sub-section (5) of this section. Sub-section (13) of section 144C pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st any part of the order of the Assessing Officer (in pursuance of the directions of the Dispute Resolution Panel).....'. It is manifest that the liberty to file cross objection has been given to the AO u/s 253(4) of the Act only against that part of the order of the Assessing Officer which is in pursuance of the directions of the Dispute Resolution Panel. This provision would not encompass a case of the AO filing cross objection against that part of the assessment order which has not been disturbed by the DRP. 15. In a nutshell, the position is that after the insertion/amendment by the Finance Act, 2012 to sub-sections (2A) and (4) of section 253, the Department has acquired a right to file appeal or cross objection against the assessment order passed in pursuance of the direction of the DRP to the extent it is aggrieved against such direction. It has no right to file appeal or cross objection against the voluntary decision of the AO/TPO which was not subject matter of any adverse direction by the DRP. The analogy which follows is that if no appellate recourse is open to the Department against the suo motu order of the AO/TPO, then, the DR, who argues before the tribunal for and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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